AI
Wednesday, September 17, 2003 1:09:33 PM
*** Gold related post ***
RGLD broke through the 20.58 fibo. 19 looks like the target now. I'll be waiting close to there.
==============================================================
Hi, ld
Now you tell me! I bot some this AM at 20.87 that are feeling kinda heavy...... <ng>
Critical time ahead this week
Daan Joubert
September 15, 2003
US commentators for some time have been very concerned about the record level of open interest in gold contracts on the Comex., which reports regularly on the breakdown of the long and short open positions held by three classes of market players – Commercials, Large Speculators and Small Speculators.
Commercials are the institutions and other large players in the gold market who owns or has access to stocks of gold. These are mainly the bullion banks and gold producers who hedge gold by going short of the market on Comex. The Large Specs are the hedge funds and other players who build very large positions, generally going long of gold in direct opposition to the hedging Commercials. The Small Specs, individuals, play the market both ways, but mostly also end up long of gold contracts.
Last week, open interest in gold contracts on Comex reached record levels approaching 290 000 contracts – substantially more than the approximately 240 000 contracts of early February when gold last traded above $380 and then got slammed down by the overnight increase of 50% in margin requirements. The higher level of margin is still in place, which means that the amount of money invested in gold contracts is well over half as much again as in early February. This implies either that the gold bulls of 8 months ago have found new reserves after the losses they suffered during February, as well as a good deal of new confidence in gold, or that the market has attracted many new large and small players who believe gold has a shiny future and are willing to bet on it. Or a combination of the two.
Because they are so over-extended again, it also means that the market is vulnerable to another sell-off if some scare results in the speculators running for cover. If there should happen a sell-off for any reason, one can imagine the Commercials doing their best to get the gold price lower into territory where they can feel more comfortable with their short positions, which probably means back into the low $360’s or even below $350. This they can do by selling aggressively into the declining market where buyers will be scarce, with most gold bulls already committed to the maximum and desperately trying to get out of their long positions by selling into any bid that may appear on the screens.
The fact that the gold price sold off on Friday to end around $374 after holding above $380 for so long – and during that time enticing much more buying of gold contracts at the elevated prices – must have an effect on all the holders of long positions on Comex. The early purchasers, with memories of the $60 sell-off in February, must wonder whether they should close out their positions to lock in profit, while more recent buyers are watching their stop loss levels closely, if these were not already triggered on Friday.
The hourly chart of the gold price shows that the recent steep bull channel is still intact. The gold price has hit the top of the channel to reverse down to support at the main lower boundary of the channel, where it ended on Friday. There is nevertheless a lower support level originating from the bottom spike below $360 on August 26th that is today offering final channel support near $371.
We therefore have the gold price at very important support right now, with an important duty resting on the market in Japan where trading for the new week resumes on Monday. If the Japanese can at least keep the market stable, then that could inspire some confidence for the European market later in the day. Yet just remaining stable might not be good enough; there has to be some convincing evidence quite soon that the rising trend in gold can resume despite Friday’s late weakness – and this has to happen before the US market later on Monday has an opportunity to pile in on the selling side to see if major stops can be triggered.
If gold should break lower now to test the $371 support level, it will require a great deal of determination on the part of the bulls to hold the price within the channel in the face of some stop loss selling by Specs in combination with what the Commercials are trying to do. It would mean that rumours of one or more really large buyers of physical gold must then manifest in sustained and substantial buying of bullion. The futures market is very fragile, in view of the over-extended positions of large and small speculators and the fears engendered by Friday’s break lower to well below $380.
Yet the futures market can rule the roost only as long as the physical market lets itself be influenced by what happens on Comex. If the demand for bullion is large and consistent enough to absorb any arbitrage selling that results from lower futures prices, then Comex has to adjust to that fact, with new shorts scurrying to cover positions that are not making enough progress towards profit because of a stable or rising bullion price.
It could well be that the large buyers have relaxed their buying sufficiently to lower the price to where it is more attractive to be buying gold, but that is a very risky strategy, if true. If a sell-off on Comex is triggered, confidence will be shattered and whatever gold has been picked up by these buyers over recent weeks will suddenly look very expensive. This makes it more reasonable to assume that the sell-off on Friday was another major effort by the Commercials, at a time when the market is traditionally thin, to spook long holders of contracts – and of stocks in gold mines – into a selling spree.
Conclusion
At this point in time it is not possible to predict with any certainty what will happen this week. It is however becoming increasingly evident that demand for bullion is picking up to a level where the influence of Comex and the futures market on the gold price is on the wane, yet not without a near titanic battle between the bulls and the bears.
If there is a new sell-off this week, it should last much less than the 5 month period from the previous low in April to the start of the current bull trend before we again see gold resuming its bull trend. The financial world is appearing more precarious by the day to people who look beyond the short term historic indicators of the US economy to observe trends that spell disaster in months and years to come – and they are buying gold as a hedge for the risks ahead. Their purchases of gold bullion will increase as time passes, irrespective of any sell-off that might occur now and which is more likely to be seen as an opportunity to pick up cheap gold, rather than to frighten them away indefinitely.
It is a matter of time. Gold shorts beware!
