Dear CIGAs,

It looks to me like gold’s inability to climb back over $1,000, or at the very least get back over $960 to resume an uptrending move,  in the face of such an horrific financial meltdown, brought about a wholesale liquidation of stale longs who have bailed out in both disappointment and disgust. I will continue to maintain that only the Almighty knows how much of our own TARP money was used by the bullion dealers at the Comex to overwhelm the bids that came into that paper market. As I have said before, throw a few $billion here and a few $billion there in my direction and I could have all kinds of fun with a few commodity markets. Since all of the idiots who voted in favor of this execrable bailout haven’t the faintest clue as to where the money is going or for that matter, what it is being used for, is it that far-fetched to think that a portion of it is being used by these paragons of virtue, the bullion banks, to destroy the only thing honest that is left in the financial world, namely the yellow metal? These are some of the same people who would package their grandmothers together and sell them off to a hedge fund if they thought they could make a quick buck off of it.

No matter – technically gold is looking heavy and will need to hold above today’s session low to prevent a potentially bearish head and shoulders pattern from forming on the daily price chart. Rest assured if I can see it, those same folks mentioned above can see it also. If the chart painters can prevail and force that pattern to form, we are probably going to have to sit through another one of those frequent technical washouts that have marked this bull market in gold for many years. A case could be made from the charts that a move down to near the $800 level is not out of the question although we should see quality buying enter at  the 50% retracement level near $853 on down to the 100 day moving average around the $847 level. Gold needs to hold here and hold now!

I want to mention that I am seeing a great deal of red in just about all of the various commodity markets this morning with the energies getting hit particularly hard and the grains also swooning. That indicates index fund selling which is one of the reasons gold also dropped so severely. They bail out or move into most commodity markets in sync as their nature requires them to buy or sell a broad basket of commodities when filling orders for clients. Not to mention the fact that these bear raids on gold almost always coincide with either option expiration or rollover periods, the latter which we are now seeing as the twits that run the funds must roll from April to June gold or else take delivery, something which they are apparently allergic to but which would put an end to this endless charade at the Comex. Open interest indicates that the rollover has begun.

For those of you who are so inclined to continue filling my inbox with your foul mouthed emails whenever gold moves lower, please spare me your rants about how the US economy has hit bottom and the worst is behind us and thus gold is now doomed. If you really and sincerely believe that, then please, please, put all of your money into Treasuries and stop reading the web site.

The mining shares are actually holding up pretty well considering the mauling that gold is receiving today. Then again the day is yet young.

As I am still attempting to catch back up from vacation my comments will be abridged today. Please see the chart for some additional technical aspects.

Click chart to enlarge today’s hourly action in Gold in PDF format with commentary from Trader Dan Norcini

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