DAN NORCINI'S THURSDAY CHART/COMMENTS

Hourly Action In Gold From Trader Dan


Posted: May 06 2010 By: Dan Norcini Post Edited: May 6, 2010 at 1:54 pm
Filed under: Trader Dan Norcini
Dear CIGAs,

Once again it was Euro gold (gold priced in Euro terms) which was the real standout today. It made yet another brand new all time high at the PM fix coming in at €928.807. Gold in British Pound terms also notched another all time high fixed at £787.385. Even Dollar priced gold made its best showing at the PM fix since December of last year. Clearly, there is a wholesale flight in Europe to gold as a safe haven as fears surrounding the stability of the Euro intensify. So strong is the demand that there have been some anecdotal reports that dealers are having difficulty keeping gold bars and coins in stock. Once again, it is this strong showing in terms of the European currency prices, that is generating the buying in Dollar priced gold and it is that which is making life for the Comex bears extremely challenging to say the least. They simply cannot hold it down with all the buying of physical metal originating out of Europe- demand for the real thing is overwhelming the paper sellers at the Comex.

Don’t you find it enlightening that no matter how often some seem to denigrate gold’s safe haven status, that it is an almost reflexive response in human nature to move towards the metal in times of uncertainty, fear and unrest? From that standpoint, the war on gold by the Western Monetary authorities must be judged an abysmal failure for they have failed to discredit it. Investors vote with their feet and those feet are running into gold. In the end, that is the real arbiter of what the public believes is of worth.

On the technical price charts gold’s showing today is very impressive. It knifed up through overhead selling resistance near $1190 in firm fashion. Every one of those brand new shorts that were piled on two days ago are now hemorrhaging severely with many of the weaker-hands being forced out as their buy stops were set off in a upward cascade effect.

Gold now needs to get a solid close above $1199 – $1202 to be primed for a run at the all time high. Either that or trade above this level for at least an hour would do the trick. There is a pretty fierce battle going on right now between the bullion banks and the funds above $1190. The banks are attempting to hold price under the above mentioned resistance level as they know full well that a push through there on the close means they will be forced to retreat to $1220.

There was a slight increase in open interest in yesterday’s session, most of that in the August and December contracts as it appears we might already be seeing some early rolling out of the Junes.

The HUI pulled itself away from the ongoing weakness in the broader equity markets as the breakout of bullion on the charts was the catalyst for new buyers to come into the mining sector. They are still lagging the performance of bullion however due to those infernal ratio trades of the hedgies. I am not sure at what point those will be lifted en masse but right now they are still active to some extent.

The bond market is on a solid tear higher as yesterday’s hesitancy to hold near the session highs gave way to increasing demand for “safe haven” plays. I still think that this is an idiotic investment choice but it is what it is for now. Some of these guys are clueless about gold and just run into Treasury debt for shelter pretty much along the lines of Pavlov’s dogs. That is a hard dinner bell clue to break. At some point they are all going to be standing around looking at each other and saying to each other, “ now what do we do with these scraps of paper?”

Crude oil is in a near freefall dropping yet another $2+ a barrel at midday. The rampaging Dollar is engendering selling across many of the commodity markets again today although it does appear that some of them are making a bit of separation from the algorithm related selling.

I find it interesting to note that today the Swiss franc is trading higher as well as the Yen and the Dollar in a safe haven play. The Swissie has not been faring too well of late with all the selling taking place in the Euro. I want to repeat what I mentioned yesterday – the onus is on the ECB to perform in order to prevent a complete collapse in the Euro. So far they are doing nothing but talking. The more they talk and do nothing, the harder the Euro is going to get sold off and before long, they are going to be in serious trouble. European monetary officials seems paralyzed like a deer staring into the headlights of an oncoming truck. At the very least they are going to have to buy Greek, Portugal and/or Spanish bonds. The market is about to force their hand.

DAN'S CHART:
http://jsmineset.com/wp-content/uploads/2010/05/May0610Gold.pdf