DAN NORCINI'S COMMENTS ON DECEMBER 3, 2008

FROM JSMINESET.COM Hourly Action In Gold From Trader Dan Posted: Dec 03 2008 By: Dan Norcini Dear CIGAs, I am a bit pressed for time today as the price action in the various commodity futures that I trade is keeping me on my toes. Some of the commodity markets are following the US equity markets higher today while some of them are not, notably gold and most of the metals. Gold in particularly is not trading “right” today. By that I mean the correlation between it and the US equity markets has been pretty close recently. When the equities are moving higher, gold has been moving higher in what I am calling the reflation trade. The opposite also has been holding true. Today, the equity markets were initially higher and yet gold still got whacked again. Generally, we have been seeing the Dollar and the US equity markets going in opposite directions as well. Today that changed with the Dollar moving slightly higher while the equities were also moving higher. That brought in selling into gold after the market had recovered most of its overnight losses. About 30 minutes before the close of pit session trading in New York, gold was hit once again. So too were the mining shares. The war against gold obviously continues. Interestingly enough, the equities faded off their highs just about the time gold was getting ready to close in the pit. The volume in the gold is getting quite anemic. It looks more like a holiday trade than a normal business day trade. Spreads between bids and offers at times are as much as 7-8 points at times even in the most active month. The contraction in open interest is taking its toll on liquidity. Yesterday saw another drop of over 1900 contracts bringing the total to an almost laughable 264,796. I say laughable because who would have envisioned that during a time of such incredible financial duress, the interest in gold would be collapsing. That just goes to show the extent of the de-leveraging trade. Again, we are talking about the phony paper gold market and not the real deal. Technically gold is treading water holding just above support near the $760 level basis February. Failure there and it will retest $740. Upside resistance is first at $780 - $785 and then at $800. We had another 285 deliveries assigned this morning with HSBC the largest stopper followed by Bank of Nova Scotia. Fortis Clearing is providing the brunt of the selling. Total deliveries so far this month are 11,758 contracts or 1,175,800 ounces. That is a nice chunk of gold but we still need some more taken out. Open interest in the December contract still is a bit high for this late in the contract’s life which could mean that there are more than a few players left who intend to take delivery. The total remaining as of yesterday is 2,118. That is 211,800 ounces of potential physical gold purchases. More guys still could come into that month yet if they knock prices much lower so stay tuned. A quick comment about the price action in so many of these markets which can aptly be termed, “schizophrenic” – they have become the domain of day traders and scalpers. Drawing too much in the way of assumptions from price action in regards to the fundamentals is a waste of time. They will go in whatever direction the most money happens to get thrown at them on any given day. If the biggest order of the day is one that says in effect; “Jump off the edge of the canyon and follow me” – guess what – They all will do exactly that! Newsletter writers in particular, who are forced to make daily recommendations to their readers are to be pitied. What they write one day, they have to take back the next only to eat those words the day after. Better to sit on the sidelines and wait and see if some semblance of sanity comes back after the new year. I have chatted with a few of my trading pals and the consensus is becoming just that. Take a long vacation and let the rest of these guys chop each other to pieces, particularly the hedgies.