Monday, April 24, 2006


'Phenomenal' Trading Ranges For Metals

The precious metals are seeing some volitility. "Gold continued a rollercoaster ride on Monday, trading in a broad range below its 25-year peak, and silver took a beating, falling more than 8 percent. Some investors booked profits from highs and price dips attracted new buyers, but overall sentiment remained upbeat, traders said."

"Gold traded in a range of $20 an ounce, compared with an average $27 in the previous three sessions, but much higher than about $10 in the past weeks. Gold raced as high as $639 an ounce from $632.00/632.80 late on Friday, before dropping to an intraday low of $618.70. It was quoted at $622.80/623.80 in New York, against a 25-year peak of $645.75 on Thursday."

"A weak dollar first pulled more money into gold, before easing oil prices took some of the worry out of inflation concerns, prompting a wave of bullion sales, dealers said. Oil fell sharply after the Organization of Petroleum Exporting Countries promised to keep pumping near maximum capacity."

"Analysts said the dollar was under pressure after finance ministers of the world's biggest economies called for major exporting nations to allow their currencies to rise against the dollar to help resolve global imbalances."

"For the second time in three sessions, silver futures fell sharply largely due to more liquidation after a sharp run-up in recent weeks, analysts said Monday. Most-active May silver lost $1.190 to $11.775 an ounce on the Comex division of the New York Mercantile Exchange."

"'Really, silver had gotten too far in front of itself,' said Paul McLeod, vice president with Commerzbank. 'So we're seeing a pullback.' The challenge for traders now is finding technical levels to use as a basis for their trading, after the wide ranges that have been occurring lately, he commented. Intra-day ranges lately have been 'phenomenal' and the volatility is likely to continue, said McLeod."

"The May contract managed to get back to $13.32 overnight, but eventually turned south again and hit its weakest levels of the day just before the close. 'When the market failed to hold $13, I think it shook some confidence in the market a little bit,' said Jim Quinn, commodity floor analyst with A.G. Edwards."

"Some of the activity may have been options-related, and some was probably also tied to upcoming first-notice day for the May futures on Friday, said Quinn. 'Everybody is starting to roll out of the front and into the back a little bit,' he said. 'Nobody wants to be involved in the notices.'"

"McLeod suggested increased margins may have contributed to some of the selling. They were raised for Comex gold, silver and copper after Friday's close. 'The late speculators who came in may have thought it was too expensive to hold their positions,' he said."

"Much of the selling has been from managed-money accounts, said Quinn. 'The buying in here is dealer and it's scale-down,' he added."

"McLeod offered the view that the bulk of the selling pressure has been from traders exiting silver, rather than a large influx of fresh shorts. Sell stops accelerated silver's losses late in the session as it broke down below the area around $12.05 and dipped under $12, said Quinn."

"Platinum fell as low as $1,100 an ounce before recovering to $1,118/1,123, against $1,125/1,130. Palladium was down $2 at $353/358."

Wow. A $1.19 move in silver; that's about the biggest move I can remember, although there were some wild swings in the 80's. Physical players probably are glad to see lower prices, and volitility is better than months and years of flat prices for traders. At least when it's moving, you can make some profits.

How this plays out will probably set the stage for price direction for years to come. Interesting times!
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