Dear CIGAs,

News that China wants to further press the issue of an alternative to the Dollar as the main currency for global trade sent the Greenback reeling and enabled gold to beat back selling associated with further weakness in crude oil. Buying entered the gold arena when the $940 level was breached inducing short covering by weak-handed bears and sending the market up and through all of the major moving averages after finding support near the 100 day. The close was in the upper half of the day’s trading range and under normal circumstances one would expect to see further upside follow through – then again, that assumes a freely traded market which gold is not.

Today is the start of a new trading month and a new quarter and that means yesterday’s bizarre price movements associated with book squaring and positioning are hopefully behind us and we can get a better read on the price action of these whimsical markets. To show you how idiotic yesterday’s whackiness was, the HUI has taken back everything it lost yesterday and then some. Up, down, up, down, up, down… And to think that we thought we were through playing with yo-yo’s when we got out of junior high.

The fact that gold was able to shrug off selling associated with weakness in the energies and in some of the grains is encouraging. Interestingly enough, all of the metals were higher today, including platinum and palladium and copper. Resistance in gold is at today’s session high followed by $950 and then $958- $960. It will take a closing push through $960 to target our old pal at $980. Support is at today’s session low near the 100 day moving average.

The Dollar is perched perilously just below the 80 level on the USDX  and from a technical perspective there does not look to be much in the way of support for it until you get closer to 79. As long as weakness in the greenback continues, gold bears will be forced to expend a tremendous amount of ammunition to absorb hedge fund buying in gold. It would help things tremendously in the gold pit were crude oil to mount a charge back above $71 and maintain its footing there. A charge higher in crude will reveal that inflationary thinking is dominating that pit rather than a deflationary mindset.

I will try to get a monthly chart of gold up for June later today as time permits.

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