© September 2003 Daan Joubert
http://www.goldsignals.com/
RGLD broke through the 20.58 fibo. 19 looks like the target now. I'll be waiting close to there.
==============================================================
Hi, ld
Now you tell me! I bot some this AM at 20.87 that are feeling kinda heavy...... <ng>
Critical time ahead this week
Daan Joubert
September 15, 2003
US commentators for some time have been very concerned about the record level of open interest in gold contracts on the Comex., which reports regularly on the breakdown of the long and short open positions held by three classes of market players – Commercials, Large Speculators and Small Speculators.
Commercials are the institutions and other large players in the gold market who owns or has access to stocks of gold. These are mainly the bullion banks and gold producers who hedge gold by going short of the market on Comex. The Large Specs are the hedge funds and other players who build very large positions, generally going long of gold in direct opposition to the hedging Commercials. The Small Specs, individuals, play the market both ways, but mostly also end up long of gold contracts.
Last week, open interest in gold contracts on Comex reached record levels approaching 290 000 contracts – substantially more than the approximately 240 000 contracts of early February when gold last traded above $380 and then got slammed down by the overnight increase of 50% in margin requirements. The higher level of margin is still in place, which means that the amount of money invested in gold contracts is well over half as much again as in early February. This implies either that the gold bulls of 8 months ago have found new reserves after the losses they suffered during February, as well as a good deal of new confidence in gold, or that the market has attracted many new large and small players who believe gold has a shiny future and are willing to bet on it. Or a combination of the two.
Because they are so over-extended again, it also means that the market is vulnerable to another sell-off if some scare results in the speculators running for cover. If there should happen a sell-off for any reason, one can imagine the Commercials doing their best to get the gold price lower into territory where they can feel more comfortable with their short positions, which probably means back into the low $360’s or even below $350. This they can do by selling aggressively into the declining market where buyers will be scarce, with most gold bulls already committed to the maximum and desperately trying to get out of their long positions by selling into any bid that may appear on the screens.
The fact that the gold price sold off on Friday to end around $374 after holding above $380 for so long – and during that time enticing much more buying of gold contracts at the elevated prices – must have an effect on all the holders of long positions on Comex. The early purchasers, with memories of the $60 sell-off in February, must wonder whether they should close out their positions to lock in profit, while more recent buyers are watching their stop loss levels closely, if these were not already triggered on Friday.
The hourly chart of the gold price shows that the recent steep bull channel is still intact. The gold price has hit the top of the channel to reverse down to support at the main lower boundary of the channel, where it ended on Friday. There is nevertheless a lower support level originating from the bottom spike below $360 on August 26th that is today offering final channel support near $371.
We therefore have the gold price at very important support right now, with an important duty resting on the market in Japan where trading for the new week resumes on Monday. If the Japanese can at least keep the market stable, then that could inspire some confidence for the European market later in the day. Yet just remaining stable might not be good enough; there has to be some convincing evidence quite soon that the rising trend in gold can resume despite Friday’s late weakness – and this has to happen before the US market later on Monday has an opportunity to pile in on the selling side to see if major stops can be triggered.
If gold should break lower now to test the $371 support level, it will require a great deal of determination on the part of the bulls to hold the price within the channel in the face of some stop loss selling by Specs in combination with what the Commercials are trying to do. It would mean that rumours of one or more really large buyers of physical gold must then manifest in sustained and substantial buying of bullion. The futures market is very fragile, in view of the over-extended positions of large and small speculators and the fears engendered by Friday’s break lower to well below $380.
Yet the futures market can rule the roost only as long as the physical market lets itself be influenced by what happens on Comex. If the demand for bullion is large and consistent enough to absorb any arbitrage selling that results from lower futures prices, then Comex has to adjust to that fact, with new shorts scurrying to cover positions that are not making enough progress towards profit because of a stable or rising bullion price.
It could well be that the large buyers have relaxed their buying sufficiently to lower the price to where it is more attractive to be buying gold, but that is a very risky strategy, if true. If a sell-off on Comex is triggered, confidence will be shattered and whatever gold has been picked up by these buyers over recent weeks will suddenly look very expensive. This makes it more reasonable to assume that the sell-off on Friday was another major effort by the Commercials, at a time when the market is traditionally thin, to spook long holders of contracts – and of stocks in gold mines – into a selling spree.
Conclusion
At this point in time it is not possible to predict with any certainty what will happen this week. It is however becoming increasingly evident that demand for bullion is picking up to a level where the influence of Comex and the futures market on the gold price is on the wane, yet not without a near titanic battle between the bulls and the bears.
If there is a new sell-off this week, it should last much less than the 5 month period from the previous low in April to the start of the current bull trend before we again see gold resuming its bull trend. The financial world is appearing more precarious by the day to people who look beyond the short term historic indicators of the US economy to observe trends that spell disaster in months and years to come – and they are buying gold as a hedge for the risks ahead. Their purchases of gold bullion will increase as time passes, irrespective of any sell-off that might occur now and which is more likely to be seen as an opportunity to pick up cheap gold, rather than to frighten them away indefinitely.
It is a matter of time. Gold shorts beware!
© September 2003 Daan Joubert
http://www.goldsignals.com/
Dan 
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