(February 22 – 11:30 ET) – Golds are getting stronger, but be prudent about oil stocks, the analysts at Royal Bank’s Dominion Securities are cautioning. “The stocks have now pulled back to support at the intersect of their 30- day averages, and looked poised to re-accelerate,” syas DS. A close of the TSE Gold index above 5331 will confirm support for a “sustainable rally”.
Gold is volatile right now and DS expects buying below US$300. “Since physical demand remains quiet and the forward market remains awash with liquidity we can only assume producers are looking for opportunities to buyback some of their hedge positions.” DS forsees short-term strength in gold thanks to the near completion of a sale by the Dutch Central Bank. The bank sold 7 metric tons last week and DS believes it only has another 5 tons to sell by September 2000 to complete its selling.
In the short-term it forsees support at US$296.25 and resistance at US$306.60. In the medium-term support should settle at US$285.75 and resistance at US$319.60. Over the long run, support should come at US$272.85 and resistance at US$340.50.
As for the oil and gas stocks, despite the huge price run in oil itself the stocks have languished. DS says stock traders obviously believe the price of crude isn’t sustainable at current levels, and the stocks are discounting a drop in prices. It forecasts that a close below US$29.98 per barrel would produce some downward momentum, noting that near-term support is US$26.70 and the major support beyond that is about US$24.00. Once the commodity price settles, removing some of the uncertainty, stocks will be free to find their range, says DS.
-IE Staff