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-- Posted Friday, 19 May 2006 | Digg This Article
METALS: OVERNIGHT CHANGES THROUGH 4:00 AM: GOLD +2.40, SILVER +16.00
London Gold Fix $682.00 -6.00 LME COPPER STKS 106,825 ml tns
-1,325 tns
GOLD stks 7.796 ml oz, Unchanged COMEX SILVER stks 121.5
ml oz, +581,453 oz OVERNIGHT ACTION: Minimal gold gains overnight but Dollar strength has the market's attention. GOLD: OUTSIDE MARKET DEVELOPMENTS: With the Dollar returning to the vicinity of the recent highs, we suspect that a negative currency market psychology is going to continue hanging over the gold market. With the current and former US Fed Chairman both expressing concern over inflation and at the same time hinting at vulnerability in the US housing market, it is possible that the flight to quality interest in gold partially offsets the potential negative impact of a rising US Dollar. While the US equity market is showing some strength this morning, world equity markets on the week have been mostly undermining gold. In the energy complex, higher early price action might be considered supportive, but the gold market seems to be accepting a negative impact from the oil sector this week. Finally, sharply lower copper price action this morning suggests that physical demand expectation in at least one key market remains off balance. However, it is a positive that platinum prices are showing significant strength this morning, as that serves to countervail the negative tilt being thrown off by copper this morning.
GOLD MARKET FUNDAMENTALS: While the Japanese have come out with economic information this morning that points to expanding growth, the promise of higher global interest rates seems to countervail some of the hope for improving physical demand. In the US, both physical and investment demand remains off balance, especially with the US Dollar rising and the US equity market generally hinting at a slowing of the US economy. However, Asian traders this morning suggested that the decline in gold prices this week, has attracted jeweler, fabricator and investor demand! In a negative note, Gold Fields has made an attempt to expand production in western production areas and that is a sign that higher prices are beginning to stimulate companies to expand production. However, seeing Asian interest on breaks is very positive, but it is certainly clear that the threat of rising US interest rates has cast a cloud over the gold market this week. While inflation is typically supportive to gold, when inflation ushers in aggressive rate hike action, the result can be violent back and forth price action in gold. However, the US economic report slate is empty today and somewhat light early next week, and that should make the action in the equity market a much more important factor. While the gold market is higher in the early going today, we have to note the persistent strength in the Dollar, as a higher Dollar could end up taking early control away from the bull camp. As we have already suggested, the main focal point of the trade will probably continue to be the direction of the US equity market. With the equity markets expressing concern over the pace of future growth and equally concerned about another US rate hike, it could be difficult for the gold market to hold above $675 today unless there is a fresh geopolitical concern floated in the Iranian situation. In fact, without some fairly disconcerting political development it is possible that the bears will try to press prices down again today. However, even though a number of Wall Street analysts are jumping on the "commodities are over-valued band wagon" we are still not inclined to call for a top in gold. On the other hand, unless there is a more upbeat view in the equity market, or a significant increase in global financial uncertainty, the near term edge in gold goes to the bear camp. SILVER: OUTSIDE MARKET DEVELOPMENTS: With copper starting the session out weak again and the Dollar showing some strength, the silver market is seeing a partially negative outside market impact this morning. However, the sharp bounce in platinum is a bright spot, but that potential lift isn't getting much attention in the early action today. It is positive that early US stock index futures action is positive, especially after the mostly negative macro economic impact of the numbers this week. In other words, it might be a positive that the US economic report slate is empty today. However, as suggested in the gold market commentary this morning, the trade is apparently looking to the stock market for a significant portion of its guidance.
SILVER MARKET FUNDAMENTALS: Unfortunately for the bull camp in silver, the market hasn't seen a continuation of declines in physical silver supplies, as a decline in stocks, in the wake of the recent setback in prices, might have suggested renewed physical buying interest on price declines. On the other hand some might suggest that the positive economic dialogue from Japan is a positive for silver, but the overall track in the global equity markets in the coming sessions looks to be the final arbiter of expectations for global growth. In retrospect, it is difficult not to see this week's equity market action as a major negative for silver prices. Furthermore, physical demand expectations are off balance and recently even investment interest has waned. Some traders have suggested that July silver has a critical point on the charts today of $12.50, while others suggest there is little classic support on the charts until the $12.00 level. Despite some initial gains early today the onus seems to be on the bull camp to prove that more declines aren't in store for the silver market. We still don't think that the bull market has run its course, but to rekindle the buying interest might require a much more optimistic view toward the economy, or a fresh financial/geopolitical crisis. For the time being, the world is apparently going to give Iran a pass and it would also seem like oil prices are going to fail to inspire uncertainty. In conclusion, we expect the silver market will continue to waffle and could with a minor nudge, see the July contract slump down to more significant support down around $12.00. METALS TECHNICAL OUTLOOK 5/19/2006 COMEX SILVER (JUL) 05/19/2006: The close below the 40-day moving average is an indication the longer-term trend has turned down. Momentum studies trending lower at mid-range could accelerate a price break if support levels are broken. The close below the 9-day moving average is a negative short-term indicator for trend. The swing indicator gave a moderately negative reading with the close below the 1st support number. The next downside target is now at 1192.5. The next area of resistance is around 1291.0 and 1348.5, while 1st support hits today at 1213.1 and below there at 1192.5. COMEX GOLD (JUN) 05/19/2006: Stochastics trending lower at midrange will tend to reinforce a move lower especially 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 market tilt is slightly negative with the close under the pivot. The next downside target is 669.5. The next area of resistance is around 688.3 and 699.0, while 1st support hits today at 673.5 and below there at 669.5.
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, 19 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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