Hourly Action In Gold From Trader Dan
Posted: Mar 03 2010 By: Dan Norcini Post Edited: March 3, 2010 at 2:06 pm
Filed under: Trader Dan Norcini
Dear CIGAs,
Another day, another new record high in both Euro gold and British pound gold at the PM Fix; €832.906 and £754.648 respectively. Swissie gold also is strong today and remains within striking distance of its all time high of 30 years ago. About mid-morning however, both the Euro and the Pound experienced a sharp short covering rally which while it put some pressure on gold priced in both of those currencies, it resulted in a strong move lower in the US Dollar, which provided added upside impetus for Dollar priced gold enabling it to follow through on yesterday’s break out of the trading range pattern as it moved further away from the former cap near $1,130.
The move higher in Dollar priced gold is a confirmation from a technical standpoint that the breakout above that level is legitimate. Funds will now target the $1,150 – $1,155 level. Judging from what I can see of the price action above the $1,140 level, the bullion banks are fighting like Banshees to keep that resistance level from being reached. Should they be able to break through the selling that will emerge near the level, they stand a good chance of taking gold back to its all time high above $1,200. Any retracement in price will need to hold above $1,110 to keep the bullish momentum alive.
It appears we are already seeing the early beginnings of funds rolling out of April gold and into the June contract. That will intensify as we move further into the month. The steady increase in open interest is healthy and shows that fresh money is flowing into the market.
The mining shares as evidenced by the HUI are putting in a stellar performance today as they too are following through on yesterday’s strong showing. The index is on target to put in its second consecutive close above the 40 day and 50 day moving averages as well as the horizontal resistance level near 420 which had held it in check for the last few weeks. Not only that but it has broken the downsloping trend line drawn off the December and January peaks. Technical indicators are also confirming the move higher.
I am trying to read the hedge fund ratio spreads and it does appear that those are being unwound which is the reason that the shares are outperforming the metal itself today. That is a good sign for the miners as these spreads have been supplying a large portion of the pressure on the mining shares. We’ll need to keep an eye on this to see what their next move is going to be. If you look at the chart here you can see how those spreads have leaned on the shares in general against the metal. If they begin to unwind in earnest, the shares will outperform the metal. Let’s see what occurs there.
Click here http://jsmineset.com/wp-content/uploads/2010/03/HUI-Gold-Ratio-3-2010.pdf for today’s HUI-Gold Ratio chart with commentary from Trader Dan Norcini…
Technically, the Dollar looks very vulnerable here right now. It has still not taken out the critical support level near 79.70 and confirmed a top but those reoccurring bearish divergence signals in the technical oscillators are continuing to flash warning signal after warning signal. There are a tremendous amount of fund related sell stops sitting just beneath 79.70 on the USDX. Bears are going to be gunning for those. If they reach them, they stand a few good chances of inducing a large speculative long liquidation orgy. If the funds can defend that level, they are going to have to hope for more bad news out of Europe.
Any sign that Greece is going to be thrown under the bus and the Dollar will move higher as Jim explained yesterday. That will not be a sign of Dollar desirability as a safe haven but rather a move higher out of default. Gold in terms of those major European currencies would then continue to perform very well, just as it has been recently. That should shore up support under Dollar priced gold on any setbacks in price.
One more thing about the Dollar – should 79.70 give way on good volume, the last line of defense for the bulls will be near the 79.30 -79.15 level. Failure there and the Dollar will drop rapidly down towards 77.00 – 76.90.
The S&P 500 is floating higher and has pushed above its major moving averages with the 10 day now above the 40 and 50 day. That has the market on a bullish technical footing with bulls hoping to push price back up towards 1150. Such a move higher in the broad equity markets will help the mining shares.
DAN'S CHART:
http://jsmineset.com/wp-content/uploads/2010/03/March0310Gold.pdf
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