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-- Posted Friday, 2 June 2006 | Digg This Article
METALS: OVERNIGHT CHANGES THROUGH 4:00 AM: GOLD +2.90, SILVER +21.00
London Gold Fix $630.80 -2.45 LME COPPER STKS 109,800 ml tns
-1,300 tons
GOLD stks 7.795 ml oz, Unch COMEX SILVER stks 108.4
ml oz, -398,806 oz OVERNIGHT ACTION: Chinese spot gold lower in response to global gold market weakness. GOLD: OUTSIDE MARKET DEVELOPMENTS: While the copper and platinum markets are giving off slightly more optimistic signals in the early going today, than was seen on Thursday, the overall outside impact on gold looks to be limited. In fact, world equity markets are mixed, the US Dollar is virtually unchanged and the energy complex is marginally higher. However, with the gold market seeing somewhat undermining economic information yesterday morning, it might be even more important today to see an as expected US non Farm payroll reading. In fact, considering the recent broad based weakness in the metals markets, many traders see the payroll report today as a major crossroads for gold. However, given the recent strength in the US Dollar, a slightly hotter than expected US payroll gain this morning could end up countervailing some of the physical and investment buying interest that could be prompted by a strong number.
GOLD MARKET FUNDAMENTALS: It would seem like the gold market has adopted a slightly more optimistic attitude overnight, especially if one compares the action this morning to the action Wednesday and Thursday morning. At times over the last two sessions, the gold market seemed to be in danger of a sustained broad based commodity selling wave and with the US numbers softening yesterday and the Dollar generally strong, the bear camp had a number of elements working in its favor. Therefore, while prices are attempting to firm in the early going today, the market still has a feeling of vulnerability. In short, the bull camp could be right back on the rocks, if the numbers today fail to denote solid forward progress in the US economy. On the other hand, equity market action on the week has been supportive of the bull tilt, energy prices seem to be firmly underpinned again and perhaps most importantly, copper and platinum prices have for now, rejected aggressive selling pressure. While the overall numbers might not be that significant to the world gold market, Turkey did report a 45% increase in May gold imports overnight. In another news item from Thursday, Russia noted a recent increase in gold reserves, so there does appear to be some positive countervailing fundamental news to the mostly bearish headline flow in gold week. However, to finish the week above the recent lows, the gold market might have to come through the US data this morning, with a sense that fears of US slowing are misguided. While the August gold seems to have rejected the $625 probe, it did manage a minor new low for the move before recovering. At least in the early going today, the gold market is out from under aggressive copper and platinum selling pressure and the Dollar is quiet. Unfortunately, we see the US non farm payroll reading as a middle of the road reading that might be partially discounted due to the anticipated slide in the US Factory orders report later in the session. In our opinion, the gold market remains vulnerable, especially with a number of media outlets suggesting that the commodities bull market is due for a 3 to 6 month corrective slide. Therefore, the opposition to gold is certainly present and will probably attempt to pressure prices if the US numbers fail to foster growth views. Some traders continue to point to a gap on the August gold chart down around $613.50 to $614 as a solid fair value zone. In order to throw off the liquidative tilt in gold definitively today, the market needs to see the US numbers pick up, energy prices start to rise again and the Dollar clearly back into a down trending pattern. For the time being, we are willing to sell out of the money near to expiration Gold calls. However, long term position players should be long gold, but short calls and long puts against that positioning. SILVER: OUTSIDE MARKET DEVELOPMENTS: Fortunately for the silver bulls, the action in platinum and copper prices overnight is much less undermining than it has been at times this week. Seeing platinum and copper under such significant pressure seems to foster broad based commodity fund liquidation, as those markets were early leaders in the commodity bull market. While the silver market hasn't been lifted by favorable action in the equity market this week, the selling pressure in silver could have been much more significant this week, if the stock market had remained under pressure. Therefore, a favorable US payroll report today might not lift silver prices, but a weak payroll reading could easily serve to rekindle selling pressure in silver.
SILVER MARKET FUNDAMENTALS: With silver exchange stocks overnight showing another casual decline overnight, the supply situation remains somewhat supportive. However, ETF holdings of silver declined to $824 million, with only 68.4 million ounces of silver being held in the Trust. However, despite a break of approximately $2.00 from the May highs, there really hasn't been an aggressive liquidation of silver, certainly not to the magnitude that some were expecting. In fact, if the amount of silver held in the Trust recovers on a bounce in silver prices, that could leave the market with the impression that players are being pushed away from the silver market easily. On other hand, seeing the silver prices continue to correlate with platinum and copper prices highlights the physical demand focus in silver and that means silver needs constant confirmation that the US economy is still growing. Key developments for the silver market today, would be a S&P trade above 1287.50, a June Dollar above 85.00 or a May Non Farm payroll gain below +170,000. The silver IShares posted an 800,000 share trading day on Thursday, with the Trust holding only 68.9 million ounces and that is indicative of slight slackening of interest. While July silver has managed to rebound back above a past critical support level of $12.00 overnight, it must prove that it can finish the session on a positive footing to downplay the bearish short term trend. In fact, the talking heads continue to predict a significant correction in commodity prices ahead, with some predicting an end to the commodities boom. Therefore the bull camp needs help from the numbers today just to discount correction fears. In our opinion, the market would not present a favorable technical look today, if July silver falls back below a critical pivot point of $11.80. In the end, we don't think the up trend has run its course, but we still can't rule out a slide back below $11.50. Therefore, those looking to get long, should consider selling calls and buying puts as a way to sustain the position through more indecisive action. METALS TECHNICAL OUTLOOK 6/2/2006 COMEX SILVER (JUL) 06/02/2006: The close below the 60-day moving average is an indication the longer-term trend has turned down. Daily stochastics are trending lower but have declined into oversold territory. The market's short-term trend is negative as the close remains below the 9-day moving average. The gap lower on the day session chart is bearish and puts the market on the defensive. The market's close below the 1st swing support number suggests a moderately negative setup for today. The next downside target is now at 1124.8. The next area of resistance is around 1222.5 and 1252.8, while 1st support hits today at 1158.5 and below there at 1124.8. COMEX GOLD (AUG) 06/02/2006: Momentum studies are still bearish but are now at oversold levels and will tend to support reversal action if it occurs. The market's short-term trend is negative as the close remains below the 9-day moving average. The gap down on the day session chart is bearish with more selling pressure possible today. The market setup is somewhat negative with the close under the 1st swing support. The next downside target is 619.9. The next area of resistance is around 640.0 and 645.8, while 1st support hits today at 627.0 and below there at 619.9.
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 Friday, 2 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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