Hourly Action In Gold From Trader Dan

Posted at 1:46 PM (CST) by & filed under Trader Dan Norcini.

Dear CIGAs,

Easing concerns regarding Greece amid speculation of an international bailout brought in a wave of buying into the European currencies with the result that the some technicians are now calling for a bottom in the Euro and a top in the Dollar based on the price charts. It is a bit early to confirm that but one thing is certain, gold certainly responded to the movement in the Forex markets as it shot upward directly into a region of considerable significance on its technical price chart further confirming the bullish signals that have been abounding of late.

As mentioned here recently in regards to the Commitment of Traders report analysis, the big hedge and index funds are holding relatively low speculative long side exposure in the gold market as the sideways trade of the last few months bled down their holdings considerably all the while the price held relatively firm. With the momentum now clearly bullish, these same funds are plowing back into the gold market judging from the sharp increases in the open interest numbers that are being reported. It is this flow of managed money which will take gold considerably higher as long as it continues in force. While these computer algorithms are the expression of mindless machines when they are selling, that same “mindlessness” works in favor of the bullish cause when they are firmly in the “BUY” mode. Whether we like it or not, Managed Money is what drives today’s markets and for now, it is driving gold higher.

Adding to the bullish momentum is the price action in the mining shares as evidenced by the very strong performance of the HUI which is confirming the move higher in bullion. The 2 cylinder engine is firing on both cylinders which is always a friendly development.

For you silver guys out there (I love reading your emails whenever I mention silver so keep them coming!) a factor that is of importance, silver just took out its all time high in Euro terms today at its morning fix in London. The same thing holds for the metal as holds for gold, a market making all time highs when priced in other currencies besides the Dollar, is very difficult to push down for any extended period of time simply because the successive highs makes for bullish investor psychology. Silver is functioning as a monetary metal right now because it is outperforming copper so its strength is not merely a reflection of improving industrial demand as some suggest.

Technically gold could not quite manage to push through the resistance noted on the chart near the $1165 level. It ran right to it but then pre-weekend profit taking and bullion bank led selling was able to prevent it from pushing past that level. As you can see on the chart, there is one more level of resistance left just above this level and then a clear path to the all time high is within reach. Next week will be key to seeing whether or not gold can follow through on this week’s very impressive technical performance. After a show like it put on this week, it will not be unexpected to see longs booking some profits.

Commodity markets were mixed today with some segments moving higher and others moving lower such as the crude oil market. It surrendered all of the gains it had put on throughout the week. The weekly chart still looks strong in spite of today’s bout of weakness. Natural gas however was higher so the energies were not completely down and out for the count.

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