Monday, August 31, 2009

Enter City Hall?

Friday’s intraday high of up $17.50 and up $11.50 close turned out to be far more bitterly contested than the outside observer could see. On actual volume of some 104,330 lots (25% above estimate and the highest since early August) open interest surged 17,793 lots (55.34 tonnes, or 4.7%).

At a glance, this is the biggest change since March 26th when gold was breaking down from its late March secondary top, and the biggest rise in well over a year. If Dec gold had moved proportionately it would have been up $44.90!

Obviously, serious objection is being registered to gold going up. It is hard to believe that a purely commercially-motivated short would be so rigid on a summer Friday. But to the extent that such parties joined the bandwagon, gold must have upside risk.

Indian ex-duty gold today: AM $1.85, PM 55c, with world gold at $955.70 and $954. Adequate, and too thin, for legal imports. The rupee softened 0.4% to R48.83 and the stock market slipped 1.61%.

While these conditions cannot be much fun for India’s importing gold dealers, the implication is that India stands ready to support gold on any set back.

Vietnam gold this morning stood at $1.82 premium to world gold of $957.05 early this morning.

With world gold up some $14 from the previous TOCOM close and the yen in a gold-unfriendly firming trend on might have expected Japanese selling, but in fact there appears to have been buying. On day session volume equivalent to 11,621 Comex lots open interest rose 2.62 tonnes (841 Comex) and the public seems to have added 0.55 tonnes to its long. The active contract closed down 11 yen, while world gold came in some $2 above and went out some $2 below the NY floor close.

With London closed, European gold drifted sideways around the TOCOM close. Heavy selling hit on the Comex open, slashing $10 off gold in half an hour. Euro gold notably tracked $US gold action. Estimated volume at 9AM was a fairly heavy 40, 802 lots. Following that, Comex gold recovered, closing down $5.30 having been down $11.20 at the low. Euro gold was notably more hesitant, as the $US had started to weaken.

Once again, it is curious how gold- positive action by The Gartman Letter (buying sterling gold on Thursday, kind words on Friday) seems to stimulate aggressive selling.

Good insight into the dramatic significance of quite a minor up move by gold at this point from a chart perspective is supplied by

http://www.youtube.com/watch?v=Aqu4L9-lxVE&feature=channel

(Sound!).

While the open interest and today’s trading action indicate the Bears are making a stand, the seasonal and chart situation is very threatening for them.