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-- Posted Wednesday, 14 June 2006 | Digg This Article
METALS: OVERNIGHT CHANGES THROUGH 4:00 AM: GOLD +4.20, SILVER +31.00
London Gold Fix $567.25 -23.50 LME COPPER STKS 104,550 ml tns
-950 tons
GOLD stks 7.795 ml oz, Unchanged COMEX SILVER stks 108.9
ml oz, +5,029,964 oz OVERNIGHT ACTION: After some downside follow through in Asia, gold opened higher in London. GOLD: OUTSIDE MARKET DEVELOPMENTS: While the Dollar is moderately lower overnight, the recent gains might make it difficult for the gold market to be lifted by a weaker Dollar, as many are starting to fret over an up trend pattern in the Greenback. However, equity prices are showing some bounce this morning and the rest of the metals markets are positively biased in the early going today. Even energy prices are showing some recovery action this morning and that means the net impact to gold, from outside market action might be considered supportive this morning.
GOLD MARKET FUNDAMENTALS: The factors driving gold lower yesterday were numerous, with fear of slowing and declining inflationary expectations at the top of the list. It also appears that the gold market saw a bit of technical capitulation during the action Tuesday and that might make the market less vulnerable to sharp downside extensions. However, with the front page of the Wall Street Journal this morning, suggesting that equity prices might have been undermined because of the ramifications of strong global growth (rising interest rates) it might be premature to signal the end of the bullish psychology in gold. Certainly seeing the biggest decline in 15 years undermines sentiment and probably serves to scare off would-be investors but overall, the world economy is moving forward and it might be an error to assume that a slow gradual rise in interest rates is going to derail growth. In fact, over the last three weeks China has posted stellar retail sales figures, Canada managed an impressive downtick in unemployment and India nearly posted a double digit growth in its GDP. In short, it would seem overly pessimistic to factor in a deflationary condition, when evidence of inflation and growth are still present. With the US CPI report this morning many traders are suggesting that a positive but not too hot reading might actually serve to support gold prices. However, unless world equity markets show better performance ahead the metals markets might only be able to mount technical short covering gains. With several bullish articles surfacing on the attractiveness of gold at lower prices (one in the US, another in India and one in the South African Times) we are inclined to suggest that the spike low on Tuesday was indeed a solid low. In fact, the $550 level has both technical and fundamental credibility as a key low. We suspect that the spec and fund long was leveled aggressively and therefore the COT report results on Friday afternoon will probably lend some support to gold prices. Rather than pay up for inflated call premium we would suggest that traders consider long futures plays from $567 as it is possible that gold will take a while to rebuild its bullish capacity. On the other hand, the market is still faced with the impending June 28th US rate hike and that might serve to limit gold prices in the near term. Aggressive traders might consider being long futures and shorting 2 August gold $620 calls for 630 each against that position. Near term critical support in August gold is now $555 and then again at $550. For today resistance might be pegged at $580. SILVER: OUTSIDE MARKET DEVELOPMENTS: With the gold market shaking off the selling wave in London this morning and other base metals prices a bit higher today, the pressure on silver might be temporarily alleviated. On the other hand, world equity markets are trying to recover and the Press is full of stories that suggest the recent slide in equities might have overstated the severity of the slow down threat in the global economy. However, we suspect that the silver market will continue to be significantly impacted by the near term direction in copper prices, as the copper market was an early leadership market for all the metals and the metals markets have grown accustomed to following the ebb and flow of copper prices. In general, the outside market impact on silver today, looks to be minimally supportive today.
SILVER MARKET FUNDAMENTALS: While the silver exchange stocks situation has generally supported silver prices lately, a sharp "multi million" ounce build in stocks overnight provides an additional supply side undermine to silver today. However, it should be noted that silver held by the ETF has so far held together at 66.9 million ounces, while the net asset value fell to $701 million because of the price decline. In short, the supply element is partially negative but not disastrous to silver prices. From a demand perspective, it does seem like the lower price structure is fostering a number of bullish news stories and that might help silver respect the recently carved out support zone on the charts of $9.53. In order to see a revival of the bull tilt in silver, probably requires distinctly positive leadership from equities, copper prices and perhaps even platinum prices. It might an important psychological accomplishment for July silver to regain the $10.00 level today, but those who are still bullish toward silver might have to be happy with a couple days of sideways action. In other words, the market needs to rebuild confidence and it also needs to see the macro economic outlook cleaned up a bit. On the other hand, the world economy is still forwardly biased and silver prices around $10.00 do not deserve to distinction of being labeled expensive. In fact, if the US rate hike weren't hanging over the market and the equity market wasn't periodically giving the bear camp an assist, we would be anxious to re-enter the long side at current prices. As it stands, fresh longs should be accompanied by long put coverage but we suspect that the carnage has mostly run its course. Critical support is seen at $9.71 today. METALS TECHNICAL OUTLOOK 6/14/2006 COMEX SILVER (JUL) 06/14/2006: 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 gap lower price action on the day session chart is a bearish indicator for trend. The defensive setup, with the close under the 2nd swing support, could cause some early weakness. The next downside objective is now at 895.3. The 9-day RSI under 30 indicates the market is approaching oversold levels. The next area of resistance is around 1006.5 and 1071.3, while 1st support hits today at 918.5 and below there at 895.3. COMEX GOLD (AUG) 06/14/2006: Momentum studies are still bearish but are now at oversold levels and will tend to support reversal action if it occurs. 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 market is in a bearish position with the close below the 2nd swing support number. The next downside target is 544.1. More downside action may be limited by the RSI under 20 putting the market in extremely oversold territory. The next area of resistance is around 581.5 and 603.0, while 1st support hits today at 552.1 and below there at 544.1.
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 Wednesday, 14 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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