Dear CIGAs,

As stated many times on this page, trying to come up with explanations that detail the price movements of the Comex gold market day in and day out has become a fruitless task. The Dollar goes up, gold goes down. Oops- I mean the Dollar goes down, gold goes down. The stock market goes up, gold goes up as risk comes back in. Oops – I mean the stock market goes up, gold goes down. Crude oil goes down, gold goes down. Oops – I mean crude oil goes up and gold goes down.

The point is simple – we continue to watch a market that is not a free one and therefore analysts who are frequently quoted by the wire service writers who always are looking for sources to quote, have no idea how to explain the gyrations in the Comex gold market. I would much rather have someone who is honest instead of pretending to be some sort of omniscient wizard who has a cosmic connection to the Comex gold market and unfailingly knows beforehand exactly what it will do on any given day and why. Then again our government is currently filled with such people so what can we expect.

Here’s a clue to the clueless analysts – just look at the CFTC commitment of traders reports – that is all you need to know to explain the price action in paper gold. Last Friday’s report showed what we who have been following this market since the bull move began in 2001 – all of the selling pressure in the Comex gold market has been coming from the commercial side as usual and that selling is concentrated in the bullion banks who continue to pull this flim-flam scheme and sucker the hedge fund managers who refuse to get in the war.

I was watching the wonderfully done War Between the States’ movie, “Gods and Generals” last evening. It detailed the early years of the war 1861-1863 and focused a great deal on the battle of Manassas, Fredericksburg and Chancellorville and particularly one of my heroes, Confederate General Thomas “Stonewall” Jackson. What I find so admirable about Jackson was his intuitive grasp of the battlefield and how quickly he was able to adjust to changing conditions and anticipate the movement of the Federalists forces. He ran rings around the Union generals and even with a smaller force was able to pull off victory after victory because of his tactical skills and his ability to maneuver his men bringing them to bear on the battlefield at exactly the right time and the right place to achieve maximum effect. He was a fearless, pious, killer who despised the Yankee invaders.

To make an analogy – the bullion banks are the Federalist forces, numerous in the sense of being well-supplied, but the hedge funds, instead of being led by skillful tacticians who insist on victory and possess a killing instinct, are instead led by inept idiots who insist on marching right into the fortified positions of their enemy expecting to be able to drive them out from behind their redoubts and who refuse to change their tactics and adapt even when they achieve the same results time and time again, namely defeat. The delivery intentions for the February contract for today showed again a big ZERO when it came to longs standing for delivery. Yes, that is a ZERO, NADA, NOTHING, NOT ONE OUNCE, of real physical gold was demanded by the longs but particularly by the hedge funds who will die in their ranks before actually doing something tactically brilliant and forcing the enemy to come out of his entrenched fortifications and search for actual gold to deliver to aggressive longs who mean business and are intent on destroying their enemy for good. Might as well fire wadding at the enemy instead of lead….slingshots against rifles…

Tip to hedge fund managers – go over and look at what some of your brethren did in the grain markets which forced the CBOT to take action to limit the amount of grain delivery receipts…

The results are predictable – gold stalled out as the bullion banks simply sold more paper gold and absorbed all the bids. The longs ran and once again the bullion banks plundered the damn fools. For the sake of our readers, that is why Jim and I have constantly cautioned those who want to trade the paper market, not to chase the price of gold higher but to buy it only on weakness and sell it into strength when it becomes obvious that the capping move is in play. Do not follow the lead of the hedge funds – if they are going to play the part of the fool, let them do your work for you and make money off of their ignorance. Fade them….

See the chart for the technical support levels now that gold has rolled over. $880 is back in play should today’s low not be able to hold.

The XAU looked as if it might be on verge of a breakout last Friday as it managed the best close since October 2008. It could not generate any upside follow through in today’s session however.

The Dollar was down against every single major today – even against the Yen. The commodity currencies continue moving higher and that is something that has major implications for the entire commodity world. It also shows that “risk” is back in meaning the safe haven bid for the dollar has faded which is why gold is supposedly going back down. I will remind that brilliant commentators who told us this when gold goes down when the “risk is out” mentality comes back once again.

The grains are higher today with crude oil and natural gas higher also. Copper was taken lower alongside of silver as there remains some uncertainty in that market over what the Chinese are actually doing. Platinum was knocked lower on news of Nissan job cuts as it served to reinforce how bad things are in the automotive industry worldwide right now. Palladium followed platinum lower.

Something that is happening to the bonds that I think is quite significant – they have broken down below the 100 day moving average with every one of the major moving averages that I track now having turned decidedly down. There is a bit of support near the 123^00 level but frankly, it is not much. The 200 day moving average, a huge area from a technical perspective, is down near the 120 ^28 region. If bonds were to break down below that, I think the Fed would either have to move in and begin buying up the long end of the curve or face a crippling rise in the interest rates. It appears that the porkulus bill coming out of Washington has bond traders rightfully anticipating a tidal wave of supply which will be far too massive for current demand to absorb. People are wondering whether or not the bond market bubble has popped – guess what – it has. Bond traders might just now be attempting to draw out the Fed and see if they will make good on their prattle about actually buying bonds to force down interest rates. Speculators and monetary authorities have this understanding… the monetary authorities make noises and the specs test them to see if there is anything of substance behind their bluster.

Tomorrow is another day – who knows what we can expect to see.

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