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Comments for Metal Producers

Bob Hoye
Institutional Advisors
Posted Dec 15
, 2006

Base Metal Prices have been likely to test the May highs on year-end positive vibes.

So far, the high on our index (less nickel) has been 737, set in the first week of the month. This occurred as the hotter metals were attempting to break above recent highs.

Nickel was on its third attempt to get through 35,000. Similarly, zinc was having a third go at 4600. Lead was working on a test of its early November high and, at 1808 on Monday, a record high was set.

The 7% slump in two sessions suggests that the surge was a test and not a breakout.

However, the commodity perma-bulls are adamant and may be able to keep these pigs on a favourable glide path for a few weeks more.

Both producers and investors should be lightening up.

Commodities: As outlined last week, the Goldman Index of Agricultural Prices (GKX) was getting overbought but with a negative divergence.

The high was 277 at the end of the month and it has slipped to 259, where there is some support. Taking out 248 will set an intermediate downtrend.

This would be from a multi-year high and it is worth noting that the widely-followed CRB set its multi-high at 366 in May. The breakdown below the 40- week moving average was in August and the low was 293 in early October.

The rebound made it to 323, which, at .322, is close to a Fibonacci .318 retracement. Along with the ongoing threat of the inverted yield curve, this suggests that the May high was a cyclical peak.

Golds: This sector continues to consolidate the impressive gains out of early October.

Unfortunately, it was mainly a goldbug rally and therefore vulnerable.

The real price is what counts over the long term and our gold/commodities index was likely to set a cyclical low around November and the low was 164 set on October 23.

The initial bounce made it to 188 in mid-November. This needed testing and it has been close to 173 since last week, which seems to be building a base.

More than that, our long-term technical work indicates that a cyclical low has been accomplished.

The following chart shows the plunge since January as well as the cyclical low on the Coppock, which reversed on November 3.

We are highly confident that gold's real price is on a new bull market whereby the price could almost double over the next few years.

  • Note the cyclical low in 2000 as that bubble was blowing out.
  • Something similar is being logged.
  • The Coppock is designed to determine cyclical lows.

-Bob Hoye
Institutional Advisors


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