Looking at the futures, we see that oil is holding in there around the $97/barrel area and silver is doing the same around the $32/ounce level. Gold is coming under a bit of pressure as it was unable to take out the $1700/ounce level, but now we watch to see if it can hold the $1690/ounce level. We probably go into consolidation mode now, but we would like to see bases established so that we are within striking distance of resistance levels when the jobs numbers come out later this week or the European Central Bank decides to finally start doing debt purchases.
Oil & Natural Gas
Even with big news out on Friday volume in Kodiak Oil & gas (NYSE:KOG) was just in line with their average and shares were unable to break higher after shares ran into resistance at the $9/share level, an area which we have documented well over the past few weeks. We thought for sure that shares would be able to breach that level and move higher if the news out of Jackson Hole indicated the Fed was going to keep interest rates low, and the fact that shares were unable to indicates that we have some serious headwinds here. Shares finished up $0.23 (2.64%) to close at $8.94/share, which was a nice move but if shares are unable to move northward through resistance in the next week or so we find ourselves a bit less bullish as it pertains to Kodiak.
Freeport-McMoRan (NYSE:FCX) performed just as we suspected it would with the speech that Bernanke gave. Shares moved higher, and strongly so. Volume was 15.4 million shares on Friday as the stock moved higher by $1.42 (4.09%) to close at $36.11/share. With the Fed indicating that they are willing to act if and when it is necessary, and that they have plenty of firepower at their disposal we think that all commodity players can rise higher but especially Freeport due to circumstances we have discussed in recent weeks (the copper exposure for a growing economy paired with the gold exposure for an easing environment). Europe's potential news in the coming weeks could very well be enough to power shares above the $40/share level, but we caution investors to pay attention to the headline risk involving their assets in Asia and Africa.
Thompson Creek Metals (TC) rose sharply on Friday due to their gold exposure. The irony is not lost upon us that they rose on news impacting gold which is the reason the stock has fallen so much over the past few months. The project delays and cost overruns in the industry are nothing new, and Thompson Creek has shown an inability to avoid them, thus the shares have been crushed as they have had to raise money by diluting current shareholders. On Friday however we saw shares rise $0.31 (12.35%) to close at $2.82/share. This is not the way we would play gold, as it is not a pure play or even a gold producer at this time but we recognize that this is a favorite among some of our readers due to the molybdenum production and promise of gold. It is risky and we want our readers to recognize the pitfalls here - those being a mine under construction with rising costs and the company being forced to dilute current shareholders.
Although there are certain tax issues one faces with owning SPDR Gold Shares (NYSEARCA:GLD), we think that it is a better play on gold than owning Thompson Creek for sure. GLD rose $3.70 (2.31%) to close at $164/unit with volume of 18 million units traded. The move here trailed silver, but we still think that is should do fine. Bernanke has now put in a floor and now it is Europe's turn to do right by the markets. It has been their way to disappoint world markets over the past few years but it seems that the ECB will now move to accommodate markets and their members at the same time by working much like the U.S. Federal Reserve does with their debt purchases. That is bullish long-term for gold in both U.S. and euro denominated terms.
iShares Silver Trust (NYSEARCA:SLV) is another vehicle investors need to be aware of the tax consequences of investing in their units, but a good way to play silver with liquidity. It has been our desire to own actual silver coins minted in the U.S., but that does have liquidity risks and adds an extra hurdle for when one does want to exit a position. If your goal is to trade in and out over the next few months, the iShares Silver Trust is the vehicle for you as trading physical silver would be a headache and costly. Silver is now trading above the $32/ounce level and we recently bounced off of the 200 day moving average, if we can move above the $32.20/ounce level then we could see a run towards the $36/ounce level.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.