Gold gave the gold bulls a nice Christmas gift in today’s holiday shortened trading session by closing up. As I have stated for the past week now, reading too much into any of these holiday markets is fool’s work but I must admit I would much rather prefer to see a “+” sign in front of the gold price rather than a “-“ sign even if it comes on such anemic volume. I heard reports stating that the longs spiked the egg nog of the bears and because it was so quiet down in the pit, they all just fell asleep and could not do any selling. Hey – who cares – it worked. Between spiked egg nog and physical delivery of gold, the bulls might have finally hit upon a nice weapon against the perma shorts at the Comex. Personally I think it would be more effective to simply lock the exchange doors and leave them all outside the building in the cold and snow. Since it is Christmas, they could let them back in after prices had spiked a couple hundred dollars so they could watch “How the Grinch Stole Christmas”.
Gold seemed to take its cue more from the weakness in the Dollar than much of anything else today although from a technical perspective, it did hit the bottom of the trading range yesterday and bounced away from it giving range players a reason to buy. It is still in consolidation mode as it bee-bops back and forth between $830 and $850. For now the probabilities favor more of that into the end of the year although an upside breach of $850 in the February will see it run to test the lap between $855 – $860 shown on the daily chart. Gold continues trading above the 100 day moving average which has not yet turned higher although the 10 day through 50 day’s are all moving up, a bullish technical sign.
We had a pretty decent amount of deliveries assigned today against the December contract – 128 to be precise. The total for the month of December to this point is 13,452 or 1.34 million ounces with 369 contracts remaining open in that month as of yesterday. Registered gold at the Comex continues to hover around the 2.83 million ounce mark.
Open interest took a hit yesterday as weak-handed longs were run out.
The mining shares are trading in a comatose fashion today – nothing worth commenting on.
Crude oil was knocked lower again today in what has become a familiar occurrence as the drop below $40 was the signal for the shorts to lean on it as frustrated bottom pickers throw in the towel and look to perhaps try again at a lower level. The recently expired January crude contract ended its life with a settlement print of $33.87 so bears will be targeting that level. A failure there and $30 will be here almost immediately. Should crude be able to hold above there, it will encourage those who are looking for a bottom.
A point of interest – there are some grumblings in the oil patch that the Nymex crude oil contract needs to have some modifications made to it to make it more reflective of the broader global oil market. This particular contract is for what we call “light or sweet” crude as compared to the vast majority of oil traded globally which is “heavy or sour”. Also, the delivery point in Oklahoma only has so much storage capacity and a glut at that location can cause prices in the delivery month to digress quite widely from larger global market prices elsewhere. Some are saying that the Nymex is no longer serving as an accurate benchmark for crude oil prices. This might be worth following to see if anything comes out of these murmurings. From what I am hearing front month Nymex prices are lower than a large amount of the crude being traded elsewhere. If modifications are made to the contract that would result in more delivery points and some latitude in the grade of oil that could be delivered against the contract we might see a bit of a move higher in prices, especially in the front or delivery month, although that would be something that is a bit down the road at this point in time. Just something that I felt deserved mention.
I should note here that for the most part since July of this year, the fortunes of crude oil have pretty much been the fortunes of the entirety of the commodity complex. Today all of the metals, precious and industrial, were higher in spite of crude oil weakness and even sugar and corn were higher. I am glad to see this divorce occurring between individual markets and the crude complex because it further confirms my views that the bulk of the hedge fund deleveraging and index fund redemption-related selling is behind us and that many markets have now gone back to trading their own particular set of supply/demand fundamentals.
Bonds continue to pause below their recent peak with no sign of any concerted selling at this point. Like gold and most of the other markets, bond trading is subdued in front of the holiday.
The grains continue to show strength with soybeans taking over the leadership role.
In closing I would like to personally thank all of you who took the time to write such warm Christmas greetings. You have read my remarks from time to time about some of the harsh and vile emails that I occasionally receive from disgruntled readers but I feel I have been remiss in not saying that the vast majority of notes that I receive are filled with gracious words from the most wonderful collection of folks that no doubt have ever graced this planet. Time often precludes me from responding to each and every email although I do make a real effort to do so. So let me state here how grateful I am for all the kind sentiments expressed by so many of you and to wish all of you a most wonderful Christmas and a Happy, Healthy and Prosperous New Year.
Merry Christmas to all and to all a good night!
Click chart to enlarge today’s action in Gold as of 12:30pm CDT with commentary from Trader Dan Norcini