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-- Posted Tuesday, 16 May 2006 | Digg This Article
METALS: OVERNIGHT CHANGES THROUGH 4:00 AM: GOLD -2.00, SILVER -23.00
London Gold Fix $681.00 -12.00 LME COPPER STKS 109,150 ml tns
-4,925 tns
GOLD stks 7.746 ml oz, Unchanged COMEX SILVER stks 122.7
ml oz, -90,371 oz OVERNIGHT ACTION: Chinese and European gold were down sharply off follow through selling from Monday. GOLD: OUTSIDE MARKET DEVELOPMENTS: With the rest of the precious metals showing weakness again overnight, the US Dollar somewhat firmer early and oil prices weak again, it would seem that the liquidation or profit taking tilt has remained in place. With European economic readings soft this morning and world equity markets registering some unease over the last several sessions, the gold market senses a lowering of growth and inflation expectations. With an important US inflation number due out this morning, the trade will be quite interested in the US PPI readings and considering somewhat hot international inflation readings released overnight it would appear that the trade expects some minimal support from the US scheduled numbers this morning.
GOLD MARKET FUNDAMENTALS: While the Press overnight carried stories about some light physical buying on weakness, the gold market looks to come into the early US session back on its heels again. However, with the EU preparing to offer Iran a complete Civilian Nuclear program, oil prices weak again and recent US economic numbers a bit soft, it seems as if physical and investment demand expectations in gold will remain soft. In fact, with Chinese and European gold starting the session out soft and the US Dollar showing strength, it is would seem that the early setup today resembles the setup from Monday morning. However, the US PPI report this morning is expected to show some inflation but under the current sentiment, it might take evidence of "hot inflation" just to countervail the negative commodity tilt and re-inspire the fund buyers. One might note that the range of expectations on the PPI report this morning contains some fairly lofty inflation expectations and for that reason, many traders think that the liquidation pressure in gold will be mitigated today. With the June gold already managing to bounce off critical support of $675 overnight, it is possible that the market has found a psychological support zone. However, the fundamental picture hasn't totally shifted back into a patently supportive condition yet, as the outlook for global growth is currently questionable, uncertainty from oil price action has declined and for the last few sessions, even the Dollar has bounced. In fact, with the German ZEW readings overnight soft, Russia and China suggesting that they won't vote for force against Iran and ongoing weakness in the stalwart copper market, we have to leave the edge to the bear camp again today. Given the overbought readings in the last COT report, the gold market probably needs to see a PPI reading above +0.8%, just to avoid a further slide in prices. While we think that the up trend will eventually resume, we can't rule out a sub $675 trade today in June gold and perhaps even a $650 trade over the coming two sessions. SILVER: OUTSIDE MARKET DEVELOPMENTS: With gold showing signs of weakness in international action overnight, the copper market positing moderate declines overnight and the German ZEW readings soft, we have to think that the bear camp has maintained control over silver prices. While the UK inflation readings might have been supportive for silver this morning, we have to think that the weak German ZEW reading is a more important reading for silver, which has generally favored the industrial demand tilt over the financial investment tilt. In fact, with the copper market showing another moderate decline overnight, we suspect that the bear camp has a feeling that it can control silver prices again today.
SILVER MARKET FUNDAMENTALS: One can't help but acknowledge that silver lagged behind the rest of the metals markets on the recent rally and therefore the silver market might be slightly less vulnerable to an aggressive downside extension from a pure technical perspective. However, with world equity markets under some pressure and copper posting a massive two day decline, the expectation for softer physical demand seems to be confronting silver players. In fact, a number of traders have already suggested that silver looks to track the equity market in the coming sessions, while others think that silver will derive a bit of support today from a partially hot US PPI reading this morning. Given the recent popularity of silver as an investment, many traders are expecting fresh buying interest to show up soon and with today expected to be the third day down from the highs, and silver coming into the action this morning approximately $2.13 below the recent highs, some of the overdone status of the market has probably been mitigated. As suggested already, the silver market needs to see an improvement in the economic outlook, the return of inflationary expectations or perhaps more importantly, a return to the financial uncertainty brought on by a weak Dollar or rising oil prices. In the mean time, the bear camp has an edge and a decline in the July silver to the $12.50 level and perhaps even the $12.00 level can't be ruled out. However, we will be watching closely for signs of renewed fund buying interest on the coming weakness and we will watch for signs that the macro economic outlook is going to improve off a downside extension in oil prices. Watch and wait for a fresh long entry point, but the time to get long is probably not this morning, unless the PPI report posts a 1% gain this morning. METALS TECHNICAL OUTLOOK 5/16/2006 COMEX SILVER (JUL) 05/16/2006: A crossover down in the daily stochastics is a bearish signal. Declining momentum studies in the neutral zone will tend to reinforce lower price action. The close under the 18-day moving average indicates the intermediate-term trend could be turning down. The gap down on the day session chart is bearish with more selling pressure possible today. There could be some early pressure today given the market's negative setup with the close below the 2nd swing support. The next downside objective is 1273.5. The next area of resistance is around 1364.0 and 1395.5, while 1st support hits today at 1303.1 and below there at 1273.5. COMEX GOLD (JUN) 05/16/2006: Momentum studies trending lower from overbought levels is a bearish indicator and would tend to reinforce lower price action. A negative signal for trend short-term was given on a close under the 9-bar moving average. The gap lower price action on the day session chart is a bearish indicator for trend. There could be some early pressure today given the market's negative setup with the close below the 2nd swing support. The next downside target is 666.3. The next area of resistance is around 695.5 and 708.2, while 1st support hits today at 674.5 and below there at 666.3.
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.
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-- Posted Tuesday, 16 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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