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-- Posted Thursday, 1 June 2006 | Digg This Article
METALS: OVERNIGHT CHANGE to 4:00 AM:London Gold Fix $633.25 -10.75 LME COPPER STKS 111,100 ml tns -1,075 tons GOLD stks 7.795 ml oz, Unch COMEX SILVER stks 108.4 ml oz, -255,246 oz OVERNIGHT ACTION: Gold was lower in Sydney overnight because of more strength in the Dollar. GOLD OUTSIDE MARKET DEVELOPMENTS: With the Dollar higher again and a partial commodity selling mentality present in the marketplace, the bear camp seems to have retained an edge overnight. Already this morning the gold market is presented with slightly less optimistic macro economic readings, from the UK where the PMI report was soft and from the Euro zone, where 1st quarter GDP was up only +0.6%. Apparently the gold market was partially disappointing in the FOMC meeting minutes released yesterday, but there will also be significant US data released again today. Just to round out the outside forces applying some pressure to gold this morning, is a pattern of softer oil prices in the early action. GOLD MARKET FUNDAMENTALS: The gold market comes into the action this morning under pressure again and with the June Dollar Index at times overnight 100 points above the low from Wednesday, there is some justification for the early gold weakness. While the US equity market managed an impressive bounce yesterday, a number of global equity markets were under pressure overnight because of the fear of rising US interest rates and that seems to be providing the gold market with some fresh liquidation pressure. Chinese spot gold was lower overnight and that mostly follows the global pattern for the metal. With a heavy slate of US economic information set to flow, the bears will be looking for soft numbers, while the bulls are hopeful that the economic picture will brighten enough to discourage a broad based commodity fund selling wave. However, it seems that the tension toward Iran is declining slightly, with the US agreeing to talks and Japan suggested that they were not planning sanctions against Iran. Given the weakening of resolve, we suspect that Iran will be very willing to talk but will be even more set against halting enrichment. It would also appear that the weekly oil inventory readings this morning will dampen inflationary concerns, as another rise in gasoline stocks today, will be the 5th straight rise in stocks and that lowers the macro economic concern of a summer gasoline supply debacle. In short, at this early hour, the bear camp seems to have a large number of factors favoring its views and the expectations for the scheduled releases this morning also seem to favor the bear camp. With the overnight chart action pretty negative and the majority of the fundamental issues favoring the bear camp, it is difficult to argue against a continuation of the downside action. In fact, we wouldn't be surprised to see the August gold slide to lower consolidation support of $625 and perhaps even to the old gap area down at $614 to $613.5 in the event that the numbers today point to a softening US economy. Seeing a soft US economy and the prospect of ongoing US rate hikes is a double negative for gold. While volume has started to rise on the current break, we still haven't seen a noted rise in open interest that would indicate a value zone. In fact, the bear camp looks to maintain control until gold prices arrive at an even lower trading range. Traders might consider selling July gold $655 calls for 1300 as a short term trade, with the July options having only 26 days until expiration. SILVER OUTSIDE MARKET DEVELOPMENTS: With several world equity markets fearful of rising US interest rates and equity prices in general factoring a slower growth track for 2006, it would seem like the environment remains bearish toward silver. In fact, with platinum and copper very weak on Wednesday and apparently poised to follow through on that weakness again today, it is clear that physical and investment demand for silver is still being downgraded by the metals trade. Like the gold market, the silver will be watching the US equity market closely for direction today and with the US economic report slate very active, it is possible that a more salient opinion on the US economy will be derived from the headlines today. As it stands, the silver trade seems to be assuming a partially weak US economic track. SILVER MARKET FUNDAMENTALS: With both platinum and copper prices under moderate pressure and the macro economic outlook in the US softening, it would seem that the physical and investment demand theme is being tempered. Surprisingly very favorable macro economic information from Europe, the UK and India yesterday failed to improve psychology toward silver and for that reason we have to think that the trade will be attempting to put a bearish spin on the flow of information from the US this morning. While the rise in the Dollar is a negative to silver, that impact continues to be indirect, but against a backdrop of more weakness in copper and platinum today it is likely that the bear camp will retain an edge. A minor decline in exchange stocks overnight just barely keeps the talk of a physical play in the news overnight. In conclusion, the initial outlook today seems to carry many of the same hallmarks as Wednesday morning and that would seem to give the bear camp an edge. Trading volume in IShares silver appears to have leveled out around 634,000 shares of daily trade volume, with net holdings of silver standing at $907 million and nearly 70 million ounces of silver held by the trust. Therefore, despite a rather significant break in silver prices of nearly $1.00 since the May highs, the investors in silver seem to have held tight. However, given the breadth of slightly bearish items presented to the silver market early this morning, we can't rule out a continued slide toward consolidation support on the charts of $12.00. With a clean sweep of lower equity prices, lower oil prices and a slightly soft tone to the US economic numbers, July silver could slide to the last two months lows of $11.715 over the coming two sessions. METALS TECHNICAL OUTLOOK 6/1/2006 COMEX SILVER (JUL) 06/01/2006: The daily stochastics have crossed over down which is a bearish indication. Momentum studies are declining, but have fallen to oversold levels. The market's short-term trend is negative as the close remains below the 9-day moving average. The market is in a bearish position with the close below the 2nd swing support number. The next downside objective is now at 1176.1. The next area of resistance is around 1286.0 and 1338.0, while 1st support hits today at 1205.1 and below there at 1176.1. COMEX GOLD (AUG) 06/01/2006: The close under the 40-day moving average indicates the longer-term trend could be turning down. Momentum studies are still bearish but are now at oversold levels and will tend to support reversal action if it occurs. A negative signal for trend short-term was given on a close under the 9-bar moving average. The close below the 1st swing support could weigh on the market. The next downside target is now at 630.2. The next area of resistance is around 659.9 and 673.7, while 1st support hits today at 638.1 and below there at 630.2.
-- Posted Thursday, 1 June 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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