|
-- Posted Wednesday, 7 June 2006 | Digg This Article
METALS: OVERNIGHT CHANGES THROUGH 4:00 AM: GOLD -5.90, SILVER -17.00
London Gold Fix $623.50 -11.10 LME COPPER STKS 108,000 ml tns +475 tons
GOLD stks 7.795 ml oz, Unchanged COMEX SILVER stks 107.1 ml oz, -483,128 oz OVERNIGHT ACTION: Downside follow through off a rising $ and a hawkish US Fed view. GOLD: OUTSIDE MARKET DEVELOPMENTS: While the Dollar is higher again today and applying some pressure to the gold market, the trade is suggesting that the Dollar upside might be set to slow now that the trade is mostly convinced that the Fed will hike rates at the end of the month. With the equity market only marginally lower overnight and energy prices mixed, the gold market is only partially undermined by the macro condition, but with the copper market still in a liquidating posture, it seems like the potential for more general commodity fund selling remains in place. While the market doesn't seem to be factoring significant slowing in the economy, the idea that the Fed might have to continue to pull back on the reigns to keep inflation psychology under control is apparently very limiting to the precious metals markets.
GOLD MARKET FUNDAMENTALS: With a major gold producer (Newmont Mining) suggesting that gold prices still have more gains ahead off "5-10 years" of flat production, the dominance of the currencies in the daily gold outlook is somewhat tempered. However, the market yesterday totally discounted predictions that Russian Gold and Currency reserves were set to rise by $5 to $6 billion in the May to June time frame. Even with a major bank/brokerage suggesting overnight that gold prices will test historical highs in the coming 3 years, as global investors use gold to hedge again inflationary concerns the market doesn't appear to be willing to turn off the negative bias. However, in looking at the daily factors influencing gold over the last 18 months, the inflation influence really wasn't a dominating factor until the April and May time frame with investment interest, a falling Dollar and uncertainty off oil generally providing the gold market with its buying sentiment for the early portion of the "bull market". Therefore, while gold and silver have recently been undermined by the Fed's attempt to control inflation, it seems that a number of players still think that inflation is set to have a long shelf life. In another story overnight, the IMF might have prompted some central banks to overstated or double count their gold holdings in the 1998 through 2001 time frame, by a common practice of counting gold in vaults and also counting gold that was loaned or swapped. In short, there is talk that overall gold supply around the 1999-2001 low was overstated, and that gold prices were inordinately "compressed" as a result of the supply estimates. It will be interesting to see if the IMF story prompts the market to upgrade its view of central bank gold buying. On the other hand, the gold market will be confronted with two more Fed speeches and a US Consumer Credit report today and given recent reactions to scheduled events the bears might be expected to maintain an edge. While the bias in prices is pointing downward off another Dollar rise, the market is expecting the Dollar rise to slow or halt. We also think that the preponderance of bullish long term fundamental thinking on gold will serve to revitalize some investment interest. However, from a technical perspective August gold could easily slide to close-in support of $625.7 and perhaps to $624. Lower support off the April gap area around $613.5 to $614.5 probably won't be tested unless the US equity market continues to dive and or the US Dollar re-visits the May highs above 85.30. We remain longer term bullish, but short term the market might not have a catalyst to turn off light liquidation pressure. SILVER: OUTSIDE MARKET DEVELOPMENTS: While the copper market did manage to recover from a significant washout yesterday morning, that critical outside market remains under pressure again today. With the gold/Dollar action also negative again this morning, we have to leave the bias in silver, from the outside markets perspective with the bear camp. However, world equity markets don't appear to be under direct aggressive pressure today and the market seems to have become much more accepting of a June rate hike by the Fed. In the near term, the equity and copper markets should continue to be very important leading indicators for silver prices.
SILVER MARKET FUNDAMENTALS: With exchange stocks of silver continuing a pattern of contraction and the market seeing a long list of very bullish long term fundamental predictions toward gold, the silver market would seem to have news to counter the mostly bearish news flow of the last 4-5 trading sessions. However, it would not seem like the trade is focusing on physical supply potentials yet and with the platinum and copper price action remaining disjointed, it is clear that a number of different and opposing psychologies are operating in the marketplace. While it seems like the financial markets have accepted the idea that the Fed will go ahead and hike rates in late June that distinction doesn't seem to have tempered or removed pressure from the silver market. In fact, many traders think that without a distinct bounce in equity prices, the silver market might not be able to reverse the recent pattern of selling. While exchange stocks mounted another significant decline overnight, they still haven't cleared the psychologically important 100 million ounce level and therefore the supply issue hasn't caught the attention of the market yet. However, we suspect that the bullish gold news overnight, does serve to put a psychological value under the precious metals markets. However, we are not sure that July silver can avoid a re-test of consolidation support down at $11.55, but we do doubt that July silver needs to fall all the way down to $11.00, unless there is a huge downside extension in the equity market and or a view that the Fed is set to over tighten and in the process derail the US economy. METALS TECHNICAL OUTLOOK 6/7/2006 COMEX SILVER (JUL) 06/07/2006: A crossover down in the daily stochastics is a bearish signal. Daily stochastics are trending lower but have declined into oversold territory. A negative signal for trend short-term was given on a close under the 9-bar moving average. The gap lower price action on the day session chart is a bearish indicator for trend. The close below the 2nd swing support number puts the market on the defensive. The next downside objective is now at 1148.8. The next area of resistance is around 1199.5 and 1208.8, while 1st support hits today at 1169.5 and below there at 1148.8. COMEX GOLD (AUG) 06/07/2006: A crossover down in the daily stochastics is a bearish signal. 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 lower on the day session chart is bearish and puts the market on the defensive. The defensive setup, with the close under the 2nd swing support, could cause some early weakness. The next downside objective is now at 627.0. The next area of resistance is around 638.4 and 641.9, while 1st support hits today at 631.0 and below there at 627.0.
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 Wednesday, 7 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.
Previous Articles by Nell Sloane
|
