Sunday 1 May 2011

METALS OUTLOOK - 29 April 2011


METALS OUTLOOK: Uptrend In Precious Metals Likely To Continue Next Week

29 April 2011, 02:49 p.m.
By Debbie Carlson
Of Kitco News
http://www.kitco.com/
(Kitco News) - The strong upward trend in gold and silver seen this week is likely to spill over into next week’s trade as the markets remain concerned about inflation.
Gold prices hit record highs and silver came close to reaching $50 an ounce in the nearby contract as a weaker dollar gave commodities across the board a boost.
June gold futures on the Comex division of the New York Mercantile Exchange settled at $1,556.40 an ounce, up 3.3% on the week, just under the week’s high of $1,560.40. July silver gained 5.2% on the week, settling at $48.599 an ounce.  The high for the week was $49.845. Technical analysts said the markets posted strong weekly and monthly closes which bodes well for bulls.
“I’d say the precious metals, in the aftermath of the FOMC meeting and consequent Fed statement, will continue to worry about inflation in the U.S. There are questions if the U.S. central bank is behind the curve. That will likely put pressure on the dollar which will help out gold and silver,” said Bart Melek, vice president and director, head of commodity strategy, rates and foreign exchange research at TD Securities. 
Earlier this week at the Federal Reserve’s monetary policy-setting meeting, interest rates were left unchanged and it was announced that the second round of quantitative easing will end in June.  Following the meeting, Federal Reserve Chairman Ben Bernanke fielded questions from the press – the first time this has happened post-meeting. His answers did little to change the market’s view that the Fed is allowing inflation to rise. For his part, Bernanke said he believes the rise in food and energy costs are transitory.
That in turn, has put more pressure on the dollar. A weaker greenback makes commodities like precious metals cheaper to buy in other currencies. That said, there is little faith in non-dollar currencies as a whole, which has been a support for precious metals.
“There’s not much to stop (the precious metals rally). Really it’s about the dollar and it has been. When we see a rebound (in the dollar) is when we’ll see the metals correct as well. That doesn’t signal the end of the trend,” said Frank Lesh, broker and futures analyst with FuturePath Trading.
Of the precious metals, silver has been the leader in the rally, with gold following. Silver has been rising at breakneck speed and a sharp correction is bound occur, but when that happens is anyone’s guess. Silver prices nearly rose to $50 earlier this week before seeing a retreat, but continued to rise after the initial break. 
Lesh said while the dollar continues to fall, he noted the rate of change is lessening, suggesting it is getting oversold. “It’s getting crowded on the short side,” he said.
The dollar is due for a bounce, but the downward trend won’t change. Likewise, metals are getting a bit rich.  “We’re getting overbought in the metals, but that doesn’t mean you don’t want to buy the dips,” he said.
Lesh said near-term resistance for June gold is in the $1,560s. Support for gold is seen at $1,523, then $1,516 and $1,503, last week’s closing level. “We could fall back $20-$30 quickly on profit-taking, but I don’t see it going below $1,490s for the near-term. Of course there’s always the unforeseen,” he said.
Silver is harder to peg because of the extreme volatility. The $50 area remains an upside target, with $55 a second target. Support is seen at $45, then $40. Those are wide levels for the gray metal, but he said with how violent silver has traded, it’s very difficult to pinpoint chart areas. “A lot of the little accounts are getting chewed up in this trade….There’s nothing up here but air,” Lesh said.
Friday was first notice-day for May futures, he said so there’s been some selling of the May contract and buying of July and deferreds as traders roll long positions forward. That will likely continue into next week.
Next week brings the U.S. monthly unemployment report, which can impact the market’s direction. The April report is expected to show a rise of 216,000 jobs, with the unemployment rate holding at 8.8%, according to an analysis by MarketWatch.
Depending on how the data come out, it could affect metals if it gives the dollar boost. A strong figure would be a sign the economy is growing.
By Debbie Carlson of Kitco News dcarlson@kitco.com




All information on this website is for educational purposes only and is not intended to provide financial advise. Any statements about profits or income, expressed or implied, does not represent a guarantee. Your actual trading may result in losses as no trading system is guaranteed. You accept full responsibilities for your actions, trades, profit or loss, and agree to hold MinKL Invest harmless in any and all ways.

No comments:

Post a Comment