Hourly Action In Gold From Trader Dan
Posted: Jul 02 2010 By: Dan Norcini Post Edited: July 2, 2010 at 6:25 pm
Filed under: Trader Dan Norcini
Dear CIGAs,
Gold held fairly well today considering the fact that there was further unwinding of those Gold/Euro and Gold/Sterling spread trades. That trade continues to be tied to the shift away from the problems of sovereign debt in Euroland and an increasing focus on the abysmal state of the US economy which we were reminded of with today’s payroll numbers.
You can see the unwind by looking at the performance of Dollar-priced gold versus Euro-priced gold at the London PM Fix over the past week. Euro gold lost 6.4% of its value against a fall of only 4.2% in Dollar gold. If you recall, gold priced in Euro terms had been outperforming gold priced in Dollar terms during the height of the European sovereign debt crisis. Now that those fears are fading somewhat, Euro gold is dropping at a faster clip.
We will be able to see where the investment community focus is shifting from day to day or week to week by monitoring the performance of these two “currency” pairs in the days and weeks ahead.
I should note here that merely because the attention of the market “shifts” from one day to the next does not mean that the situation is going to improve or that the causes underlying the original crisis have been corrected and that now the problem is solved. It simply means that investors are looking at something else for the time being. Today’s trading crowd has a terminal case of ADD (Attention Deficit Disorder) and seems incapable of looking at two things without forgetting about one of them but it is what it is and that shows up in the daily price movements in these markets.
Trying to read too much into any market in front of a holiday weekend is not a wise thing to do as a great deal of the activity is more often than not book-squaring and profit taking but if I had to pick my “druthers” (That is Texan for “I’d rather”) I would choose to see gold move higher or at least stop going down after a day like yesterday.
It did put in an “inside day” – an inside day is one in which the market high and low of the current session does not exceed the previous day’s high or low – so that is encouraging to the friends of gold that sellers could not manage any further additional downside traction. Still, yesterday’s technical damage was pretty significant so gold is not out of the woods yet. Bulls will need to get the closing price back above $1,227 to at least spook some of the weaker-handed shorts. Additionally, that sagging momentum indicator shown on the chart will need to break its downtrend.
The longer-term weekly gold chart looks okay as it shows the uptrend intact but next week’s price action will need to see gold stay above $1,175 on a closing basis to keep the bears from further entrenching themselves. That chart shows some indicators turning lower so bulls will need to take charge next week to prevent any further deterioration getting displayed. A weekly close below $1,165 would not be at all helpful.
Mining stocks are higher today which is a welcome sign. The HUI needs to at least climb back above the 50 day moving average near 464 to get anything going to the upside.
Bonds moved lower today for some reason even with the lousy numbers out of the jobs report. Could be pre-holiday profit taking by longs who definitely had a good week in there.
Happy Birthday America! Remember those things that have made you great and work to see that they are not lost or taken from you right under your nose.
DAN'S CHART:
http://jsmineset.com/wp-content/uploads/2010/07/July0210Gold.pdf
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