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-- Posted Tuesday, 30 May 2006 | Digg This Article
METALS: OVERNIGHT CHANGES THROUGH 4:00 AM: GOLD +2.50, SILVER +10.50
London Gold Fix $652.25 +.25 LME COPPER STKS 105,625 ml tns
+400 tons
GOLD stks 7.796 ml oz, -97 oz COMEX SILVER stks 110.1
ml oz, -2,358,222 oz OVERNIGHT ACTION: Modest gains overnight most in the wake of moderate Dollar losses. GOLD: OUTSIDE MARKET DEVELOPMENTS: A sharp slide in the Dollar overnight seems to have sparked some optimism in gold to start the US holiday shortened week. With oil prices generally higher and the rest of the metals markets higher this morning, the gold market certainly has a number of positives going in its direction. On the other hand, weakness in the equity market might dampen part of the optimism being generated by the Dollar and oil. We might also note that the action in the oil market is somewhat diffused and might not be considered patently supportive for gold at the start of the session today. The gold market will see a fairly active flow of US economic news this morning and that could add or detract from the somewhat favorable macro economic spin that was left over from last week's action.
GOLD MARKET FUNDAMENTALS: While the US gold market action was showing signs of early strength this morning, Sydney gold was lower off what the Press labeled a lack of investor interest. From the early sweep of market action this morning, it would not seem like the gold market is in for a perfect storm of positives, unless the equity market recovers and unleaded gasoline prices join the rest of the energy markets in their upside bids. With the early futures action this morning indications showing a moderately weak equity market, it could be imperative to see favorable US scheduled information, just to countervail the concern of slumping physical demand for gold. With volume and open interest patterns still in what seems to be a liquidating pattern, the technical trade continues to be concerned of more downside action. However, the most recent COT report readings did show a moderate liquidation in the prior weeks Non-Commercial long position and since the gold market comes into the action this morning, nearly $20 below the level where the COT report was measured, it is possible that the net spec long position in gold was overstated by the CFTC weekly report. As we have already suggested, the May 23rd Commitment of Traders with Options report showed the Gold Non-Commercial position to be net long only 103,596 contracts and that is a decline of 15,626 contracts on the week. With the nearly $20 per ounce break since that report was compiled, we suspect that the combined spec long position of 143,000 contracts is reduced even further. However, the gold market is still generally vulnerable to long liquidation, especially if the outside market conditions promote liquidation. In fact, as long as the Dollar is weak and the gold market may not find support on the charts until 84.14, but with the Dollar pointing downward we assume that gold will be mostly underpinned by the currency market action. In the end, we can't rule out a trading range today bound by $636.5 and $661.5 basis. SILVER: OUTSIDE MARKET DEVELOPMENTS: Slightly positive gold market action and generally upbeat copper market action seems to leave silver in a positive tilt into the US opening. However, we have to think that the silver market is a little more put-off by the weakness in the stock market than the gold market, as silver probably needs to rely more on physical demand than the gold market, which at times benefits from flight to quality and currency influences. A very negative prediction of a 1987 style stock market liquidation in the copper market, might also deter some would be buyers of silver over the coming sessions.
SILVER MARKET FUNDAMENTALS: The silver market continues to see a significant drawdown in stocks and that could be a signal that implied investment demand has been stimulated instead of weakened in the wake of the slide off the May highs. With stocks falling by as much as 1 to 3 million ounces per day for most of the last two weeks, it would seem like some type of physical or delivery play is underway. An increase in Japanese silver imports in the month of April reverses the pattern of declines seen in the prior month and that might also add to the idea that physical demand is set to remain strong. In the most recent COT report reading on silver, the combined spec and fund long positioning was reduced slightly and while the silver positioning is considered slightly overbought, the market isn't patently overbought as a result of the new data. Given the early slide in the stock market (into the US opening today) it might be critical for the silver market to see something positive from the regularly scheduled US economic information, as the silver market seems to be alternatively concerned about slackening economic commodity whether or not the funds are poised to liquidate aggressively. With the May 23rd Commitment of Traders with Options report showing the Silver Non-Commercial position to be net long 23,591 contracts and the Non-reportable position net long 23,682 contracts for a combined spec and fund long position of 47,000 contracts, the silver market could be considered somewhat vulnerable on the charts. However, since the COT report was measured, the silver market has declined 34 cents and has seen volume and open interest level out after the pattern of declines that were seen immediately after the April 20th washout in prices. Therefore, we get the sense that the July silver sees some fundamental and technical support down at the $12.00 level but we are not convinced that the silver market poised to restart the uptrend pattern in the coming sessions. METALS TECHNICAL OUTLOOK 5/30/2006 COMEX SILVER (JUL) 05/30/2006: Momentum studies are declining, but have fallen to oversold levels. The close below the 9-day moving average is a negative short-term indicator for trend. The market has a slightly positive tilt with the close over the swing pivot. The next downside objective is 1233.5. The next area of resistance is around 1289.0 and 1297.5, while 1st support hits today at 1257.1 and below there at 1233.5. COMEX GOLD (JUN) 05/30/2006: Daily stochastics are trending lower but have declined into oversold territory. The close below the 9-day moving average is a negative short-term indicator for trend. The market has a slightly positive tilt with the close over the swing pivot. The next downside objective is now at 635.3. The next area of resistance is around 658.0 and 663.2, while 1st support hits today at 644.0 and below there at 635.3.
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.
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, 30 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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