DAN NORCINI'S MONDAY COMMENTS

Hourly Action In Gold From Trader Dan

Posted: Mar 01 2010 By: Dan Norcini Post Edited: March 1, 2010 at 1:47 pm
Filed under: Trader Dan Norcini

Dear Friends,

There are two things of significance that need to be noted in today’s trading session.

The first is that the European currencies were again under attack with the Euro, the Swiss Franc and the British Pound all getting hit hard. The Pound in particular is getting obliterated. It is evident that the sharks are now in a feeding frenzy when it comes to Europe. If I lived in England, I would be looking to protect my life’s earnings as rapidly as possible. The Pound looks like it is on its way to 1.43 or lower before any chart support is likely to appear.

The result – European based gold prices shot higher at the PM fix today scoring brand new all time highs in terms of both the Euro and the British Pound. Euro priced gold scored a Fix at €824.269 while Sterling Gold came in at a mind-numbing £746.149. Can anyone say that European investors are not becoming increasingly fearful of the health of their currencies? Wait until the same fear finds its way over here and wraps itself around the minds and hearts of the average US investor.

The second occurrence of today is that US Dollar priced gold managed to claw its way higher even with the Dollar pushing above the 81 level on the USDX. It bounced off the confluence of the 40 day and 50 day moving averages and shot up through the rising 10 day moving average before it ran into the selling resistance at the top of the recent trading range.

Gold is acting like it is in some sort of pressure cooker. It keeps building up pressure but cannot blow the lid off of the pot. Something makes me feel that when this market does break through the bullion bank selling at the top of this range, it is going to accelerate quite swiftly. The selling appears “unnatural” based on the recent behavior of the metal. I know that is totally subjective but that is how this thing feels. When you see gold shooting into all time highs in assorted currency terms and selling appearing at an easily pinpointed level on a price chart, you can tell that the selling is contrived and is being designed around technical objectives. From a fundamental perspective, no normal seller attempts to “fight” a market that so obviously wants to go higher.

Technically, if gold cannot plow through the bullion bank capping effort at today’s highs, the tendency will be for the metal to drop back down into the defined trading range and then see if the support moves higher to meet it.

Copper shot up sharply higher mainly in part to fears of supply disruptions associated with the terrible earthquake that hit Chile this past weekend. Funds did some selling up close to 3.50 when news filtered out that the mines would not be affected as much as some initially feared but the situation there is quite fluid and one cannot rule out further upside in copper.

Weakness in crude oil and in natural gas as well as the grains were a weight on the various commodity indices which is where some of the selling in gold was tied to due to algorithm-based orders.

The HUI managed to bump up within a couple of points of last week’s high before it ran into further selling. We still need to see this index climb above 420 to start an upside trending move.

While the Dollar was strongly higher at one point in the session, it did back down from above the 81 level again. Bearish divergence continues to display itself but because of the attacks being made on Europe’s currencies, the Dollar bears cannot break down the technical support levels on the charts. Last Friday’s Commitment of Traders data shows that massive speculative net Long position still at very lofty levels. Dollar bulls will need to close it above the 81.50 level or some of these shorter term oriented longs are going to bail out.

DAN'S CHART:

http://jsmineset.com/wp-content/uploads/2010/03/March0110Gold.pdf