Dear CIGAs,

In a manner somewhat reminiscent of last Friday’s stunning upmove, gold shrugged off early selling pressure tied to some stability in the US Dollar and weakness in crude oil, reversing course around midmorning and tacking $13 onto its trading session low. The buying pushed price all the way to yesterday’s peak and then some.

I am a bit hesitant to go too far out on a limb these days when it comes to market predictions but gold seems to be trading in a fashion that is suggestive of the presence of a large scale buyer who is willing to take on the concerted selling efforts of the bullion banks. The reason I mention this is on account of the dip buying that is taking place which is coming even without much support from the Dollar at times. Whether or not this will continue is anyone’s guess, but the price action is evidence enough for me that, for now, this buying is quite substantial.

Technically, the close above yesterday’s peak in gold brings a very good chance of bringing in further recruits to the bull cause which could easily take price on up to significant technical resistance centered in and around the $980 level. That will be a tough nut to crack for it is the last barrier of note before $1,000 comes into play. Support lies first at today’s low near $953 and then again at $947- $945. Today’s close above $965 is quite friendly.

What is encouraging for the bullish cause for gold is the price action in the miners. Even with the broader equity markets lower today, they are trading higher as I write this choosing rather to move in tandem with bullion rather the rest of the paper world. There is some minor resistance in place near the 380 level on the HUI with the index looking like it wants to challenge that. Besting that level puts 400 into play.

I should also note that the bonds are moving lower today in the face of lower equities. The pending home sales data was friendly and that took the wind out of the bond bulls after they were strongly higher earlier this morning. That data spurred on risk takers once again and that probably more than anything is what brought back buying into the crude oil pit which is attempting to sneak up on $72/barrel. I want to reiterate something I have said many  times before – crude oil is trading more as a currency than a commodity. It has become an inflation hedge which is the main reason that a strict adherence to the demand/supply factors of that market can at times seem to be an exercise in futility for traders. It is really in another world and I see nothing that will change that anytime soon. When risk is in, crude is going to move higher and when risk is out, crude is going to move lower. It is pretty much that simple – for now!

Copper simply refuses to stay down and silver too is apparently joining the metals’ party. A sleeper metal has been palladium, which quietly made an 11 month high today. It looks to be tracking the increase in auto sales. Maybe that has something to do with the government’s “cash for clunkers” program.

I am waiting for the “cash for ice box clunkers” ( I need a new refrigerator), the cash for noisy washing machines (I need a new washer) and the cash for “dirty, environmentally unfriendly clothes dryers” program. I actually installed one of those highly energy efficient SOLAR CLOTHES DRYERS ( around here we call it a clothes line) and am waiting for my check from the feds on that. Personally I think we should have a “cash for big screen TV’s” program since the older ones are so energy inefficient. Don’t forget the “cash for new fluorescent light bulbs” program. With all these nifty handouts, no wonder the commodity world is so happy these days.

Poor ol pork bellies are one of the few commodities not joining the happy parade – they are limit down today. Looks like folks need to go out and eat more bacon and do their civic duty.

The CCI (Continuous Commodity Index) is looking more and more like it is presaging a trending move higher in the entire commodity complex. It completed a nearly textbook 50% retracement move from its December 2008- June 2009 move higher and is now demonstrating a move up and away from that level. The key to any trending move in the complex will be whether or not it can take out its June peak. If it can, the deflationists have lost the battle and the inflationists have been vindicated. Stay tuned on this one.

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