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Dan Norcini continues:
“Many of the large traders had already positioned themselves long ahead of the announcement, but many of the small specs came into the trade in gold at $1,775 and above. So we had small specs heavily long near the top of the market, and that’s why I warned that we would see a selloff.
Let’s say a small spec had taken a position long in gold at $1,780. It was evident that support was near $1,750. Once that level got violated, that’s where a great deal of stops were located from the small specs, so many of them were flushed out....
Continue reading the Dan Norcini interview below...
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“Look at it this way, a spec who’s long from $1,780, immediately has a $3,000 loss per contract at $1,750. As the market descended further, the losses build to $3,500, $4,000, etc., for each contract. So the small guys, who are vulnerable, were brutalized by this reaction, and many of them were flushed out because of the nature of the pull back.
Meanwhile, the hedge funds have been steadily moving into the gold market. So as these small specs were panic selling, the commercials were covering, but they were competing with the hedge funds who are in there taking additional long positions in gold.
The hedge funds were buying gold at much lower levels, around $1,600, and $1,625 to $1,650 is where they began to heavily concentrate on the long side. So their computer algorithms are now in a buy the dip mode. This is exactly what we saw in the action yesterday.
The hedge fund computer algorithms flashed into buy mode near the 20-day moving average, which is why gold bounced so aggressively off of the lows yesterday. So it is constructive when the weak hands (small specs) are taken out of a market, but the big question right now is, was this takedown enough? Have enough of them been flushed out of the market or do we need to take out another level and push out some more weak hands?
It’s too early to tell, but yesterday’s low is very significant because of the extent of the price recovery the gold market experienced. If we test this area again, we will have to see if the market can hold the low. If the low is taken out and it turns out that more weak hands need to be flushed out of the market, we should see a quick move to the $1,720 level. That eliminate more small specs out of the market, and allow for a resumption to the upside.”
Norcini also added: “The strength in the HUI was very noticeable yesterday as well. We saw the gold shares divorcing themselves from the broader action in the stock market. That doesn’t happen very often. That strength in the HUI firmed up the bullion market.
There is no question now that the shares are leading the bullion. We will have to see if that trend continues going forward. The 480 zone is a very significant level on the HUI. It should serve as support if the trend is to continue higher. We already saw strong buying in the shares when the HUI briefly traded into the high 480s yesterday.
This could help put a floor in the price of gold if it were to briefly trade down to the $1,720 area. I want to say that I firmly believe the move in gold is still to the upside, and that this correction should be brief, as the gold market consolidates its recent gains.”
Interestingly, yesterday the spot price of gold went exactly to the $1,735 level that Ben Davies had predicted in his recent KWN interview.
Now we have Norcini, Fitzpatrick, Turk, Hathaway, Davies, and von Greyerz, all calling for this pull back in gold to be very shallow, somewhat like what we have seen so far. Gold may trade in a somewhat narrow range while it consolidates its recent gains, before accelerating to the upside once again.
© 2012 by King World News®. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. However, linking directly to the blog page is permitted and encouraged.
This above is just a small portion of the type of critical information which is covered each week in the KWN Weekly Metals Wrap with Bill Haynes and Dan Norcini. To hear a continuation of this conversation, you can listen to the entire interview by CLICKING HERE.
The interviews with Rick Rule, Nigel Farage, Ben Davies, Dr. Keith Barron, Jean-Marie Eveillard, Bill Fleckenstein, and Egon von Greyerz are available now. Also, be sure to listen to last week’s line-up of other KWN interviews which included and Felix Zulauf, Rob Arnott, Michael Pento, and Gerald Celente, by CLICKING HERE.
Eric King
More Incredibly Important Developments In The Gold Market
Today King World News is reporting on important developments taking place in the gold market. Acclaimed commodity trader Dan Norcini told KWN that many of the small speculators have now been “flushed out” of gold. Norcini has been stunningly accurate in his predictions of the movement of the gold and silver markets.
Now the acclaimed trader discusses the latest important developments in gold: “As I mentioned over the weekend, the small specs were at a record level in terms of their long positions, but the important thing is many of them had bought near the top of the market when the bullish enthusiasm for QE3 was at its peak.”
© 2012 by King World News®. All Rights Reserved. This material may not be published, broadcast,
rewritten, or redistributed. However, linking directly to the blog page is permitted and encouraged.
September 26, 2012
