DAN NORCINI'S MONDAY COMMENTS

Hourly Action In Gold From Trader Dan


Posted: Apr 12 2010 By: Dan Norcini Post Edited: April 12, 2010 at 2:23 pm
Filed under: Trader Dan Norcini
Dear CIGAs,

The big mover of the day was news of the Greece bailout (okay – call it a “rescue package” – it is still a bailout) put together by the EU to the tune of €30 billion ($41 billion) at 5%. Further icing on the cake is to come from the IMF which is providing €15 billion. The Forex markets went into a tizzy last evening with the Euro jumping more than 2 points at one time before things began settling down and a bit of relative calm descended on the currency markets as traders attempted to sort out the implications. Once they did, the Euro surrendered over a full point worth of gains and the Dollar moved back ½ cent off its worst overnight lows.

Gold shot all the way to $1,170 when the news broke but as it came into New York and as the Dollar began recovering, the sell side crowd went back to work and knocked it down off its best levels of the session. The same thing occurred with both silver and copper as well, the latter which had made a new yearly high before sellers came in and took it down.

It was particularly odd seeing the bonds moving higher as the whole idea behind the party in the Forex markets was that a meltdown had been avoided and it was time to play the risk trades once again. Something tells me that the feds are playing in the bonds as they are particularly worried about rising interest rates and would have us believe that they can conjure unlimited amounts of money into existence with little to no effect on yields. The reason cited for the higher prices today was a lack of upcoming auctions over the next couple of weeks.

I must admit I will never come to terms with the repugnant idea of calling numberless scraps of paper backed by nothing but debt a thing of value. Anyone else doing the same thing would be rightfully called a counterfeiter or a flim-flam artist and would summarily be hauled off to the dungeon where his stinking carcass would be left as food for the maggots . Only when the federal government does the same is it hailed as “providing liquidity” or “aiding the recovery process”. Oh well, it is what it is and as long as the majority believe the fairy tale, it will be true. With all that is transpiring in this nation I suspect that it is only a matter of time before the sleeping majority awaken to this wholesale fraud and demand the return of honest money. Let us hope for that day for the sake of our children.

Enough of my little rant for today however as the price chart of gold beckons for further analysis. I mentioned last Friday that there was one more level of resistance between gold and a potential revisiting of its all time high and that level was near the $1,170 – $1,175. Should gold clear that, it would no doubt draw in huge flows by the Managed Money sector that would take it back to the old highs. Well, guess what? It ran exactly to that level and that is where it was capped by the usual crowd. They can read a price chart as well as we can and know where they are vulnerable to attack.

The setback from this level is therefore not particularly surprising but the weakness in the Dollar has thus far kept the sellers from dropping price down significantly. Momentum in gold is still strong and the rising moving averages detail a market in a bullish posture which should keep dip buying active on setbacks. Please refer to the chart for the technical support and resistance levels. Gold would have to drop below $1100 to do any serious damage on the chart although I would not want to see it below $1,130 any time soon as that would bring out the top callers once again.

Open interest continues to rise which is a healthy sign as it indicates the influx of fresh money flows. The big move higher on Friday came on a rather small increase in the total open interest by recent standards so it appears that we did get some weaker-handed shorts pushed out of the market. The stronger-handed bullion banks are digging in however.

The HUI seems stuck near the 450 level as if waiting for some further signal to give it the impetus it needs to move higher. Initial support lies down near 430 with the index needing to take out 455 to give it a legitimate shot at advancing to 460 – 462.

Crude oil set back a bit but the market still appears firm. Rising energy prices will help to keep a firm bid under the gold market as will a rising CCI (Continuous Commodity Index) which is within a couple of points of making a 2 month high. Both bear watching as they will have a definite impact on the gold market.

DAN'S CHART:
http://jsmineset.com/wp-content/uploads/2010/04/April1210Gold.pdf