Hourly Action In Gold From Trader Dan

Posted at 2:09 PM (CST) by & filed under Trader Dan Norcini.

Dear CIGAs,

The Dollar continues to run into a wall of selling just shy of the 78 level in the USDX. There is some minor support centered in the 76.60 – 76.70 level. If that gives way on strong volume look for a move lower which will test the 76 level once again. Failure there and 74 is a given with gold breaking out above the $1,030 level.

As Jim has written, the notion that the US Dollar is a “safe haven” is laughable and those who have not yet realized that the greenback is the whipping boy of the foreign exchange markets will soon do so much to their own dismay.

Gold priced in terms of the Euro and the British Pound is still very strong with BP Gold the stronger of the two. Euro gold is flirting with the 700 level but cannot yet muster enough strength to break through that level. I suspect that when it does, it will do so rather abruptly and move strongly higher in Euro terms signaling an aversion to the Euro, notwithstanding the higher yields in Euro land compared to the Dollar.

The strength in the Euro is not coming because investors believe Europe’s economy is in any better shape than that of the US but rather because carry traders are chasing the yield differential advantage by leveraging up on that side. Eventually however, the reality of paper proliferation in Europe will send more prudent investors on that continent into gold, as owning any kind of paper asset when its Central Bank is spitting them out faster than amoebas can multiply will remove confidence from the currency.

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