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-- Posted Tuesday, 23 May 2006 | Digg This Article
METALS: OVERNIGHT CHANGES THROUGH 4:00 AM: GOLD +2.10, SILVER +22.00
London Gold Fix $661.70 +16.50 LME COPPER STKS 107,150 ml tns
-175 tons
GOLD stks 7.796 ml oz, Unchanged COMEX SILVER stks 120.4
ml oz, -86,633 oz OVERNIGHT ACTION: International Spot gold prices were higher, while Chinese gold futures ended up sharply. GOLD: OUTSIDE MARKET DEVELOPMENTS: While the Dollar is somewhat higher this morning, the reversal from the highs on Monday seems to have provided some underlying support to gold this morning. In other outside market action, copper silver and platinum prices are all higher overnight and with the equity market and energy prices also firmer early in the trade today, outside market conditions are the best in perhaps seven sessions!
GOLD MARKET FUNDAMENTALS: In addition to favorable outside market conditions today, we suspect that the demand outlook for gold is improved by the upgrade in the Chinese 1st quarter GDP reading from 10.2% to 10.3%. We also think that gold is being supported by talk in Australia that they might have to hike interest rates even further, just to countervail the inflationary impact of surging Chinese demand for Australian materials. In other words, in addition to the favorable macro economic inputs the trade is once again anticipating ongoing strength in physical gold demand. In another positive fundamental note, China's Central bank has indicated that it will set up a reserves management center to control the country's reserve investment in gold. With Dow Jones reporting Chinese gold reserves to be 600 tons at the end of March and Chinese currency reserves at a stellar $875 billion, it would certainly seem like the Chinese are a little lopsided in their reserve diversification and may, as some have predicted, move to increase their gold holdings. With the Chinese setting up a mechanism for controlling gold reserves, the recent talk of increasing gold reserves up to analyst projections of 2,500 tons has become a little more tenable. In short, demand fundamentals have improved and we suspect that the investment interest will also be stirred by the improving physical demand talk. In the mean time, the market seems to have garnered some solid support on the charts off the $650 level. With the fundamentals of supply and demand coming back toward the bull camp, at least part of the recent commodity liquidation wave is countervailed. In fact, seeing the Chinese growth news and the rekindled anticipation of increased Chinese central bank reserve buying of gold, should be a warning to would-be sellers of gold, that this market isn't one to be attacked without concern for the repercussions. We also have to think that slightly higher equity price action, stronger oil prices and the prospect of more stern dialogue toward Iran, is providing the market with fresh buying support. We also have to think that the bears had the conditions yesterday to hammer gold downward and they appear to have missed out on a golden opportunity. Therefore, it certainly appears like control has shifted at least temporarily, back to the bull camp. However, it would not be a positive development to see a June gold trade back below the $651 level, but a trade back above $664 could increase the dominance of the bull camp. SILVER: OUTSIDE MARKET DEVELOPMENTS: The silver market is also seeing mostly favorable outside market conditions today, with the Dollar non-descript, most metals prices higher and the equity market showing early gains. However, the higher copper price action might be the most important development this morning, as that could shore of expectations for strong Asian physical demand. With the silver market lagging the most, of all metals markets over the last month, it would certainly seem like the direction of the equity market is a key component to the trend in the silver.
SILVER MARKET FUNDAMENTALS: We suspect that investment demand expectations will rise with the upward revision in the Chinese GDP and we also suspect that rising energy prices and rising equity prices are making the overall environment for silver look the best in two full weeks. However, in a negative note, Kodak announced that they would increase film costs and that might be seen as a slight detraction from the physical demand front. Like the gold market, silver appears to have recoiled away from the even numbers zone of $12.00, and some traders are suggesting that the silver market has salvaged a higher bottoms formation, despite the aggressive compacted selling seen in the first half of May. In the near term, the silver market still probably needs to rekindle growth and inflation expectations even further, just to keep the commodity fund selling pressure from returning to the market. With the US economic report slate becoming a little more active today, and oil prices firming in the face of the coming numbers, the silver market seems to start the session out on a much better footing. The silver has not only rejected the sub $12.00 price level but it seems that the outside market forces have shifted back toward the bull camp. However, given the consistency of the selling since the May highs and the presence of such bearish commodity market dialogue, one can't suggest yet that the bear tilt has run its course. However, seeing the July silver regain $12.82 in the July contract might spark follow through to the $13.00 level. In summary to fully put the recent liquidation wave behind the market, the US numbers have to be positive, stock prices have to rise and oil prices have to remain well bid. METALS TECHNICAL OUTLOOK 5/23/2006 COMEX SILVER (JUL) 05/23/2006: The downside crossover of the 9 & 18 bar moving average is a negative signal. Momentum studies are still bearish but are now at oversold levels and will tend to support reversal action if it occurs. 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 target is 1211.1. The next area of resistance is around 1257.0 and 1267.0, while 1st support hits today at 1229.1 and below there at 1211.1. COMEX GOLD (JUN) 05/23/2006: Declining momentum studies in the neutral zone will tend to reinforce lower price action. The market's short-term trend is negative as the close remains below the 9-day moving average. The daily closing price reversal up on the daily chart is somewhat positive. The market tilt is slightly negative with the close under the pivot. The next downside target is now at 639.8. The next area of resistance is around 664.9 and 668.7, while 1st support hits today at 650.5 and below there at 639.8.
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 Tuesday, 23 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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