Hourly Action In Gold From Trader Dan
Posted: Feb 24 2010 By: Dan Norcini Post Edited: February 24, 2010 at 1:49 pm
Filed under: Trader Dan Norcini
Dear CIGAs,
The big chatter of the day was Fed Chairman Bernanke’s comments up on Capitol Hill where he admitted the obvious – interest rates would need to stay low for an “extended period”. He also remarked that inflation would remain subdued. Couple that with new home sales data that was abysmal and that was enough to send the Dollar lower, the Euro higher and feed back into inflation trade although that home sales number also brought out some risk aversion trades. Yesterday was the deflation trade; today we are back to the inflation trade with a sprinkling of the deflation trade mixed in. Tomorrow who knows, just pick one…
By the way, that new home sales number was the lowest level since they began keeping records on that sort of thing way back in 1963. Even that did not keep copper from rising today as the inflation trade buying was sufficient to overcome the negative news from the US construction front. Perhaps the strength in the crude oil market was a factor as it appeared that index fund buying was active in both markets.
Gold could not quite figure out what it wanted to trade today – the former part of Bernanke’s comments detailing the extended period of low interest rates (read that as weakness in the Dollar) or the latter part, namely, inflation remaining subdued (weak economy and risk aversion trades especially with the stunning new home sales number). It was caught in a violent tug of war for most of the session as a result settling down about $5.00 at the close of pit session trading.
Based on what I can see of the gold price action compared to the mining shares (HUI), it appears that there was rather heavy unwinding of the ratio spreads in today’s sessions. There was also a significant amount of gold/silver spread unwinding.
The HUI is thus far having an inside day and is trading above yesterday’s session low, but just barely. Any faltering here and the index will have a good chance of testing the 375 level. Resistance remains first at yesterday’s high near 406. Some of the shorter term technical price charts are showing the index rolling over. Bulls will have to step up and perform soon or they will cede their hard-fought gains to the shorts. So far, they are attempting to do just that.
I know some of our readers are disappointed with the action of gold but I do want to remind you that considering the fact that this is not a seasonally strong period for gold, its continued refusal to break down technically is impressive.
DAN'S CHART:
http://jsmineset.com/wp-content/uploads/2010/02/February2410Gold.pdf
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