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-- Posted Monday, 5 June 2006 | Digg This Article
DAILY US METALS COMMENTARY 06/05/06 METALS: OVERNIGHT CHANGES THROUGH 4:00 AM: GOLD +7.50, SILVER +22.50
London Gold Fix $644.50 +13.70 LME COPPER STKS 108,275 ml tns
-1,525 tons
GOLD stks 7.795 ml oz, -195 oz COMEX SILVER stks 108.2
ml oz, -226,850 oz OVERNIGHT ACTION: The combination of higher oil and a weaker $ fueled global buying. GOLD: OUTSIDE MARKET DEVELOPMENTS: The Dollar came within striking distance of the May lows this morning and is largely supporting gold into the US opening even though the Greenback has bounced away from its lows. With Crude Oil prices rising above $74.00 overnight and gasoline prices apparently leading the way to even higher prices ahead, the gold market seems to be getting renewed flight to quality buying interest. However, overnight one Press outlet suggested that gold was seeing some buying interest from funds moving from oil into gold. With global stock markets a bit off balance overnight, as a result of the oil price action, the precious metals markets fail to get a totally clean sweep of outside market influences into the US opening this morning.
GOLD MARKET FUNDAMENTALS: With the Dollar seemingly headed back to its recent lows and the headlines carrying stories about increased central bank interest in gold, it would seem like both physical and investment interest in gold is firming again. According to an article in a UK Newspaper, the gold market is seeing big money investors moving back into gold at an aggressive pace, in fact on the May dip in prices, "big money" buyers were apparently very aggressive in increasing their holdings of gold. Apparently Russian players were a leading component of the big money players that have recently swooped back into the long side of gold. In retrospect the metals were surprisingly supported by the US Employment report readings last Friday, as the trade saw the combination of a smaller Non farm payroll gain and a decline in the US unemployment rate, as a sign that the US economy was seeing healthy growth that in the end, might allow the Fed to pause. Seeing the Fed pause might be the best outcome for gold, as that might allow the US economy to re-gather some speed and at the same time would generally undermine the US Dollar. A number of traders have suggested that the $650 level in the August contract has become a critical pivot point in the near term trade. It should also be noted that the recovery bounce last week in gold was $30 and that same type of bounce this week would project to nearly $654. With the Dollar down, oil up and copper/platinum also higher, the bull camp certainly seems set to start the week in control of sentiment. However, in order to shift sentiment permanently into the bull camp, the gold market might have to see price gains accompanied by an increase in trading volume and open interest. The May 30th Commitment of Traders with Options report showed the Gold Non-Commercial position to be net long 100,231 contracts, with the Non-reportable position net long 41,415 contracts for a combined spec and fund long of 141,000 contracts. However the gold market, from the COT report mark off date was at times last week, down $37 an ounce and therefore the technicals will probably support a bit of short covering buying early this week. From the fundamental front, there should be some initial buying interest and that could serve to push gold up toward the first resistance point on the charts of $654. SILVER: OUTSIDE MARKET DEVELOPMENTS: With platinum and copper higher this morning and gold price action this morning also supportive, about the only limiting element for silver this morning is a bit of weakness in world equity markets. The market continues to see a leveling of trading activity in the Silver ETF instrument, but in general the recent $2.00 break in silver prices didn't seem to push investors aggressively away from the market. While the gold market is getting support this morning from the rise in oil prices, the silver market might actually be held back some by the macro economic concerns that are normally sparked by the threat of exploding energy costs. Given recent action, it seems that silver market will attempt to take more direction from copper prices, than from the gold market.
SILVER MARKET FUNDAMENTALS: Another minor decline in exchange stocks overnight seems to keep the physical supply issue in a supportive posture. However, in order to get a true physical supply threat in motion, total exchange stocks will have to slide below the 100 million ounce level. On the other hand, new alternative silver investment tools might have siphoned off 60 to 70 million ounces from the world supply equation and therefore it might not take as big of a drawdown in supply to spark another wave of concentrated speculative buying in silver. The big question many traders are asking is whether or not the silver, platinum and copper markets can continue to rise in the face of a slumping equity market. While equity prices recently have regained their footing, the rise in oil prices overnight might serve to undermine equities and in turn undermine the macro economic outlook. While investment interest remains a dominating force in silver, the market must also keep physical demand expectations running hot to justify an extension of the bull trend. Therefore, players will be watching action in the stock market closely. While the July silver seems to have regained its footing with a rise back above $12.00, we have not seen volume and open interest rise in confirmation of the bull recovery. As we have already mentioned, the near term setup in the market is somewhat less impressive than in the January through March time frame, as oil prices no longer seem to be able to rise in concert with the equity market. We concede the path of least resistance to be up in silver but unfortunately volatility against the upside trend looks to remain quite severe. The May 30th Commitment of Traders with Options report showed the Silver Non-Commercial position to be net long 24,916 contracts, with the Non-reportable position net long 24,558 contracts for a combined spec and fund long of 49,000 contracts. However, like gold, silver action late last week probably pushed a large number of longs out in the washout down last week and therefore the technical setup in silver this morning is probably conducive to some near term buying interest. Near term targeting in July silver is $12.77. METALS TECHNICAL OUTLOOK 6/5/2006 COMEX SILVER (JUL) 06/05/2006: Daily stochastics declining into oversold territory suggest the selling may be drying up soon. The market's close below the 9-day moving average is an indication the short-term trend remains negative. With the close higher than the pivot swing number, the market is in a slightly bullish posture. The next downside objective is now at 1174.8. The next area of resistance is around 1225.5 and 1242.8, while 1st support hits today at 1191.5 and below there at 1174.8. COMEX GOLD (AUG) 06/05/2006: Momentum studies are still bearish but are now at oversold levels and will tend to support reversal action if it occurs. The market's close below the 9-day moving average is an indication the short-term trend remains negative. The market has a slightly positive tilt with the close over the swing pivot. The next downside objective is 630.0. The next area of resistance is around 646.0 and 650.0, while 1st support hits today at 636.0 and below there at 630.0.
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 Monday, 5 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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