Filed under: Trader Dan Norcini
Dear CIGAs,
Sovereign debt woes out of Europe, particularly Portugal, continue to bring a strong bid into gold. During the early part of the European trading session gold had pushed within a mere 4 euros of its all time high before it was taken down as the clock moved into New York trading (gee – what a surprise). These problems are not going to go away any time soon and as they come to the forefront of the headlines will serve to remind traders of the problems with the Euro and facilitate a drive to gold as a safe haven. They will also be there to serve as a supportive feature for the metal during bouts of price weakness should further fund long side liquidation take place.
If Portugal, or any other of these financially troubled Euro nations, cannot sell their bonds, the ECB is going to have to come in and become the buyer of last resort or else risk a spreading of a debt contagion on their watch. Chatter was that they were already doing just that today. We’ll see how many of their bonds the Japanese and Chinese will actually buy after stating that they would be purchasers of some of the debt. Savvy investors in the Euro zone have figured out that what the ECB is doing is a sort of back door QE and that is why they are buying gold and thus why the price of gold in euros is so firm.
In US dollar terms, gold climbed back above the significant chart level of $1380 during those European trading hours but fell back coming into New York and surrendered the level. We still have a “sell the rally” psyche since the price is trading below the short term moving averages so bulls will need to get the price firmly above $1400 to change that but first they have to better this $1380 mark. As the session wore on in New York, bulls made a late comeback and recaptured the hill at $1380 heading into the close, achieving a nice technical victory. Several of the technical indicators that I follow are down in the oversold zone and beginning to flatten out so it will not take too much in the way of further price gains to push those indicators into generating buy signals. Bears would still dearly love to take price below $1365 and hold it there to enable a push towards $1345 – $1340 but thus far have been frustrated in their attempts to do by the emergence of solid buying of physical coming out of Asia and Europe. These shorts will be forced out if price closes above $1400.
Silver is showing good strength at a time when it needed to on the technical charts. The further it moves up and away from $28.50, the better for the bulls as it will bring some buyers back in from the sidelines who were hesitating for fear of getting trapped by fund selling that would ensue if those support levels were taken out. The chatter about tightness in the physical silver market certainly appears to be validated by the price action of the metal at the Comex. I still want to see it climb back above the $30 level and hold there before getting confident enough to expect another leg higher. It ran into selling exactly at the 10 day moving average which is currently trending lower so we will want to see it first push past this level near $29.80 and close above it to begin spooking the bears and inducing some short covering.
The metals are finally getting some help from the HUI but that index needs to climb above 560 to get anyone terribly excited. There are so many shorts in the mining shares that if the metals can break their overhead resistance levels, a frenzy of buying is going to appear.
Bonds were lower again (Here we go back to the yo-yo once again) as risk was back in vogue today. The Yen was sold off as it always is during times of risk trades and the CCI was up sharply with crude oil rising back above $90 and moving towards $91. Copper was also quite strong today taking on more than 10 cents at one point. At least for today the markets seemed to be in sync with what the bond market was doing. Perhaps that is because the Fed was not quite as active today doing their QE thing that they love to do with the freshly created binary digits that we all get to pay for (correction – our kids get to pay for). Anyone who thinks we still have free markets in the US needs to wake up and smell the coffee. The bond market is very heavily managed by the monetary authorities; without their manipulations of long term interest rates, the bond market would have already broken down and begun another leg lower. Prospective bond buyers should be forced to wear a wrist band with a red warning light that glows whenever the CCI (Continuous Commodity Index) is moving strongly higher particularly if crude oil is going along for the uphill ride.
I see my pals at GATA have won a small but perhaps significant victory in their efforts to pry open the books of the masters of the dark (that would be the Fed). Congrats to Bill and Chris!
Corn is leading the grains complex this morning as traders anticipate a bullish release from the USDA tomorrow morning. Corn tends to draw strength from gains in crude oil as that tends to support ethanol prices. If corn closes above $6.30 and wheat closes above $8.10, watch out! Beef and now pork prices are climbing sharply at the wholesale level pushing the price of cattle into record territory for some contracts. Look for a resurgence in cattle rustling ( I am serious about this). Many of the commodity charts are showing prices just below recent highs. A push past those levels and the rising price of food is going to see the afterburners kick in. Retail prices have already begun their climb higher as any of you who monitor prices at the local grocery stores are aware. When it takes as much money to pound a pound of bacon as it does a fine quality Choice beef filet, we are all in trouble. Unfortunately for all of us, there does not appear to be any relief in sight. Keep in mind that much of this is man induced – it is the direct result of Federal Reserve policy. As mentioned yesterday, the fundamentals in many of the foods are already strongly bullish – the extra kick higher than comes from a plethora of funny money chasing tangibles, just exacerbates the situation. I sincerely believe we are going to be seeing food riots around many parts of the globe this year. The Eastern authorities know full well whom to blame for that. Unrest in any nation is a serious political issue and the West is fomenting it by foolish monetary policies and reckless money printing.
