www.nsfutures.com Daily Metals Commentary Monday March 03, 2008 We welcome those who are interested in managed futures/options programs to visit our site at http://www.nsfutures.com/managed.cfm. PRECIOUS METALS COMMENTARY 03/03/08 THE BULLS CONTROL BUT TRADERS SHOULD EXPECT A 2 SIDED TRADE AHEAD OVERNIGHT CHANGES THROUGH 3:15 AM (CT): GOLD +8.50, SILVER +21.00, PLATINUM -17.60 London Gold Fix $978.25 +$21.25 LME Copper stocks 141,375 tons -2,275 tons GOLD stks 7.371 ml oz -791 oz SILVER stks 135.0 ml oz +96,531 OUTSIDE MARKET DEVELOPMENTS: The Dollar has generally remained weak overnight and that in conjunction with a growing fear of US recession seems to have facilitated another wave of flight to quality buying of gold and silver. With an extremely full slate of scheduled US economic information today and throughout the week ahead, it will be important to see the precious metals reconfirm their focus on a weak Dollar and not on the prospect of too much US slowing. In fact, the US will see Construction Spending, monthly Auto sales and ISM manufacturing readings and it is possible that the fear of a US recession will end up being splashed all over the headlines. However, with the markets also detecting further US financial sector turmoil, it is also possible that flight to quality or safe haven buying interest in the metals will gloss over fears of too much slowing. With the petroleum complex weak initially today and US stocks showing the prospect of another downside failure on the charts this morning, it would not seem like the metals are getting a clean sweep of favorable outside market influences. One should also note a bit of divergence in the metals markets early this morning, with platinum showing some minor weakness. GOLD GOLD MARKET FUNDAMENTALS: With Indian gold showing definitive strength overnight and the US Dollar at least initially weak, the bull camp appears to have the upper hand into the US opening. News that gold producers continue to have difficulty in South Africa, doesn't seem to be a key focal point, but that is thought by many in the trade to be underpinning gold prices. However, the trade is probably emboldened by predictions of ongoing strong demand for gold in the Middle East, with Egypt the most recent country giving off solid demand evidence. In fact, with recent new highs in oil prices and fresh new lows in the US Dollar, the metals trade is rife with talk that oil related buying of gold is set to escalate. With fresh predictions of a widening 2008 platinum deficit, some gold traders might suggest that a further narrowing of gold production from South Africa is to be expected. However, recent positioning reports showed a number of record position readings by both the specs and the commercial trade in gold and that highlights the ongoing potential for extensive price volatility. The bear's best argument ahead might be to see clear evidence of extreme slowing from the US, as that could lead to concerns of global slowing. With the February 26th Commercial Net Short position in Combined Gold and the "combined" spec and
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www.nsfutures.com
Daily Metals CommentaryMonday March 03, 2008
We welcome those who are interested in managed futures/options programs to visit our site at http://www.nsfutures.com/managed.cfm. PRECIOUS METALS COMMENTARY 03/03/08
THE BULLS CONTROL BUT TRADERS SHOULD EXPECT A 2 SIDED TRADE AHEAD OVERNIGHT CHANGES THROUGH 3:15 AM (CT): GOLD +8.50, SILVER +21.00, PLATINUM -17.60 London Gold Fix $978.25 +$21.25 LME Copper stocks 141,375 tons -2,275 tons GOLD stks 7.371 ml oz -791 oz SILVER stks 135.0 ml oz +96,531 OUTSIDE MARKET DEVELOPMENTS: The Dollar has generally remained weak overnight and that in conjunction with a growing fear of US recession seems to have facilitated another wave of flight to quality buying of gold and silver. With an extremely full slate of scheduled US economic information today and throughout the week ahead, it will be important to see the precious metals reconfirm their focus on a weak Dollar and not on the prospect of too much US slowing. In fact, the US will see Construction Spending, monthly Auto sales and ISM manufacturing readings and it is possible that the fear of a US recession will end up being splashed all over the headlines. However, with the markets also detecting further US financial sector turmoil, it is also possible that flight to quality or safe haven buying interest in the metals will gloss over fears of too much slowing. With the petroleum complex weak initially today and US stocks showing the prospect of another downside failure on the charts this morning, it would not seem like the metals are getting a clean sweep of favorable outside market influences. One should also note a bit of divergence in the metals markets early this morning, with platinum showing some minor weakness. GOLD GOLD MARKET FUNDAMENTALS: With Indian gold showing definitive strength overnight and the US Dollar at least initially weak, the bull camp appears to have the upper hand into the US opening. News that