DAN NORCINI'S FRIDAY COMMENTS

Hourly Action In Gold From Trader Dan


Posted: Feb 26 2010 By: Dan Norcini Post Edited: February 26, 2010 at 1:43 pm
Filed under: Trader Dan Norcini

Dear CIGAs,

Today was “Let’s buy commodities day” as fund money came back into the sector sending a large majority of the individual commodity futures higher. Copper was well bid all day as was crude oil with even natural gas getting a decent bid. The grains were all stronger as well. The culprit behind the influx of fund money – yep, you guessed it – the Dollar was sharply lower today.

Gold of course pushed higher on the session as it moved away from the lower end of the recent trading range and is currently sitting in the middle of its upper and lower range boundaries. It did manage to climb back above the major moving averages with the 10 day now making a bullish upside crossover of both the 40 and 50 day moving averages. That is friendly although it still needs to take out overhead resistance centered near $1,130 (the upper side of the trading range) before the bulls can regain control over the gold market. It will probably take a Dollar break of 79.60 (last week’s low) on the USDX before it can muster sufficient strength to do so but with the currency markets continuing to look shaky and especially with gold priced in terms of the European currencies continuing to perform so well, it could very well do this independently of the Dollar.

Incidentally, gold priced in terms of the British Pound scored a brand new all time high at today’s London PM Fix, coming in at £731.18, as it eclipsed the previous high set back on December 3, 2009. It is evident that the British Pound is disintegrating at a faster clip than the US Dollar as Great Britain’s economic and fiscal woes continue unabated. Both the weekly and the monthly charts of the British Pound look atrocious. There does not appear to be a whole lot of chart support until you get closer to the 1.45 level. If Sterling were to take out the 1.35 level, “Katie bar the door” because the currency could implode. If that were to occur, Sterling Gold would be trading above the £800 mark.

Euro Gold continues to cling tenaciously above the €800 mark.

It would appear that yesterday’s story in the English version of Pravda’s web site about China announcing they intended to buy the remainder of the IMF gold is being denied by the author.

Click here to view the article…
http://in.reuters.com/article/domesticNews/idINSGE61P05C20100226

As I said yesterday it would be strangely out of character for the secretive Chinese to announced before hand their specific intentions as such a thing would undoubtedly cause the price of gold to run up higher, something which they or any other buyer for that matter, would desire.

We do not need a newspaper story telling us however what we already know and that is Asian Central Banks are looking for ways to diversify their reserve holdings and gold is going to be in that mix. They will buy gold when the speculative funds are knocking the price lower and for all that we know, they may have been the buyers of size earlier this month when gold dropped to $1,040 – $1,050. These banks will be buyers whenever prices fall and will provide a long term floor of support beneath the gold market.

On the same front there is another story circulating around out there today that it is India which is looking to buy this same IMF gold. Guess what – they probably are; just like China is except neither Central Bank is going to come out and tell us ahead of time when or how much. They will just do it and then the news will filter out into the market and every one will go ga-ga and run the price sharply higher, where it will then lose some upside momentum after a while, come back down and these same Central Banks will look to buy some more and the process will repeat itself once more.

The HUI, while higher today, is having trouble getting above this Tuesday’s high near 406. You might recall that was the day we saw a sharp sell off in the mining sector. If it can close above this level, it will give the bulls a definite advantage going into next week. The next level of upside resistance, and that which must be bettered to give this sector a shot at a trending move, is the 420 level, which also happens to correspond to the 50 day moving average. Initial support is at yesterday’s low. As I write this commentary, the ratio spreads from the hedge funds are appearing once again and knocking out the props from beneath the mining shares.

Crude oil is attempting to get above $80. It has not broken down but if it cannot get over this hurdle within the next couple of trading sessions, some of the bulls will get impatient and it will drop back down into the trading range between $80 – $81 and $70. For now it appears that bull and bear forces are in a relative state of balance with the bulls having the very near term advantage.

Dollar bulls continue to prop this market up and thwarted bears from breaching critical downside support levels. Bears were gunning for the 80.14 level and managed to push price down to 80.19 before the bulls came back and shoved price back up. Even though the bearish divergences and loss of upside momentum continues to make itself evident in the USDX chart, the funds are managing to stave off the sellers as they work to defend their large long positions.

Bonds continue their charge higher and once again bond bears get obliterated thanks to the ongoing machinations that occur in that market.

 
DAN'S CHART:
http://jsmineset.com/wp-content/uploads/2010/02/February2610Gold.pdf