It was less than a week ago that the Wall Street Journal reported that the central banks of the world, even Russia’s, were acting in concert to prop up the U.S. dollar. With gold’s powerful thrust to new all-time highs yesterday, however, it looks like the bankers will have to come up with a new plan. Our longstanding target for the Dollar Index is 72.93, implying the dollar has a further 2.5 percent to fall before it is likely to find traction for a rally attempt. (Please note that a bounce from 74.05 could also provide bulls with temporary relief.) More important than the dollar prediction, however, is an 1174.90 target for Comex December Gold that has been in play since spring. This “Hidden Pivot” price objective was triggered in May, and it and a lesser target at 1134.50 have kept Rick’s Picks subscribers properly bullish even as gold swooned, careened and flailed its way higher during the summer months and early fall.
We hadn’t expected December Gold to push past 1134.50 so easily yesterday, but the fact that it turned this “hidden” resistance into suet in less than twelve hours is testimony to the tireless enthusiasm of buyers. Their easy penetration of our target makes a follow-through stroke to at least 1174.90 as close to a sure thing as any market-driven event we could imagine.
After 1174.90, What?
So what do we expect after 1174.90 is hit? As is our wont, we’ve pushed expectations aside, ahead of the actual event. We’d prefer to let gold tell us what it will do next, based on how it interacts with the target. Because it has been so long in coming, however, and because the price pattern that produced it is so clear, we’re pretty sure that the 1174.90 pivot will not be a pushover. To take advantage of this prediction, we have advised long-term gold bulls to lighten up when the target is closely approached. It can also be shorted by day traders with a very tight stop-loss. If the futures should simply barrel past 1174.90 without much effort, though, the “chopped liver” rule would be in effect. Basically, it says that if a clear target shows little or no discernible resistance, we should infer that the underlying trend still has plenty of power behind it. We’ll say more about that when December Gold hits 1174.90. Until then, we should simply sit back and enjoy gold’s romp in the face of a probably doomed effort by the central banks to suppress it.
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{ 6 comments }
Peter Eliades of Stockmarket Cycles is unhappy, noting on Saturday morning:
“Gold has had an upside projection to between $1,111-$1,131 for several months and has now moved well into that projection window. That suggests it could be reaching a top here. As we noted yesterday, however, the Fidelity Select Gold Fund has an equivalent upside projection between 52.17-56.40 and the CBOE gold index GOX has an equivalent projection to between 241.45-256.40. Unfortunately, those two projections do not align with the projections for the metal itself.”
this is well below the 1174 target so who’s gonna proven correct in the near term?
My gut tells me this will be an healthy seasonal run on gold. I read all the headlines and people are downright suspicious about gold. Many lost faith last fall never to return again. The gold crowd is always bullish on gold come hell or high water so you have to exclude them from the bulls. Mainstreamers are still thinking they are playing is smart by staying out of gold. That is my simple observation. A mania this is not…. yet, that is.
Gold has risen in line with almost all commodities to some degree. Oil went parabolic much earlier and is again trying to mount that plateau. For Gold its more a liquidity based play then any real fundamentals. In a crunch the U.S.Dollar will once again rise not fall since it will become a safe haven against emerging markets that should easily fall much harder then we do.
The dollars steady multi-year fall has been helped by the Global Central Banks. They know that if the illusion of profits falter, and it will, this will carry over to the rest of the world.
If you believe deflation is going to win out that means debt overwhelms the system and money/investments dries up quickly.
The model 1929/30 charts look amazingly similar to today with the exception of the magnitude.
Gold will not do well in this type of environment. 30 years zero coupon treasuries even at 3.5 percent will reward you handsomely.
“Gold will not do well in this type of environment. 30 years zero coupon treasuries even at 3.5 percent will reward you handsomely.” I’ve heard variations of this theme since I bought silver at $4 and change, and gold about $415. I have all the physical I need, and I have been buying mining juniors and G/S royalty funds for awhile. We’re not in Kansas anymore, and this is not a classic deflation, IMHO. It is the confluence of a number of unhealthy fiscal patterns that are ripening to manure across the planet. Treasuries at 3.5 pc will be the equivalent of change found in a couch, I’m afraid. But you lays your money down and you takes your chances…
If you believe that the CB’s basically have everything under control and are allowing the $ to gently lose it’s value and ultimately it’s leadership role, then the only thing that long term holders have to worry about is timing their exit after the inevitable parabolic rise.
But I don’t believe the fundamentals line up or mirror those of 1980 and therefore may likely not give us that chance. Increasingly, I get the feeling that the paradigm shifts that are occuring will ultimately lead to an actual collapse of our currency, or something close to the same.
Gold bugs often use the phrase ” the train is leaving the station, better load up now!!” Until now, I thought there was plenty of time left to buy on corrections, and although there may well be, it seems more realistic to just get some in your hands and not worry about timing. Just my opiinion.
I think we may need to hedge a little regarding the dollar– In the event that it becomes nearly worthless, a lot of people are going to be hurting. I have come to the conclusion that silver investments are the best hyperinflation hedge, so, after a ton of research, I bought shares of a mine in Mexico called Great Panther Resources. I think Mexico may be the best place to invest into silver mines, and I think Great Panther, if hyperinflation occurs, is well organized and set to rocket in that (hyper- inflationary) situation. Some information on this stock with comments from Jay Taylor and the like can be found at: http://www.theaureport.com/pub/co/331?cover=1
thanks
denita
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