Futures Magazine - Hot Commodities

Gold has started tracking stocks and has put in a near-term low

September 1^st, 2007
  By Chris Mcmahon

With the U.S. dollar hitting a 10-year low and with a rocky equities market, you might expect goldto explode to the upside. Instead, gold has started tracking stocks and has put in a near-term low,observes Charles Nedoss , senior account manager at Peak Trading Group. "The Fed Funds rateused to be a great predictor," he says, but with the new credit crunch, the U.S. FederalReserve and other central banks are pumping money into the system to calm nervous investors. Thatcould drive the U.S. dollar lower, reignite inflation fears and push gold up. "As much as weconcentrate on our core rate, around the world costs are getting higher and commodities are goinghigher, too," he says, adding, eventually gold will go with them. He expects gold to challenge$718 per ounce in September and picks a low of $655.

Fain Shaffer, president of Infinity Trading Corporation is bearish gold for the remainder of theyear. "It can't seem to break out past $700," Shaffer says. He attributes that partly tohedge funds selling off gold and stocks in an effort to raise cash and deal with the subprimemortgage collapse. "I don't know what to make of gold right now, but if the dollar tanks, below80, there could be a flight to quality," he says. Shaffer expects gold to trade between $670and $700 in September.

Gassed

September, 1^st, 2006
  By Chris McMahon

Natural gas has been an enigma. After rallying to all-time highs at the end of 2005, natural gasfutures dropped 66% by July 10, despite the continued bull market in crude oil. And while itrallied more than $3 per mBtu in July, it is not that price action that has analysts perplexed andled to the closure of energy based hedge fund Mother Rock LP, but the dramatic shift in thecalendar and volatility spreads. The shift moved the Sept/Dec differential from under $1 to morethan $3 from January to April.

Analysts point to weather anomalies such as last winter's record warm temperatures and theincreased severity of hurricanes for throwing off normal relationships.

"Recently the spread has been getting whacked," says Alaron energy analyst Phil Flynn,adding, "There is a new dynamic in this market."

Typically gas inventories build during summer months and drop during the winter heating season, butthe reverse was true last year as inventories built up during the mild winter and recently droppedin July and August.

Fain Shaffer, president of Infinity Trading, says, "In the past, the big moves have been for aheating play, now it's a hurricane play."

The hurricane factor may account for the spread differential as the December contract faces thefull affect of the hurricane season.

Nothing glitters like gold.

August 1^st, 2006
  By Chris McMahon

In early July gold had already recovered some of its losses when increasing geopoliticalinstability pushed it up $80 per ounce in two weeks.

With Iran refusing to abandon its nuclear aspirations, North Korea test firing intercontinentalballistic missiles, and Israel bombing the Beirut Airport while militants fired missiles intonorthern Israel , gold is back on the bull after a major correction .

John Welsh, SVP of Peregrine Financial Group Inc., isn't convinced the bull is back despite recentstrength. "I don't expect the U.S. dollar to collapse," Welsh adds . He pegs the high for Octobergold at $685 with a low of $590.

Fain Shaffer, president of Infinity Trading, says gold is responding to multiple factors and couldhit $750. Besides wars, China announced it will quintuple its gold reserves. "The big thing thatreally made it run was the verbiage in the fed statement that we may be close to an end of interestrate raises," Shaffer says.

Shaffer notes gold tanked to $550 then recovered to break above the 20-day moving average of $600,which he calls the new support level. It will now test $730 or $732. "We may make a double top andstart coming down."

Both of our analysts called for gold to continue its meteoric rise, with Fain Shaffer, president of Infinity Trading, speculating that gold would trade between a high of $550 per ounce and a low of $500. James R. Steel, VP of research at Man Global Research, said gold would trade between a high of $535, with support at $510. After a bit of a correction Comex gold closed well above $550 an ounce on Jan. 13, helped by a slightly softening dollar.