DAN'S CHART:
http://jsmineset.com/wp-content/uploads/2011/01/January1111Gold.pdf
Sovereign debt woes out of Europe, particularly Portugal, continue to bring a strong bid into gold. During the early part of the European trading session gold had pushed within a mere 4 euros of its all time high before it was taken down as the clock moved into New York trading (gee – what a surprise). These problems are not going to go away any time soon and as they come to the forefront of the headlines will serve to remind traders of the problems with the Euro and facilitate a drive to gold as a safe haven. They will also be there to serve as a supportive feature for the metal during bouts of price weakness should further fund long side liquidation take place.
If Portugal, or any other of these financially troubled Euro nations, cannot sell their bonds, the ECB is going to have to come in and become the buyer of last resort or else risk a spreading of a debt contagion on their watch. Chatter was that they were already doing just that today. We’ll see how many of their bonds the Japanese and Chinese will actually buy after stating that they would be purchasers of some of the debt. Savvy investors in the Euro zone have figured out that what the ECB is doing is a sort of back door QE and that is why they are buying gold and thus why the price of gold in euros is so firm.
In US dollar terms, gold climbed back above the significant chart level of $1380 during those European trading hours but fell back coming into New York and surrendered the level. We still have a “sell the rally” psyche since the price is trading below the short term moving averages so bulls will need to get the price firmly above $1400 to change that but first they have to better this $1380 mark. As the session wore on in New York, bulls made a late comeback and recaptured the hill at $1380 heading into the close, achieving a nice technical victory. Several of the technical indicators that I follow are down in the oversold zone and beginning to flatten out so it will not take too much in the way of further price gains to push those indicators into generating buy signals. Bears would still dearly love to take price below $1365 and hold it there to enable a push towards $1345 – $1340 but thus far have been frustrated in their attempts to do by the emergence of solid buying of physical coming out of Asia and Europe. These shorts will be forced out if price closes above $1400.
Silver is showing good strength at a time when it needed to on the technical charts. The further it moves up and away from $28.50, the better for the bulls as it will bring some buyers back in from the sidelines who were hesitating for fear of getting trapped by fund selling that would ensue if those support levels were taken out. The chatter about tightness in the physical silver market certainly appears to be validated by the price action of the metal at the Comex. I still want to see it climb back above the $30 level and hold there before getting confident enough to expect another leg higher. It ran into selling exactly at the 10 day moving average which is currently trending lower so we will want to see it first push past this level near $29.80 and close above it to begin spooking the bears and inducing some short covering.
The metals are finally getting some help from the HUI but that index needs to climb above 560 to get anyone terribly excited. There are so many shorts in the mining shares that if the metals can break their overhead resistance levels, a frenzy of buying is going to appear.
Bonds were lower again (Here we go back to the yo-yo once again) as risk was back in vogue today. The Yen was sold off as it always is during times of risk trades and the CCI was up sharply with crude oil rising back above $90 and moving towards $91. Copper was also quite strong today taking on more than 10 cents at one point. At least for today the markets seemed to be in sync with what the bond market was doing. Perhaps that is because the Fed was not quite as active today doing their QE thing that they love to do with the freshly created binary digits that we all get to pay for (correction – our kids get to pay for). Anyone who thinks we still have free markets in the US needs to wake up and smell the coffee. The bond market is very heavily managed by the monetary authorities; without their manipulations of long term interest rates, the bond market would have already broken down and begun another leg lower. Prospective bond buyers should be forced to wear a wrist band with a red warning light that glows whenever the CCI (Continuous Commodity Index) is moving strongly higher particularly if crude oil is going along for the uphill ride.
I see my pals at GATA have won a small but perhaps significant victory in their efforts to pry open the books of the masters of the dark (that would be the Fed). Congrats to Bill and Chris!
Corn is leading the grains complex this morning as traders anticipate a bullish release from the USDA tomorrow morning. Corn tends to draw strength from gains in crude oil as that tends to support ethanol prices. If corn closes above $6.30 and wheat closes above $8.10, watch out! Beef and now pork prices are climbing sharply at the wholesale level pushing the price of cattle into record territory for some contracts. Look for a resurgence in cattle rustling ( I am serious about this). Many of the commodity charts are showing prices just below recent highs. A push past those levels and the rising price of food is going to see the afterburners kick in. Retail prices have already begun their climb higher as any of you who monitor prices at the local grocery stores are aware. When it takes as much money to pound a pound of bacon as it does a fine quality Choice beef filet, we are all in trouble. Unfortunately for all of us, there does not appear to be any relief in sight. Keep in mind that much of this is man induced – it is the direct result of Federal Reserve policy. As mentioned yesterday, the fundamentals in many of the foods are already strongly bullish – the extra kick higher than comes from a plethora of funny money chasing tangibles, just exacerbates the situation. I sincerely believe we are going to be seeing food riots around many parts of the globe this year. The Eastern authorities know full well whom to blame for that. Unrest in any nation is a serious political issue and the West is fomenting it by foolish monetary policies and reckless money printing.
DAN'S CHART:
http://jsmineset.com/wp-content/uploads/2011/01/January1111Gold.pdf
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