Gold had its best day in months yesterday, but how long will the animal spirits last?  We may be better able to answer that question after we’ve seen how the April Comex contract interacts with two recent peaks located just above yesterday’s high. They are identified in the hourly chart below and lie, respectively, at 1110.90 and 1118.50.  Notice in the meantime how the entire length of yesterday’s steeply vertical surge occurred without a visible pullback.  This is a promising “impulse leg” indeed, and it would wax still more promising today if bulls were to extend the surge past the two additional peaks noted in the chart.

To achieve maximum effect, this would have to occur today (i.e., Tuesday), with no discernible pullback along the way.  The very bullish outcome we desire would become more likely if DaBoyz who work the night shift are unable to coax gold down by more than a few dollars Monday night. That would be bad news for shorts who were left hanging on the ropes when regular-hours trading ended on Monday, and it is predictable that they would become a source of panic buying on Tuesday if they have been unable to reduce their exposure by then.

Chinese ‘Retaliation’

We should note that while the Hidden Pivot Method can often give us a clear technical picture, it cannot explain why stocks and commodities move as they do. For that, we sometimes rely on the shared insights of those who frequent the Rick’s Picks chat room. (Click here if you’d like a seven-day pass to the room.)  Regarding Gold’s strong performance yesterday, one of the more interesting explanations proffered in the room suggested that the Chinese were behind it: “I think Gold went up today because China is showing Obama the sway they hold over the dollar as retaliation to the arms deal to Taiwan announced over the weekend.” But in fact, although the dollar was weak most of the day, it did not get hit quite hard enough to account for Gold’s explosive surge.  Perhaps the simpler explanation offered by another chat room denizen was closer to the truth: “Gold moves when it is ready,” he texted. “It’s all about time.”

If so, we should know shortly whether bulls are about to return to favor.  Our gut hunch is that, even after two months of grinding lower, Gold needs more time to consolidate for the next big rally. There is also the recalcitrance of Silver to reckon with. Unlike April Gold, the active-month Comex Silver contract did not achieve a bullish impulse leg on the hourly chart yesterday. However, if precious-metal futures are about to head higher, Silver will need to get in gear, and soon. The March contract traded as high as 16.715 yesterday, but it would need to hit 16.970 today to bring the hourly chart to life.

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