Hourly Action In Gold From Trader Dan

Posted at 3:48 PM (CST) by & filed under Trader Dan Norcini.

Dear CIGAs,

Yesterday the Euro was in – today the Euro is out. Yesterday the Swiss Franc was in – today the Swiss Franc is out. Yesterday the Dollar was out – today the Dollar is in.

Translation – more hedge fund madness.

I am going to make a suggestion to the regulators since we have now apparently reached the point where the Federal Government gets to now dictate executive compensation and such (then again the fools that dreamed up these financial weapons of mass destruction only have themselves to blame for bringing down the heavy-hand of the government busybodies upon them). One way to restore some sort of stability to the financial markets would be to issue an executive order banning all hedge funds from investing anywhere with real money. To compensate them for their loss of entertainment, the government should buy all of their managers and their employees an X-Box complete with the newest, fastest moving and most addicting video games and have them all distributed before the month of February is out.

Such an act would to two things – it would rid those of us who love the markets and remember when they were once sane, of the hedge fund created idiocy that we are forced to daily observe. Secondly it would demonstrate a compassionate care for the feelings of the hedgies by helping to ameliorate their withdrawal from the trading business. After all, those guys are used to pushing lots of buttons without knowing why or what they are doing and to cut them off cold turkey might be harmful to their overall psychological well being. I would hate to think that we might see some of them standing on street corners furiously pushing the crossing buttons on the red lights. Such a sight would no doubt even move the most dispassionate among us.

By the way, those of you looking for a good deal on a corporate jet or helicopter should contact Bank of America – news has come out that they are selling Merill’s copter plus some of their own fleet. I think they should put them up on Ebay. We could all chip in and buy them and then structure a debt package backed by these jets and this helicopter and sell it back to Bank of America as a high-yielding security after we get Moody’s and Fitch to stamp it “AA”. Let’s stick a yield on it of 5% and let AMBAC insure it for us. Then we could take our profits and buy lots more helicopters and corporate jets from distressed financial companies and do this some more. If the financial companies held enough of our helicopter/jet securities on their books, they could then feel confident and would begin lending again. We would all then get the credit for saving the economy and all of the politicians in Washington could just go home before they further destroy the nation. Having become extremely popular, we could then run for public office, get elected all over the nation and then go to Washington where the first thing we could then do would be to reintroduce gold back into the monetary system. And to think some of those who read this site happen to believe that we who love honest money do not have a plan!

Gold was out yesterday – today it was back in. Tomorrow – who knows? See the chart for the technical picture as I have made a few notes that are fairly self-explanatory.

Euro gold was back over the €700 level at the PM Fix today.

A side note – deliveries in February have so far been disappointing when compared to December 2008. Only a bit more than 200,000 ounces of gold have been stopped compared to 1.17 million after the first 4 delivery days back with the December contract. That is not going to help dislodge the strangle hold that the bullion banks have on the Comex.

The mining shares are higher but so are the broader stock equities and gold bullion so it is tricky trying to read what they are keying off of in today’s session. Again, both the HUI and the XAU are showing consolidation patterns on the charts.

I should note as I did yesterday, both crude oil and particularly natural gas, are looking more and more like they are in the bottoming process. While one can never be too sure with the kind of volatility we are seeing currently in so many markets, both of these energies have stopped moving lower and look to be probing for a solid bottom. Again, if these are indeed bottoming, it will be beneficial to gold since it will help put a floor under the entire commodity sector, particularly as measured by the various commodity indices. In looking at the crude oil chart, it is still trading within a broad range between $35 – $50. It will take a breach of $50 on good volume on a closing basis to convince a lot of skeptics that crude has finally bottomed for good.

Bonds continue heading lower but have managed a decent intraday bounce in the session. They are overdue for a bounce higher but need some sort of spark to set it up. Today’s low is not far above the 100 day moving average so clearly if they are going to bounce, they had better do it soon or else we are going to see the distinct possibility of another sharp downleg.

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