More interesting info on gold:
From Kaplans' site.................
Updated @ 5:40 p.m. EST, Friday, January 23, 1998.
COMMENTS OF THE DAY: Commodities in general ended Friday with modest
gains. Silver surged 17.5 cents, platinum edged up ten cents after a sharply lower start,
and palladium sank $5.05. The real story of the day was gold, which rallied nine
dollars in very heavy trading after initially starting lower and finding stiff resistance at
$290 spot. The current spot price is about $299.45, which is technically a very
unstable level. Therefore, the yellow metal next week is either likely to retreat to its
European close around $296.75, or else the huge number of stop loss orders placed
by short sellers will trigger a chain reaction of short covering. There are mild resistance
levels on the upside around $325 spot and $350 spot. With COMEX estimated
volume at 110,000 lots, it will be important to see how much of the rally could be
attributed to short covering, which will be made clearer around noon on Monday when
the open interest figures for Friday's trading are released. The less the quantity of short
covering, the greater the likelihood of an extended rally. Gold is now about one
percent above its fifty-day moving average, which represents an important technical
point, and is also just above the critical downward trendline formed by connecting the
descending peaks on a weekly chart dating back to the first week of February 1996.
Gold mining shares, meanwhile, gained an average of ten percent on Friday.
On Friday, the junior mining companies rallied more than their senior counterparts for
the first time since late October. This indicates that gold fund managers must be
receiving a sufficient net inflow of funds so that they are not fearful of investing in only
the most liquid issues. Over the past two years most fund managers have been burned
time and time again as they attempted to dip into mid-cap golds, only for the market to
plunge lower again and these shares to have trouble finding a ready buyer. Since this
represents an important technical change in direction for the junior issues, which have
been especially hard hit over the past two calendar years, a sustained gold rally would
probably induce a substantial flow of cash (especially in percentage terms) into gold
funds, where junior companies are far underrepresented in terms of their market
capitalization. Thus, such shares would significantly outperform their senior
counterparts as fund managers gradually shed their current near-absolute insistence on
liquidity and restore the junior shares to reflect their actual share of total mining output. |
