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-- Posted Tuesday, 6 June 2006 | Digg This Article
METALS: OVERNIGHT CHANGES THROUGH 4:00 AM: GOLD -10.50, SILVER -40.50
London Gold Fix $634.60 -9.90 LME COPPER STKS 107,525 ml tns -750 tons
GOLD stks 7.795 ml oz, Unchanged COMEX SILVER stks 107.6 ml oz, -598,568 oz OVERNIGHT ACTION: Despite higher Oil and stronger equity prices overnight, gold slumped off minimal currency market action. GOLD: OUTSIDE MARKET DEVELOPMENTS: While the Dollar is only marginally stronger against the Euro this morning, the negative impact on gold and the rest of the metals markets seems to be pronounced. However, despite the big overnight declines in gold, we suspect that early strength in oil and equities this morning are serving to countervail some of the initial selling pressure. On the other hand, copper and platinum prices have been showing periodic vulnerability and that has in the past hinted at broad based commodity selling interest in the precious metals. With the US Fed Chairman acknowledging slowing in the US yesterday but also hinting at a clear desire to stay on top of inflationary pressures, it is not surprising to see the bear camp in gold gain the upper hand in the action today.
GOLD MARKET FUNDAMENTALS: From the early action today it is clear that investment and physical demand expectations are crimped this morning. In fact, the Fed commentary yesterday simply seemed to yank the rug out from under the bull camp in gold, as higher US interest rates are seen as an effective move against inflation and higher rates will also provide some support to the Dollar. Perhaps more importantly is the fact that higher US interest rates will probably serve to slow and already slowing US economy. Therefore, the metals markets look to be under some temporary duress and could be threatened with aggressive commodity fund selling pressures in the event that the US stock market decides to extend the aggressive downside washout seen in the action on Monday. Countervailing part of the bearish attitude this morning, are indications of aggressive gold and silver trading volumes in the month of May, as that reiterates the rising tide of investment interest. On the other hand, the gold market might lack the necessary scheduled reports in the near term to easily throw off the sagging macro economic view, but at least a sagging economic view will put Dollar bulls off their game. With the $650 level proving to be solid resistance and the psychological condition deteriorating slightly with the down grade in growth and inflation expectations, it would not be surprising to see August gold slide toward the $625 level on the charts. However, with open interest sliding aggressively and volume falling on the May slide, we are still not willing to concede the end of the gold bull. In fact, seeing the Fed push rates up in June will probably add to the over slowing fears and could send gold prices reeling toward the old gap down at $614 to $613.5 in the August contract, but we suspect that the $625 level will at least offer some temporary but formidable buying interest. On the other hand, as we have been saying for months, the hallmark of the bull case in gold is a solidly progressing forward movement in the US and world economy and right now that theme is in question. Aggressive "short term" traders should be looking to get short August gold on rallies to $650 or should have considered selling calls as per our recent suggestion on the July $660 calls. To cut down on hate-email among the bull camp, we are not long term bearish to gold, but we are short term bearish!! SILVER: OUTSIDE MARKET DEVELOPMENTS: While the gold market weakness is certainly a dominating factor for silver today, the more disconcerting outside development might be the ongoing and more frequent selling pressure in copper prices. In fact, with the US Fed hinting at a June rate hike, the stock market fretting over the threat of over tightening, it is not surprising that the industrially demand driven metals markets are coming under some selling pressure. If the macro economic cloud continues to darken in the wake of additional equity market declines, that could turn up the outside pressure on the silver market in the coming sessions.
SILVER MARKET FUNDAMENTALS: While silver stocks continue to contract at a moderately significant rate, the trade has increasingly become more concerned about slumping investment demand and slumping investment demand could mean lower implied demand and eventually could mean higher ending stocks expectations. With the added burden of pressure in copper prices this morning, the silver market sees conditions that are conducive to broad based selling patterns of the past two months. In fact, many traders are already fretting over the pattern of lower highs and lower lows since the May highs. On a positive note, the trade has seen volume and open interest decline consistently, on the slide off the May highs and that can lead the market to discount the downside action as a temporary counter trend reaction. Seeing July copper fall below $343, or July platinum below $1,235 in the near term could be damaging for silver, as those markets were the early leaders in the 2003 to 2006 metals run up. Many traders suggest that they will continue to look to the equity market for near term guidance in silver. Near term downside targeting in July silver today is $11.75 but a slide to $11.45 can't be ruled out over the coming sessions, especially if the macro economic outlook continues to erode. In order to pick a major bottom in silver, the market will need to see volume spike up, interest in silver ETF's rebound or perhaps most importantly the market might need to see the US equity market in a persistent upward bias. Under the current fundamental track, it is very difficult to make a bullish near term case. As we suggested in the gold market commentary this morning, the silver bull market is not "done", but several of the factors that drove the metals higher over the last two years are temporarily reversed. In the end, we see the $11.00 level in the July contract, as an extreme value zone that may or may not be tested in the coming sessions. METALS TECHNICAL OUTLOOK 6/6/2006 COMEX SILVER (JUL) 06/06/2006: The daily stochastics gave a bullish indicator with a crossover up. The stochastics indicators are rising from oversold levels, which is bullish and should support higher prices. A negative signal for trend short-term was given on a close under the 9-bar moving average. The market setup is supportive for early gains with the close over the 1st swing resistance. The next upside objective is 1251.0. The next area of resistance is around 1243.0 and 1251.0, while 1st support hits today at 1216.1 and below there at 1197.1. COMEX GOLD (AUG) 06/06/2006: A bullish signal was given with an upside crossover of the daily stochastics. Rising from oversold levels, daily momentum studies would support higher prices, especially on a close above resistance. The market's close below the 9-day moving average is an indication the short-term trend remains negative. If yesterday's gap higher on the day session chart holds, additional buying could develop this session. With the close over the 1st swing resistance number, the market is in a moderately positive position. The next upside target is 653.6. The next area of resistance is around 651.5 and 653.6, while 1st support hits today at 645.9 and below there at 642.3.
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, 6 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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