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-- Posted Wednesday, 10 May 2006 | Digg This Article
METALS: OVERNIGHT CHANGES THROUGH 4:00 AM: GOLD +2.10, SILVER -5.50
London Gold Fix $704.30 +24.55 LME COPPER STKS 115,925 ml tns +275 tns
GOLD stks 7.625 ml oz, Unchanged COMEX SILVER stks 123.6
ml oz, -589,633 oz OVERNIGHT ACTION: Dollar weakness and talk of rising Chinese gold reserves lift gold overnight. GOLD: OUTSIDE MARKET DEVELOPMENTS: With the Dollar falling again on Tuesday and the Wall Street Journal carrying a front page article on the latest way fund managers are setting up to capitalize on further Dollar declines, it is possible that the Dollar impact on gold could remain supportive even in the face of the FOMC meeting this afternoon. Typically news of higher interest rates is negative to gold from a slower growth prospect and because higher rates can lift the Dollar. However, with platinum and copper prices both rising sharply again overnight, it would seem like the outside market impact on gold today will be generally supportive of the bull camp regardless of the Fed.
GOLD MARKET FUNDAMENTALS: With the trade widely expecting a persistent slide in the Dollar and the trade also entrenching the idea that the US growth differential is shrinking with most other major currencies, we suspect that currency related support will remain a mainstay in the marketplace. With the added talk overnight that the Chinese need to raise their gold reserves by 500 to 600 tons to 2,500 tons, the gold market is given a fresh supply and demand lift. With oil prices also recovering yesterday and the Dow rising back toward the all time high yesterday, it seems that soaring commodity prices are not an impediment to economic optimism and growth. In fact, with gold prices reaching the highest level since the 80's one certainly gets the sense that inflation has garnered a foothold. Therefore, the FOMC statement today, on the prospect of a June pause, could take on added importance. In other words, seeing the Fed entertain the idea of pausing in June, might lead some trades to rapidly extend their inflation expectations. As if the market were getting enough information, the US will also release a Treasury Statement today and that could fan the concern toward the US deficits issue. In general, the bull camp seems to have the benefit of the headline flow! While the rate of gain over the last few sessions is ramping up the technicals into overbought levels, the fundamental track seems to be getting even more bullish. Suggestions that China should expand gold reserves is very positive and that might countervail the potential letdown from the fact that the UN is going to delay addressing the Iranian situation by sending Iran a list of pros and cons of compliance, as that would seem to push a vote on sanctions well into the future. However, with the equity market rising, growth thought to be gathering momentum in Europe and Japan, it is clear that rising commodity prices are simply being absorbed into the world economy and for that reason alone $700 gold is not the stratospheric pricing that the bears would like to make it out to be. In fact, as long as growth continues, oil prices are in historically high ground and the Dollar is falling, the trend in gold should remain up! Asked where gold is headed, a simple answer is best, gold should continue to rise until the patently bullish environment changes! SILVER: OUTSIDE MARKET DEVELOPMENTS: As mentioned in the gold coverage this morning, both copper and platinum prices are soaring again and that has to provide silver with some support. It should also be noted that world equity markets remain strong, despite the ramping up of commodity and energy prices and therefore it would seem that inflation has indeed gained a foothold. With the copper and platinum prices soaring again overnight, it would seem like the physical demand expectations for all the metals are being constantly improved. However, it is possible that the silver market is initially undermined ahead of the FOMC meeting this afternoon, as higher interest rates have periodically tempered speculative interest in silver.
SILVER MARKET FUNDAMENTALS: With both investment and physical demand expectations rising consistently and the world economy apparently not fazed much by a rapid rise in many base commodity prices, the bulls seem to have a perfect storm brewing in their favor. With such supportive macro economic conditions being presented in the headlines on a daily basis, one should expect the investment flow in silver to continue and that could mean that silver prices are pulled up by action in other markets. However, in order to leave the session today, with strong investment interest for silver, might require the Fed giving off a hint that a pause is still possible in the June time frame. From a flight to quality perspective, silver is probably a little disappointed in the appearance of a UN delay in the Iranian sanctions situation. With the gold, platinum and copper all managing to register new highs overnight and the outlook for growth still in place, we have to assume that the path of least resistance in silver remains up. However, the inability to forge a new high on the current pulse up in the rest of the metals, could become a negative instead of a positive. The silver IShares holdings rose to 53.9 million ounces in the action yesterday and that means that the implied silver demand forecast of 60 million ounces in the ETF area is about to be seen within the first two weeks of trade in the instrument. In other words, the estimates of 60 to 100 million ounces of implied demand from the ETF area is becoming a reality in a quicker fashion than was expected! The bias is up but the laggard behavior of the silver, with respect to the rest of the metals markets is concerning. Close in critical support in July silver is seen at $14.34 and then again down at $14.26. Resistance is naturally the April 20th high of $14.84. METALS TECHNICAL OUTLOOK 5/10/2006 COMEX SILVER (JUL) 05/10/2006: Studies are showing positive momentum but are now in overbought territory, so some caution is warranted. A positive signal for trend short-term was given on a close over the 9-bar moving average. There could be more upside follow through since the market closed above the 2nd swing resistance. The next upside target is 1504.5. The next area of resistance is around 1483.0 and 1504.5, while 1st support hits today at 1410.1 and below there at 1358.5. COMEX GOLD (JUN) 05/10/2006: The market rallied to a new contract high. Daily stochastics have risen into overbought territory which will tend to support reversal action if it occurs. A positive signal for trend short-term was given on a close over the 9-bar moving average. If yesterday's gap higher on the day session chart holds, additional buying could develop this session. Since the close was above the 2nd swing resistance number, the market's posture is bullish and could see more upside follow-through early in the session. The next upside target is 715.3. With a reading over 70, the 9-day RSI is approaching overbought levels. The next area of resistance is around 710.6 and 715.3, while 1st support hits today at 692.4 and below there at 678.8.
To those of you who have emailed or commented on the daily commentary regarding price manipulation: our daily comments are strictly to provide our customers and subscribers with news, which may influence the markets marginally on a day-to-day basis. This is not the forum to address price manipulation.
There are multitudes of ways in which one can participate in a bullish or bearish perspective in the metals complex. Mining shares as well as purchasing bullion are just a few. Another investment of choice is through futures and/ or options on futures contracts. If you have traded, then you will be able to appreciate the brokerage service that Nell Sloane and Group can offer. If you have not, and wish to learn more about it, please feel free to contact her staff so that they can forward you some educational literature for your review. Please contact Nell Sloane or a member of her team at 800 238 2610.
-- Posted Wednesday, 10 May 2006 | Digg This Article
***This report includes information from sources believed to be reliable and accurate as of the date of this publication, but no independent verification has been made and we do not guarantee its accuracy or completeness. Opinions expressed are subject to change without notice. This report should not be construed as a request to engage in any transaction involving the purchase or sale of a futures contract and/or commodity option thereon. The risk of loss in trading futures contracts or commodity options can be substantial, and investors should carefully consider the inherent risks of such an investment in light of their financial condition. Any reproduction or retransmission of this report without the express written consent of Hartfield Management, Inc. is strictly prohibited.
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