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-- Posted Friday, 9 June 2006 | Digg This Article
METALS: OVERNIGHT CHANGES THROUGH 4:00 AM: GOLD +1.40, SILVER +22.50
London Gold Fix $612.50 -8.50 LME COPPER STKS 111,125 ml tns
-1,275 tons
GOLD stks 7.795 ml oz, Unchanged COMEX SILVER stks 105.7
ml oz, -1,059,974 oz OVERNIGHT ACTION: Losses overnight were mostly catch-up to Thursday's declines. GOLD: OUTSIDE MARKET DEVELOPMENTS: Apparently the ECB was a little more dovish than the market was expecting yesterday and that provided the Dollar with a huge upside extension and that moves continues to undermine the gold market somewhat in the action today. However, with the US equity market managing to recover yesterday and extend the gains a bit early today, it is clear that some of the outside market influences in gold have reversed course this morning from their conclusively bearish tilt yesterday. It should also be noted that oil prices recoiled from their lows yesterday and are also trading a little higher this morning. With the platinum and copper markets also higher this morning, one can conclude (at least in the early going) that there are more partially supportive outside market influences than bearish influences for the gold market.
GOLD MARKET FUNDAMENTALS: The net shake from this week's action is a fear that global growth is slowing and that many Central Banks seem to be poised to tighten interest rates even further. However, there was a general sense that the ECB was a bit dovish on future hikes and the trade is rife with talk that the US Fed is potentially poised to over tighten. In a more damaging sense, it seems that gold's investment prowess has been called into question with the events this week and even the physical demand expectation was challenged with the evidence of slowing in the US economy. However, buried in the face of the mostly bearish fundamental crush of headlines this week, were several potentially supportive longer term developments for gold. A number of players expect Central Bank holdings of gold to increase (led by Russian and Chinese purchases) while other prominent brokerage firms like Deutsche Bank and Citigroup continued to reiterate their confidence in gold as a favored investment. In fact, toward the end of the week, a number of large brokerages have stepped forward to suggest that the recent break in gold has created an opportunity. In short, confidence toward gold has been severely damaged but apparently not totally undermined. In the near term, the fortunes of gold might sit with the direction of the Dollar, which managed a very significant recovery against an established downtrend pattern this week. While last months US Trade Balance report was partially negative to the Dollar and gold, today's Trade Balance report is expected (by the trade) to have the opposite impact and for that reason, gold seems to enter the US trade with a minimal upward bid. With at least three major brokerages/Banks weighing in optimistically on the prospects for gold and the rest of the metals markets showing a little short covering capacity, we would conclude that the aggressive liquidation tilt has been tempered. We also think that August gold balanced its technicals with the action this week and we also think that the $613.50 level is a solid chart support point. However, in order to truly move out from under the liquidation wave, the gold market needs to see a better attitude in the equity market. In our opinion, about the only thing that will clean up the attitude in the equity market quickly, is speculation that the Fed might be reconsidering the June rate hike decision. In short, we think $613 will hold, but the odds are still relatively high that another decline to $600 is possible. SILVER: OUTSIDE MARKET DEVELOPMENTS: As suggested in the gold market commentary this morning, outside market impacts are generally supportive today instead of patently bearish, as they have been for most of the week. Most importantly is the higher action in copper and the prospect of a decent day in the equity markets. On the other hand, the silver market seems to remain very aware of the broad based commodity liquidation wave and therefore the direction of the stock market remains a very important element for silver.
SILVER MARKET FUNDAMENTALS: While the July contract managed to respect the $11.06 level, the extensive damage on the charts this week leaves the market with a vulnerable technical feel. On the other hand, the gold market has been able to muster some positive long term investment dialogue and silver exchange stocks continue to contract at an aggressive pace in the US. It should also be noted that silver held in equity shares dipped slightly to 66.9 million ounces yesterday but that is still a significant amount of implied demand for silver that wasn't present at all before the beginning of May. The bull camp would suggest that equity based ownership of silver held together well, despite the $4.10 decline in silver off the May highs, while the bear camp will suggest that more investors are set to exit silver ahead. Therefore, the fate of the silver market seems to stand with the outlook for the economy and the outlook for the equity market. In the end, the market seems to have a cautiously supported stance into the start of the US session this morning. In order to put the bear camp off balance, the July silver might have to mount a rise back above $11.50 this morning. In our opinion the $11.00 level is probably a solid psychological support zone but in order to shift the market back into a patently supportive condition, might require a modest rise in the US Trade Deficit, a lower Dollar and a pre-weekend recovery in the oil market. While we think that position players might begin to move back into silver on the long side, one would be well advised to carry along some coverage against an extension of the recent selling pattern. For instance, Buy September silver around $11.17, sell a July silver 11.75 call for 24 and buy a September silver $10.50 put for 50. METALS TECHNICAL OUTLOOK 6/9/2006 COMEX SILVER (JUL) 06/09/2006: A bearish signal was triggered on a crossover down in the daily stochastics. Momentum studies are declining, but have fallen to oversold levels. The close below the 9-day moving average is a negative short-term indicator for trend. The close below the 2nd swing support number puts the market on the defensive. The next downside objective is 1057.5. The market is approaching oversold levels on an RSI reading under 30. The next area of resistance is around 1140.0 and 1187.5, while 1st support hits today at 1075.1 and below there at 1057.5. COMEX GOLD (AUG) 06/09/2006: Daily stochastics are trending lower but have declined into oversold territory. The market's close below the 9-day moving average is an indication the short-term trend remains negative. The market is in a bearish position with the close below the 2nd swing support number. The next downside objective is now at 604.1. With a reading under 30, the 9-day RSI is approaching oversold levels. The next area of resistance is around 620.0 and 629.0, while 1st support hits today at 607.6 and below there at 604.1.
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, 9 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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