Sunday, May 6, 2007

Third Time Lucky

Before any discussion on the Metals, I must make note of the recent "decline" in OIL prices. The reason behind this decline has got to be the either the dumbest excuse I've ever heard or one of the US Governments most desperate acts to manipulate the markets...OR BOTH.


May 2, 2007, 4:58PM
DOE Halts SPR Crude Oil Purchases
NEW YORK — The Energy Department said Wednesday it rejected as "too high" all bids for the purchase of up to 4 million barrels of crude oil to have been shipped in June to the Strategic Petroleum Reserve.

DOE also said it will "suspend direct purchases of oil for the SPR until at least the end of the summer driving season."

DOE had previously rejected all bids for purchases of up to 4 million barrels of crude for the SPR in a May solicitation for the same reason.

"Both solicitations resulted in no awards because the department determined that the bids were too high and not a reasonable value for taxpayers," the DOE said.

Let's make fun of this and point out some fundamental facts. On Friday I gave this link: to a chart of Seasonal Oil Price Trading Patterns. This chart clearly shows that the price of OIL rises annually from June thru August. But the DOE has determined that OIL at today's prices is "...too high and not a reasonable value for taxpayers...". Only the geniuses in the US Government could come to such a conclusion. Why would the DOE "suspend direct purchases of oil for the SPR until at least the end of the summer driving season."? Do they want you to believe that their purchases of oil for the Strategic Petroleum Reserve are disruptive and affecting supply and thus putting upward pressure on prices this Spring? They've held off purchasing a measly 4 million barrels of oil in the hopes that it will rein in OIL prices? LOL!!! 4 million barrels of oil is equivalent to spiting in the ocean. IT IS INSIGNIFICANT relative to the big picture. THE USA consumes in excess of 20 million barrels of OIL each and every day of the year.

Just in the month of June ALONE the USA will consume 600 million barrels of OIL. LOL!!! Like not siphoning 4 million barrels of OIL off the market is going to make a damn bit of difference to available supply. The entire planet uses OVER 85 million barrels of OIL a day. Clearly the DOE is trying to "talk" the price of OIL down. The fools in the trading pits fell hook line and sinker for it too. Silver closed off it's highs Friday because of the drop in the price of oil. Fundamentally there is EVERY reason for the price of oil to go substantially higher...and by the end of this week it will again be north of $64 a barrel. Ignore the noise!


What a crazy week. In the end Gold closed at an 8 week high. And on Monday closed at an all-time monthly high. Gold tested it's 50 day moving average successfully, retraced 38% of it's recent leg up and worked off it's "overbought" RSI in the process. Gold is gathering strength for a third try at breaching resistance around 691 (SPOT) since January 1st.

Silver on the other hand... Someday the moves up in Silver will be as dramatic as the moves down. And those days may be closer than we think. Silver's slide stopped right at our Rat Trap at 13.03. Dem Rat Bastids either didn't want to press their luck or weren't up to the challenge. Silver has some serious "investment demand" building in it's ranks now:

Silver ETF has tied up 15% of world's silver supply

The silver ETF currently holds over 136.5 million ounces, after launching in late April last year at 1.5 million ounces. This implies that the silver ETF has now tied up nearly 15% of the world's silver supply.

Any froth in the Silver market has been worked off and our troops appear to be massing for another assault on resistance at 14.04 (SPOT). The gap down on April 26 should not be as difficult to work back thru as the gap down on March 2 was as this recent gap down was on relatively light volume.

Silver and Gold have established lows at the beginning of months 1, 3, and 5 now. And they have established intermediate highs in months 2 and 4. Is this a pattern? Recall that I said the next runs in Silver and Gold would be to new highs around June 8th or 15th... Time will tell if this has become a pattern and those new highs are reached. $756 Gold / $16.80 Silver = 45 Gold / Silver ratio.

The US Dollar

Technically the US Dollar is poised for a bounce...a bear market rally. Unfortunately, for the US Dollar, nobody is much interested in buying it except for those wishing to cover their shorts. Any "bounce" in the US Dollar should be short lived.

Please click on charts to enlarge.

Silver Resistance: 13.55 / 13.61 / 13.75
Silver Support: 13.44 / 13.39 / 13.30
____________________________________All prices SPOT

Gold Resistance: 686 / 691 / 700

Gold Support: 681 / 676 / 672

No comments:

Post a Comment