Dear Friends,

Today’s comments will be brief as we are in full holiday mode trading and that generally means that most action must be treated with a bit of skepticism since so many large players are out and liquidity tends to shrink resulting in exaggerated moves.

Gold found buying support overnight which continued into today’s session as the dollar gave up its gain from last Friday. Many markets were mixed today with neither bulls or bears able to gain much of an edge and trading resolving into a grab bag for locals who absolutely LOVE this time of year. They jerk the markets around in whatever direction the paper flow provides and seek to push prices into stops to allow for some quick profits. Failing that, they play a range trade and basically scalp the market. Gotta do something to pay the bills…

Technically gold looks like it might have found a short term trading range before Christmas that it feels content to bounce around in. Unless we get some sort of geopolitical event or wild move in the Forex arena, the probabilities favor more of this chop. Next week should probably see the same sort of thing as well. I prefer to see the technical price action in the first full week of trading after the New Year begins to get a better feel of where the market wants to go. By then you have a full complement of players back and more volume to work with.

Resistance at the top of the range is near $850; support is near the bottom of the range at $830.

Open interest indicates the slide late last week was indeed caused by short-term oriented longs bailing out.

December deliveries continue with another 60 being assigned this morning. The total for the month so far has been 13,266 or 1.327 million ounces. There still remain 326 contracts open in December gold.

The HUI and XAU are more interested in following the broader equity markets this AM which are down, rather than following gold which is up. The HUI still looks okay technically but the recent price action shows upside momentum has stalled out for now. Price will have to take out 300 and stay there to get the momentum players interested in buying again although the value based guys will be watching for a support level to form to give them confidence to step in on a dip.  They buy dips – momentum guys buy anything that moves and buy it at any point – they don’t give a hoot about anything else.

The February crude oil contract is now the focus after the foray by the January into the “3” handle region. Feb was reluctant to move lower after OPEC announced their production cuts but today it seems to be focusing back on the weak demand as prices slide down almost $2.00 at one point. If it takes out $40 to the downside, it will promptly be at $35 in a heartbeat. Wholesale gasoline prices at the board were down to .935 at one point today as they continue to slide lower – one of the few bright spots in the economy for the consumer.

Bonds still refuse to move significantly lower as dip buyers come in time after time on the least bit of weakness. The yield on the Ten year is 2.14% as I pen this.

I don’t know about you but I sure am glad we have all this global warming to deal with. Wind chill readings would probably be closer to minus 50 degrees instead of the current minus 40 degrees that we are getting in Chicago… Instead of 4 feet of snow in Spokane, we would probably be seeing 5 feet!  I want to therefore personally thank all you folks out there who are doing your fair share to aid in enlarging the size of your carbon footprint. Those of us who do not like the Siberian winters are most grateful for your efforts to keep us snug as a bug in a rug.

Click chart to enlarge today’s action in Gold as of 12:30pm CDT with commentary from Trader Dan Norcini