Dear CIGAs,

Safe haven buying returned to gold this morning as swooning equity markets and fears about the financial condition of the big banks sent money flowing into the precious metals complex and the bond market. Gold ignored the strength in the Dollar and the sharp drop in crude oil prices and found steady buying throughout the session with nervous shorts getting out alongside of new buying interest.

The push higher enabled to gold to climb back above broken support near the $882 level as well as regaining the 100 day moving average. If bulls can push price above $905, they will generate additional short covering.

Once again as we have seen so often over the last few months, lower equities gave rise to across the board selling in a wide array of commodity markets with only gold and silver escaping the selling blitz by index funds and some hedge funds. The Dollar was also higher (no surprise here) as investors did the usual knee jerk, “rush to safety”, move into the greenback. That has resulted in a push back above the 40 and 50 day moving averages and turned that dollar technical chart bullish once again as the 10 day and 20 day are now trending higher. Whether the Dollar can sustain these levels is completely dependent on the well being or lack thereof of the US equity markets. If equities continue sinking, the dollar will continue rising. If not, the dollar will drop like a lead brick.

I find it somewhat amusing to note that on each and every one of these broad equity market plunges, investors become more and more convinced that human beings no longer need to consume food of any kind. The kind of selling that greets the grains, the softs and other assorted edible commodity markets is almost hysterical when one considers just how utterly stupid it is. Equities drop lower and that means  no one needs to eat anymore? Welcome to the new world of investing compliments of the hedge fund community (maybe that crowd can stop eating and do us all a favor and disappear).

While the HUI and the XAU are both solidly higher at this point in the session, the technical charts are still in need of some repair. The HUI needs to recapture 305 to give the bulls a shot at further gains while the XAU has some work to do to get above 127 and generate some additional bullish enthusiasm.

Just about the point where bonds looked as if they were threatening a serious downturn, up and away they bounce from Friday’s low buying the longs salvation from what was looking increasingly desperate to their cause. No doubt our illustrious money masters will greet today’s move in the bonds will smiles upon their faces. Technically, bonds are still trapped in a range.

The Yen is sharply higher today as risk aversion is back in with the Euro-Yen cross getting whacked once again. That knocked the props out from under the soaring copper market, killed crude oil, squashed any potential rally in natural gas and generated lots of selling in the commodity currencies – the Canadian, Australian and New Zealand Dollars.

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