Dear CIGAs,

Once again, as was the case in yesterday’s session, dip buyers were lurking beneath the market to take advantage of any setback in price to buy. Their buying took gold back into the plus column after the wee bit of Dollar strength emboldened the usual gold sellers. It sure seems to me that the gold bears are beginning to get a bit frustrated since the market is not behaving as they have come to expect. What appears to have changed is that the longs are standing their ground and are refusing to be stampeded out. Since it is panicked long liquidation that enables the bullion banks and their pals to rape and plunder the Comex gold buyers, any change in the stance of the bulls short circuits the perma-bear strategy. That is forcing those who hitch themselves to the bullion bank wagon to cover which in turn helps drive the price back off the session lows. So far this has occurred twice in the last two sessions. If this continues, overhead resistance is not going to hold and price is going to move higher. This kind of action is what I am accustomed to seeing in a market that is in a bullish posture so perhaps we are indeed seeing a change in the psychology of the bulls. That would confirm the reports of very large hedge fund and index fund purchases of gold. It also confirms that continued increase in open interest indicative of fresh buying coming in.

Activity is shifting to the August contract as the rollover intensifies before June goes into its delivery period. It will be interesting to see how that goes next month and whether or not we get another large set of stoppers and a drawdown in the Comex warehouse stocks, although I must say that I along with an increasing number of others who watch these things are convinced that the numbers being reported for both Gold and Silver stocks are as close to make believe as Cinderalla’s magic carriage or Dorothy’s ruby slippers.

One of the things I am noticing and I believe merits mention is the continued disappearing act of the US long bond. It is no coincidence that as the bond market disappears into the abyss that gold is steadily moving higher. Simply put – investors looking to protect their wealth are eschewing Treasuries and more and more favoring gold. And why shouldn’t they? The current Administration and its allies in the spendthrift Congress are creating Petri dishes full of healthy debt bacteria and providing them with everything favorable for cell division and multiplication. “Yo Paulie – ya need another couple trillion in debt?” “Sure thing Mickey – give me 3 trillion for the heck of it”. Would any investor in their right mind expect to protect or preserve their wealth by stashing it into long term US debt??? This is the reason that as the bonds sink, gold rises. The technical breakdown in the US long bond is a signal that the bull run in gold has begun in earnest. Until bonds find some kind of support on the charts, there really is no reason to sell gold. After all, what kind of safe haven is left particularly one that can protect you from the coming ravages of inflation?

Along this same line I should also note that crude oil (basis July) has broken out today into another new high for the year moving up to $63.45 as I write this. Once again the CCI (Continuous Commodity Index) is moving higher with unleaded gasoline approaching $1.90 at the wholesale level. It is now at the highest level since October of last year. Get ready for some more pain at the pump as driving season kicks off in earnest. Don’t worry however – now that Obama and the feds have taken over the car companies, we can all be happy and content squeezing our average sized family of 4.3 into a go cart that runs on a wind up rubber band and needs nothing but a giant sail to move it down the road. After all, what is $4.00 gasoline to those whose cars runs on the Energizer Bunny? Seriously, this move higher in the crude complex is noteworthy as the one saving grace for many unemployed Americans has been the relatively cheap cost of gasoline and energy. Once those begin to rise, cash strapped consumers are going to be caught in a vicious snare of rising food prices (see grains) and energy bills at a time in which many have turned to maxing out their credit cards in order to make ends meet while they look for new employment elsewhere.

I tell you something that is downright bizarre  – it is watching the British Pound shooting nearly straight up even after the fact that one of the rating agencies threatened to downgrade its sovereign debt. It just goes to show you how strongly the aversion to the US Dollar has become – traders are willing to buy just about anything rather than the Dollar!

Judging by the price action in the US Dollar, it sure looks like someone has sprayed a tank full of super-concentrated Round-Up on all those “Green shoots” that are supposedly sprouting up all over the place.

Technically, gold looks like it is setting up for a run at major resistance near $967-$970 basis June. All of the major moving averages, the 10, 20, 40, 50, and 100 day, are moving higher indicating the bullish trend in the market. Momentum needs to be watched as the Bears are going to fight in an attempt to hold it below the $967 mark.  They do not want a charge from hedge funds that would take it to $1,000 should bulls be able to muster sufficient force to propel price up through that last resistance level shown on the chart. The bullion banks are trying to soak up all the incoming bids once again. How does it feel to have these bastards using your TARP money to sell paper gold at the Comex?

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