Monday's metals comments

This was transmitted to Marketwatch.com on 9/12/05 at 6:30 AM EDT.

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The Dollar/Yen rally which took place last week came to an abrupt end on Friday as traders began to realize that the FED may just stop raising rates if only temporarily. Last week was a perfect example of Gold and Silver rallying in the face of a stronger Dollar. Now, the markets find themselves at a crossroads once again. No one is more longer-term bullish on the metals than I am but the fact remains that the markets have reached extreme overbought levels. Markets have been known to continue for some time even though they are overbought on a technical basis and that could be the case here. But I’m afraid the metals bulls are going to be disappointed once again. If the Dollar does find its footing and breaks out above 110.75 yen, the metals may have no choice but to head south on the charts. The overnight action seems to support that observation as the Dollar began trading much weaker but, after breaking 109.00 yen briefly, turned and rallied. The early Dollar weakness had Gold and Silver moving higher but that early strength has now reversed although the losses are nominal. The best case scenario would be that the markets consolidate in a fairly narrow range for a week or two and work off some of the froth. The worst case would probably put the market back below $425 which would surely push the bulls to the brink.


Dale F. Doellng
Chief Market Technician
Trends In Commodities