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-- Posted Wednesday, 17 May 2006 | Digg This Article
METALS: OVERNIGHT CHANGES THROUGH 4:00 AM: GOLD +21.60, SILVER +30.00
London Gold Fix $713.00 +32.00 LME COPPER STKS 107,925 ml tns
-1,225 tns
GOLD stks 7.746 ml oz, -359 oz COMEX SILVER stks 122.7
ml oz, Unchanged OVERNIGHT ACTION: A huge recovery rally overnight might have been related to an Iranian rejection of EU Atomic incentives. GOLD: OUTSIDE MARKET DEVELOPMENTS: With the Dollar lower and the headlines carrying talk that Iran is set to reject the EU diplomatic incentives, it is clear that gold is back in favor. Just to round out the positives, the oil market is higher and the US silver market is poised for yet another US inflation report this morning. Even the equity market is higher today and that should mean that the bull camp is getting help from a wide variety of circumstances. With the US PPI report on Tuesday, showing some signs of inflation, we suspect that the trade is hopeful for yet another favorable story line from the CPI. Estimates for the CPI report call for an increase of +0.6%, but the big question will be, whether or not the headline inflation reading is countervailed by the excluding food and energy (core rate) component!
GOLD MARKET FUNDAMENTALS: With the bull investment themes surfacing again it is not surprising that prices have leapt sharply higher in the early action. With the fundamental wave quite conclusive overnight and geopolitical anxiety also on the rise, one would expect the talking heads to add to the upside momentum with their coverage this morning. With Iran pretty definitive in its rejection of the EU incentives and the US CPI report due out this morning, it won't be difficult for the Press to hype inflation and flight to quality themes today. Perhaps even more important is the fact that the equity market is higher in the face of higher oil prices, as that puts the gold market back into similar conditions to the March through May time frame! Seeing a hint of inflation today and seeing higher equity prices in the wake of the scheduled news should embolden the bull camp. With a $21 per ounce early rise in prices, a large portion of the negative/corrective tilt seen off the early May high is replaced with ideas that this market is poised for a move to an even higher level. As mentioned before, the gold market once again has the support of a host of bullish fundamentals and with the market fresh off a $57 correction, even the technicals should support a move to new highs. About the only undermine for the market today, is the potential for a partially negative weekly oil inventory reading and a negative price reaction in the energy complex. However, with the Iranian rejection of the EU atomic offering, we suspect that classic bearish fundamentals in the energy market will be played down. Therefore, flight to quality, geopolitical uncertainty, inflationary and investment interest all look to combine today to lift gold right back to the old highs. Traders should go ahead and pay up for August Gold call premiums, as the market is probably poised to move to an even higher level in the coming sessions. SILVER: OUTSIDE MARKET DEVELOPMENTS: With gold leaping higher off the Iran flap, the copper and energy markets higher and global equity prices firmer it would seem that the big picture macro economic condition has shifted back into positive ground again. We suspect that the US CPI report this morning will be marginally supportive, with the silver market watching the direction of the copper market over the direction of oil and the US Dollar. Strong mining share action in European markets this morning seem to complete the shift away from the liquidative tilt seen for three full sessions after the May 11th top in silver.
SILVER MARKET FUNDAMENTALS: With the macro economic condition shifting back into the bull camp overnight, it would seem that the investment tilt has come right back into vogue. In fact, with the market potentially seeing favorable physical demand potentials and potentially getting renewed interest from the inflation front, it is clear that the trade is once again expecting a consistent tightening of silver supply ahead. However, the fundamental development that has really surprised traders in silver is the magnitude of the investment money flowing toward silver. In fact, extrapolating the pace of investment flow toward silver over the last three weeks, the 100 million ounce silver surplus seems to be set to go away quickly and that has buyers in a very aggressive posture. In the near term, the silver market might only be restricted by the threat of overbought technical indicators, especially if the stock market rises in the face of partially inflationary CPI data this morning. The ETF in silver now has a net asset tally of $911 million, with 68.9 million ounces of silver held by the trust. In other words, the pace of flow toward silver (in just one instrument) is simply shocking and while the bear camp wants to suggest that a brightly burning star usually doesn't burn long, we have to suggest that Dow Jones is carrying a headline today that suggests the commodity bull market might run for 10 years. Surprisingly, it was only two days ago that the East Coast media was calling an end to the commodities bubble and yet investors don't seem to be buying that story line. In the end, there is simply more money capable of flowing toward silver, than the market realizes and as long as macro conditions allow for growth and inflation and the Dollar continues to decline, investors will add silver to their holdings. We suspect that silver will have little resistance until the $14.54 level and we also think that July silver will soon see firm support at the $14.00 level. METALS TECHNICAL OUTLOOK 5/17/2006 COMEX SILVER (JUL) 05/17/2006: Momentum studies trending lower at mid-range should accelerate a move lower if support levels are taken out. The market's close below the 9-day moving average is an indication the short-term trend remains negative. The close over the pivot swing is a somewhat positive setup. The next downside objective is 1303.1. The next area of resistance is around 1375.0 and 1387.0, while 1st support hits today at 1333.1 and below there at 1303.1. COMEX GOLD (JUN) 05/17/2006: Stochastics turning bearish at overbought levels will tend to support lower prices if support levels are broken. The close below the 9-day moving average is a negative short-term indicator for trend. The close over the pivot swing is a somewhat positive setup. The next downside objective is now at 679.9. The next area of resistance is around 698.3 and 701.4, while 1st support hits today at 687.5 and below there at 679.9.
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 Wednesday, 17 May 2006 | Digg This Article
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