The Expected, And Unexpected, In Gold’s Rally

• May 9, 2001
• Marc Dupee

June gold
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trading at the Comex, making good on its Pullback From Highs List
signal and leaving the contract within striking distance of a multi-month high.
Gold had also been hinting that it could make a larger-than-normal move by
registering on the Multiple Days Low
Volatility List. 

What was unusual about today’s rally was that the move
came just ahead of next Tuesday’s Bank of England auction of over 20 metric
tons of gold bullion. Gold usually falls in advance of the auction as supplies
increase. Some traders also noted that a rally in the Australian dollar
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of gold. June gold closed up 4.9 at 270.4. Anther impetus for the rally is possibly
inflation. Falling productivity, rising labor cost, and surging energy costs all
suggest inflation is creeping into the economy. Gold is a traditional hedge against
inflation.

July
silver
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Also in the metals, copper
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its contract low in a double-bottom formation and surpassed its April 30 low.
This sets up a Turtle Soup Plus One Buy in this market for
tomorrow.   

June dollar index futures
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an important role in at least two commodity sectors if it falls off
near-contract highs (there is a head-and-shoulders-top argument here).
Dollar-denominated gold could continue to rally if the buck backs off and grains
could get much-needed export demand on a lower dollar. 

The recent bout of weak economic data and abysmal
corporate performances (e.g. Cisco today) upped the odds that the Fed will cut
interest rates by 50 basis points next Tuesday. The June Federal Funds futures
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before its FOMC meeting, closed at 95.990, pricing in a 96% chance of a .50%
move. 

As mentioned in last night’s Futures Markets Outlook, June lean hogs
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moved lower out of their
Pullback From Lows
setup and fell a hefty 1.200 to close at 69.925. August pork bellies
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from the Implosion-5 List,
fell 1.250 to 76.900.

In the grains,
soybean oil’s
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Implosion-5 List. But the July contract gave back almost all of yesterday’s
gains in a Kings & Queens pattern to actually close at a contract low, down
.2600 at 14.8300. July wheat
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seventh consecutive day at a contract low, down 1 at 265 3/4. Look for a
possible reaction off the low in a delayed response to its Turtle Soup Plus One
Buy signal yesterday. 

Lower APIs yesterday and a refinery snafu relit the torch
under the energies. June crude oil
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gained .77 to 28.16, heating oil
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.7650, and

unleaded gasoline
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set up in a cup and handle and unleaded found support at its 20-day line, moving
briskly out of a two-day pullback from all-time highs. 

Natural gas
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progress in its possible measured move (out of a descending triangle) to below
3.90. Basis June closed .079 lower at 4.200.

Also in the reversal
department, cotton
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trading right at its Turtle Soup Plus One Buy
trigger.