Price capping near the $1250 level has been effective at thwarting the continued rise in gold and has resulted in new short selling by locals looking to capitalize on the backstopping of the bullion bank sell programs.

I was hoping to see the longs hold steady and not run but that appears to have not been the case today. Apparently they have been properly conditioned by the Feds to run at the first sign of a stall in upside momentum. That is how this market has traded for nearly a decade now so it is just wishful thinking to believe that might have changed. The charade in gold could end tomorrow if we had not raised a generation of computer nerds who never learned how to think for themselves.

Keep in mind however that what started out as a mild dip in gold was widely announced to have been a lessening of fears concerning Europe’s credit woes. That is what caused the big spike in the equity markets early this morning along with some friendly economic news and put some pressure on gold. The Euro moved higher as a result and the lemmings all gave a collective sigh of relief as they plunged back into the risk trades. Midday however, it all began unraveling as the Euro got nailed and is currently down more than a full penny against the Dollar and the equities are falling sharply again.

Gold has not yet responded because the bullion bank capping generated enough long liquidation to push the hedgie algos into the sell mode.

It escapes my ability to comprehend how a collapse lower in the Euro is compatible with a lessening of fears about European debt woes. With this occurring, it should not be too long before gold responds accordingly and moves higher. Personally I love watching these “analysts” making asses of themselves by commenting on one day’s price action as if a crisis years in the making has suddenly gone away overnight. Wait and see how the physical market will lead this phony paper market at the Comex.

The woes that are currently besetting Europe are not, I repeat, NOT going to go away. They may fade somewhat from the forefront of traders’ minds for a bit but that does not mean anything has been cured. Do not allow yourself to be shaken by the short term gyrations caused by these wild market fluctuations. There is NO INTELLIGENT thought behind them. It is machine generated. All such price movements do is to create opportunities for those who keep their wits and can calmly analyze a situation without being unduly influenced by the actions of the mob.

I will be curious to see how gold “fixes” at tomorrow afternoon’s PM fix and whether or not is can get above the 1,000 Euro mark. I will say however, that the inability of the Euro to thus far even manage a complete one day short covering pop is a very troubling sign. It just shows how eager sellers are to hit it again and again. If it cannot hold yesterday’s low, it is going to trade at 12100 quite rapidly. It is still lower than its worst levels of 2008 when the great carry trade unwind was in full force. Looking at the monthly chart shows that there is not a lot of support until you get down below 11900. That is how serious this is becoming.

The HUI could not hold support at yesterday’s low which coincided with the rising 10 day moving average. Unless we see those hedge fund ratio trades lifted off the shares, the most likely scenario is a drift down towards the 20 day moving average near 460. That will need to hold to prevent some sell stops from taking the shares lower.

The index must get back above yesterday’s high to force a resurgence in bullish momentum. That level is near 487.

Crude oil selling off continues to give drivers a bonanza for their summer vacations. Maybe the airlines can now actually afford to give us a bag of peanuts with our drink or at least stop trying to charge us for every thing we carry on the blasted planes. If this keeps up the Obama administration’s fixation with Hybrids is going to give way to a new wave of SUV buying!”- Dan Norcini, More at http://www.goldseek.com/email/lt/t_go.php?i=2458&e=MzM0MTg=&l=-http--www.jsmineset.com/">JSMineset.com