Dear CIGAs,

Gold ran into a bout of pre-weekend selling in today’s session as bears were able to prevent bulls from capturing the hill at the $960 level and holding it. Chart readers can see the significance of that level for if it falls, gold will move back up to $1,000 again. It looks to me like there was a bit of profit taking by short-term oriented longs not only in gold, but in crude, and the European currencies. It is not completely unexpected to see the Forex arena moving to bid the Dollar up a bit considering the fact that it just experienced its single largest day fall in more than 20 years. Longer term, now that the Fed has embarked on its currency debauching policy, traders will be looking to sell rallies in the greenback. We are still going to have the crosswinds involved from safe haven dollar buying whenever stocks falter so the day to day gyrations in the currency markets are going to flow over into the gold market as traders/investors attempt to sort all of this out.

Gold appears to be pausing or resting after its big move higher with short-term oriented traders booking profits and some fresh short sellers emerging but overall, it held up well today as eager buying came in on the dips. Ditto that for the mining shares as the HUI and the XAU are actually both in positive territory as I write this.

Volume was pretty hefty in gold again yesterday but off the torrid pace of Wednesday’s monster number. Open interest readings are healthy. We will get another look into market internals this afternoon to when the Commitments data is released but unfortunately, it will not contain the numbers for Wednesday on since the cutoff date is Tuesday.

Rollover activity in gold is picking up with June receiving the bulk of the new buying. These rollover periods have been used quite effectively in the past by the bullion banks to squash price rallies so bulls will have to perform to keep their momentum and maintain the initiative. April will be entering its delivery period soon and we will then see whether or not a sufficient number of longs have finally seen the light and decided to start standing for delivery. AT this point I am not very optimistic that they will since this new generation does not seem to know how to attack even when they are handed a battle plan that guarantees them victory.

Equities were pulled lower by the weakness in financials. This will bolster talk that the recent rally in stocks was nothing but a dead cat bounce. The weekly chart in the S&P is not particularly impressive although last week’s move higher did give bulls some cause for hope. That bottom down near the 670 level must hold or the S&P is going to 600. Upside resistance remains near the 790 level followed by 835.

Bonds surrendered the better part of their gains after being up nearly a full point today – something I find telling. Could it be that the market is still concerned about the supply glut that is coming? The weekly bond chart has decidedly improved although the fade from well off the highs indicates that the most likely course of price movement over the next few weeks is a sideways chop. Bonds will need some sort of fresh news to encourage bulls seeing that they have gotten all the bang that they are going to get from the Fed’s announced buy program.  While that has served to put a floor under them, it will take some new fodder to feed this market.

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

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