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-- Posted Friday, 12 May 2006 | Digg This Article
METALS: OVERNIGHT CHANGES THROUGH 4:00 AM: GOLD +3.10, SILVER -10.00
London Gold Fix $725.75 +18.75 LME COPPER STKS 113,950 ml tns +300 tns
GOLD stks 7.67 ml oz, Unchanged COMEX SILVER stks 123.5
ml oz, -34,208 oz OVERNIGHT ACTION: Marginally higher action overnight with some concern for the overbought condition. GOLD: OUTSIDE MARKET DEVELOPMENTS: With the Euro zone growth rate in the second quarter doubling from the 1st quarter yesterday it is not surprising that the gold market saw such impressive follow through in the action Thursday. However, overnight the Chinese posted a slight slowing of imports figures, which in turn pumped up their trade surplus. Some might suggest that slightly slower Chinese imports is a negative toward gold but seeing their surplus continue to expand could end up being bullish toward gold, if their currency reserves rise and they decide to increase their holdings of hold. In other developments the US Dollar is once again into new lows and that should leave the currency influence on gold positive into the last session of the week. On the other hand, sharp declines in equity prices and slightly weaker oil prices might cause some buyers of gold to balk today.
GOLD MARKET FUNDAMENTALS: While the Gold market is showing signs of a higher opening salvo this morning, the rest of the precious metals market action is a little disjointed and the trade is noting some early weakness in European mining shares. Therefore the bias is still generally up, but there would appear to be a few more fundamental cracks in the bull case this morning, as compared to the early action Thursday morning. Reports from India suggest that Indians are migrating gold purchases to bullion instead of jewelry and that could be a function of the soaring price. In the end, it seems that high flat prices are prompting some change in buying patterns, but as of yet haven't aggressively shut down buying interest. With Nigerian concerns resurfacing over the last few sessions, we suspect that pre-weekend geopolitical buying will provide some support to gold later in the session but the significant rise in prices over the last week is sure to raise the spec and fund long positioning in the COT reports (that will be released after the close today). Another potentially supportive development this morning is the release of the US Trade Deficit, as another big trade deficit figure could really rekindle the fear that the US situation is spiraling out of control. In conclusion, a weaker Dollar and little change in the investment outlook for the metals would seem to leave the bull camp with an edge again today. The $725 level in the June gold contract might be considered a temporary resistance point early today, as the market is overbought and the equity market has finally showed some vulnerability to the current geopolitical/economic condition. However, with the Dollar streaking lower and lower on the charts and the view of the US as a flight to quality instrument diminishing, one has to think that gold will generally continue to benefit as a safe haven alternative to the Dollar. In fact, as we suggested several weeks ago, the initial wave of buying in gold was not primarily the result of inflationary expectations and with the Fed still largely unconcerned about inflation in their recent statement, we seriously doubt that gold is bought out on the inflationary theme. In fact, as long as the Fed allows growth and inflation to expand in sync, the gold market should continue to thrive. Unfortunately the pace of gains this week has left little in the way of close-in support on the charts, with first support in the June gold not seen until $713.9 today. SILVER: OUTSIDE MARKET DEVELOPMENTS: The silver market continues to show divergent action this morning, with prices starting the early US session out a little soft. However, the copper market is showing a slightly lower trade early today and with the Chinese reporting lower imports figures this morning and weekly Shanghai copper stocks actually posting a big gain on the week, it is possible that some players are concerned about physical demand expectations in all the metals markets. It is also possible that the first meaningful correction in the stock market in a couple of weeks, is also serving to undermine silver in the early action today. However, there would appear to be enough uncertainty present globally to discourage aggressive profit taking in silver today.
SILVER MARKET FUNDAMENTALS: The factors that can be measured on investment demand in silver continue to be much stronger than expected. With the Press this morning suggesting that the current slide in the stock market is coming because of soaring commodity prices and the inflationary potential because of those price gains, we would suspect that the investment demand for silver will continue to be strong. However, too much weakness in the equity market and too much profit taking in the copper market, could have a temporary negative impact on silver prices, as the trade has adopted the direction of copper prices, as a de-facto indicator on the health of the Chinese economy. On the other hand, with both gold and platinum prices firm this morning and plenty of geopolitical anxiety still present in the headlines, we suspect that silver will generally avoid intense selling interest. Surprisingly the recent ramping up of silver prices hasn't resulted in exchange stocks declining, but that doesn't mean that overall implied ending stocks projections haven't continued to contract. Unfortunately the July silver market comes into the action this morning 28 cents below the new high posted yesterday, but with the US Trade Deficit report due out this morning, we suspect that flight to quality buying in gold and platinum will serve to keep sentiment toward silver positive. However, as in the gold market, the silver market has made such aggressive gains this week, that there is very little in the way of close-in support on the charts until the $14.64 level. Volume on the Silver IShares on Thursday amounted to 1.253 million shares and the net silver held by the Trust was pegged at 61.9 million ounces, so the implied demand expectation for silver continues to rise and that should underpin silver prices! The trend should remain up but the market is going to continue to exhibit rather wide daily trading ranges. METALS TECHNICAL OUTLOOK 5/12/2006 COMEX SILVER (JUL) 05/12/2006: A new contract high was made on the rally. Studies are showing positive momentum but are now in overbought territory, so some caution is warranted. The close above the 9-day moving average is a positive short-term indicator for trend. 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 near-term upside target is at 1565.3. The next area of resistance is around 1532.5 and 1565.3, while 1st support hits today at 1454.5 and below there at 1409.3. COMEX GOLD (JUN) 05/12/2006: A new contract high was made on the rally. Momentum studies are trending higher but have entered overbought levels. The close above the 9-day moving average is a positive short-term indicator for trend. The gap upmove on the day session chart is a bullish indicator for trend. There could be more upside follow through since the market closed above the 2nd swing resistance. The next upside objective is 738.4. The 9-day RSI over 70 indicates the market is approaching overbought levels. The next area of resistance is around 730.6 and 738.4, while 1st support hits today at 712.4 and below there at 701.9.
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 Friday, 12 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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