gold producers continue to have difficulty in South Africa, doesn't seem to be a key focal point, but that is thought by many in the trade to be underpinning gold prices. However, the trade is probably emboldened by predictions of ongoing strong demand for gold in the Middle East, with Egypt the most recent country giving off solid demand evidence. In fact, with recent new highs in oil prices and fresh new lows in the US Dollar, the metals trade is rife with talk that oil related buying of gold is set to escalate. With fresh predictions of a widening 2008 platinum deficit, some gold traders might suggest that a further narrowing of gold production from South Africa is to be expected. However, recent positioning reports showed a number of record position readings by both the specs and the commercial trade in gold and that highlights the ongoing potential for extensive price volatility. The bear's best argument ahead might be to see clear evidence of extreme slowing from the US, as that could lead to concerns of global slowing. With the February 26th Commercial Net Short position in Combined Gold and the "combined" spec and
fund Net Long position in Gold (NYMEX+CBOT) both hitting new record levels in the latest COT report, it is clear that the gold market is set for continued volatility. In fact, with the gold market managing nearly $40 an ounce from the level where the COT reports were measured to this week's early high, it is probably a good bet that the overall spec and commercial positioning in gold has become even more extended. We can't argue against more near term gains, but we see the prospect of a major price decision this week, as the market is presented with clear cut US recession evidence! The bulls should ride the wave, but longs should also consider the purchase of put protection. SILVER SILVER MARKET FUNDAMENTALS: The headlines are full of talk about silver outperforming gold prices and with the recent positioning reports showing a series of record positions in gold and silver, by many measures not seeing record levels, there would seem to be some classic technical evidence to support silver over gold. However, the silver market would also seem to be getting support from classically bullish supply side developments, as Mexico reported a December silver production decline of nearly 6%. Certainly the silver market is getting a steady flow of favorable investment demand coverage and so far, the silver market doesn't seem to be that concerned about an increase of two sided price action in both copper and platinum prices. However, the bear camp continues to hold out hope that evidence off too much slowing in the US economy will end up tripping up the silver market, but with the US Dollar remaining weak and the international trade seemingly entrenched in a pattern of buying the precious metals in the face of slowing evidence, it might take something very disconcerting from the economic front just to shift the trades trading focus. The February 26th Commitment of Traders with Options report for Combined Silver (NYMEX+CBOT) showed the Non-commercial position to be net long 52,591 contracts, with the Non-reportable position also net long 20,635 contracts and that made the "combined" spec and fund position net long 73,226 contracts as of early last week. In fact, with March Silver from the COT report mark off, today's early highs gaining another 46 cents an ounce, it is likely that the silver spec long positioning from the last COT report is now moderately understated. The bias remains up but those that are long might consider the purchase of protective puts.
Commitment of Traders - Futures and Options - 2/19/2008 - 2/26/2008 Non-Commercial Commercial Non-Reportable
METALS TECHNICAL OUTLOOK: Note: Technical commentary is based solely on statistical indicators and does not necessarily correspond to any fundamental analysis that may appear elsewhere in this report. COMEX GOLD (APR) 03/03/2008: A new contract high was made on the rally. Daily stochastics have risen into overbought territory which will tend to support reversal action if it occurs. The market's short-term trend is positive on the close above the 9-day moving average. A positive setup occurred with the close over the 1st swing resistance. The near-term upside target is at 983.8. The market is becoming somewhat overbought now that the RSI is over 70. The next area of resistance is around 980.2 and 983.8, while 1st support hits today at 969.8 and below there at 962.9. COMEX SILVER (MAY) 03/03/2008: Studies are showing positive momentum but are now in overbought territory, so some caution is warranted. The market's short-term trend is positive on the close above the 9-day moving average. With the close higher than the pivot swing number, the market is in a slightly bullish posture. The next upside target is 2020.5. The market is approaching overbought levels with an RSI over 70. The next area of resistance is around 2010.0 and 2020.5, while 1st support hits today at 1973.1 and below there at 1946.5.
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