Hourly Action In Gold From Trader Dan – 15 Sep

Hourly Action In Gold From Trader Dan

by Dan Norcini

Dear CIGAs,

As many of you are no doubt already aware, the Bank of Japan finally, finally, intervened after several weeks of increased hand-wringing regarding the extremely high level of the Yen. They have not done this since 2004 ( I might add I was on the receiving end of that ‘whoopin’ at the time). Quite frankly I am surprised it took them this long although the recent elections probably had a great deal to do with delaying the onset of what nearly every Forex trader on the planet has been expecting for some time now. The reason – once they start ratcheting up the rhetoric, especially if those pesky speculators do not turn tail and run over verbal threats, their credibility is on the line and act they must if they are to maintain the respect of the speculative community. They mauled the Yen overnight with the result that the Dollar managed to move up and away from the 81 level. The key now will be to see how effective their intervention was and whether or not the speculative community is in a mood to test their resolve.

The result of this was that the price of Gold in Yen terms shot up quite sharply overnight. The stronger yen had been enabling Japanese citizens to acquire the metal at what was probably a type of discount compared to what the rest of the world has been paying lately. As you can see on the chart, when viewed in terms of the yen, the price of gold has not been nearly as strong as here in the US and elsewhere.

Click chart to enlarge in PDF format


Gold at the Comex looks like it was taking a bit of a breather after yesterday’s strong showing. The chart pattern indicates a market in a resting phase digesting its gains. If it sets back further, the former resistance zone near $1260 should provide some initial support as dip buyers look to first surface there. Below that is $1245.

Topside selling resistance still looks to be most likely near the $1285 level followed by round number resistance near $1300.

The silver market continues to generate a great deal of bullish excitement as it built on its impressive performance of yesterday. It worked quite hard today at accomplishing a close above $20.50. That is the first barrier that it must clear to effectively target a run towards $21. I do want to see it hold above this level tomorrow.

It has some support coming in on the chart near $20.25 followed by the zone near the 10 day moving average which is just below $20.

The HUI is consolidating its gains from yesterday as well but its inability to close above the 500 barrier is a bit frustrating as those hedge fund ratio trades simply will not yet go away. For those of you who are writing emails to me about that trade, let me suggest that those trades will eventually give way to a spread trade involving using the mining shares as the long leg of a spread against the broader equity markets.

The Dollar is getting a respite from the selling wave that engulfed it the last two days but it owes any reprieve to the Bank of Japan. A crash through the floor near 81 now will send it very quickly down towards crucial chart support near 80.

Click chart to enlarge in PDF format


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