February 2010

I’ve just returned from Mexico, where I was the guest of Aurcana Corp. (OTC: AUNFF), a Vancouver-based mining company. The firm owns the La Negra mine in Maconi, a small town about five hours by car from Mexico City, and the Shafter silver mine in Southwest Texas. Although this was my first underground tour, the group of eleven that I was with included some seasoned denizens of the precious-metals netherworld. There were mining-industry analysts and investors from Canada and the U.S., several bullion-oriented gurus from the newsletter world, and two radio-show hosts, Steve Carr and Al Korelin. It was Korelin who had invited me to join his entourage for a visit to La Negra, which produces commercially significant quantities of silver, copper, lead and zinc.  Although I’ve been a regular guest on Korelin’s widely syndicated radio show, the Korelin Report, which explores the precious-metals sector and its intersection with national and world news, the economy and geopolitics, my comments on bullion have been based mainly on technical analysis and the events of the day rather than on any special feel for the mining business. Curious to learn how companies extract profits from mountains of rock, I eagerly accepted Korelin’s invitation to join the group. I was just as curious to find out whether someone who knows relatively little about drill, blasting, core-sampling, mineralization levels and such could judge from a visit to a mine whether it offered good value for investors. Valuing the Stock My answer is a qualified yes, since this verdict comes from the gut rather than from an exhaustive study of the firm’s geological and financial history. As I learned from the tour, however, it is possible for an expert to make an educated guess concerning the potential value of a mine and to arrive at a

The bonds exceeded a midpoint by enough to suggest that dual targets of 115^10 and 115^06 are coming.  Traders should focus on the lower of these two pivots. ______ UPDATE (10:54 a.m. EST): A smaller pattern has emerged on the hourly chart in which the midpoint has been surpassed, pointing toward the D target of 115^24.

An accurate bounce off of a midpoint pivot followed by a sharp breach suggests that the Yen futures are headed for a D target at 1.0890.  To get there, they will have to cut through a midpoint pivot of 1.0903 which comes from a large pattern on the daily chart. ______ UPDATE (11:06 a.m. EST): The yen rallied enough to cancel the 1.0890 target, but 1.0903 remains active. ______ FURTHER UPDATE (05:18 p.m. EST): The Fed discount rate announcement sent the yen into a dive.  The 1.0903 midpoint pivot was exceeded very narrowly, by ten pips, before the session ended.

If a midpoint pivot at 15.180 does not hold, silver's next objective will be dual D targets of 14.085 and 14.030, which come from two distinct patterns on the daily chart. ______ UPDATE (04:10 p.m. EST): So long as silver remains below 16.330, the 15.180 and 14.030 targets are active.  Just above 16.330 are additional hourly highs off to the left, up to 16.410. A move above 16.330 would be bullish, above 16.410 moreso.

Gold appeared headed for a midpoint pivot at 1094.90, which will remain in play so long as 1106.30 is not revisited.  The sibling D target is at 1083.50.  A rally of $12.70 off a session low would activate a larger bullish pattern that began at 1178.10. ______ UPDATE (11:02 a.m. EST): Gold reversed above the midpoint and exceeded 1106.30, cancelling the targets.  The rally was indeed more than $12.70, which confirmed upside targets at 1123.40 and 1148.70.  The midpoint of this pattern at 1123.40 was punctured minutes ago, signalling more upside to come. ______ FURTHER UPDATE (04:18 p.m. EST): In the chat room, two different intraday patterns were discussed which have identical midpoints at 1128.50, two ticks below the daily and weekly high of 1128.70 made yesterday.  The intraday midpoints are therefore not "hidden," but they presumably add significance to the 1128.70 high.

When the IMF announced Wednesday that it would sell 191 tonnes of gold in a way that would not be disruptive to the market, cynical cartel agents quickly disrupted the market by switching on their sell-bots.  The announcement sounds like a threat to walk away from negotiations on the verge of completion, designed to push the price just a little higher before they shake hands.  Who will buy the gold?  A guess: India, once again.  Why?  Because they need it, they don't produce it, and dog-gonnit, we like them! Thanks to all attendees for your rapt attention during noon and night webinars.  I hope we can do it again soon.  -Harry

This week Rick is traveling in Mexico. This commentary was written by Douglas McLagan. The December 2009 COMEX Gold futures contract recently completed a rally that lifted its price by more than 75% in less than fourteen months' time. This is easily forgotten by gold bulls who spend too much time watching bullion bank sell-bots run rampant on trading screens, but it is a fact. The rally took gold through an important resistance level and out of a large consolidation phase, confirming to many observers that the bull market is alive and well and perhaps ready to accelerate. Intrepid longer-term traders can hope to capitalize on a leveraged basis through the futures, but will the exchanges, specifically COMEX, continue to provide the opportunity? Put another way, the question is whether COMEX gold prices will continue to track prevailing prices for physical gold in a strong bull market, or will COMEX prices lag behind those for bars and coins? A wide enough gap between the two could easily precipitate a crisis of confidence in the COMEX which would endanger its legitimacy and proper functioning. Health, or Failure? Opinions as to whether this will happen cover the full spectrum. One view is that the recent 75% rally and the subsequent 15% correction couldn't be healthier bull-market action. The opposite view, argued forcefully in certain quarters, is that the entire "paper gold" complex, COMEX included, is certain to fail completely, and probably soon. $20 billion of gold futures can trade on an ordinary COMEX day, while maybe $50 million worth of gold is "delivered" that same day, much of it making the rounds among a small number of financial institutions and very little of it entering or leaving COMEX warehouses. What exactly keeps the COMEX price "anchored" to physical gold? London's Role An

A small, elegant pattern on the hourly chart points to a hidden pivot at 1.1024 which can be bottom-fished.  A buy at 1.1025 with a stop at 1.1019 would risk a theoretical $75 per contract.  If the yen moves substantially lower, it should find support at a hidden pivot of 1.0903. ______ UPDATE (07:42 a.m. EST): We were filled on our 1.1025 order, after which the market bounced to as high as 1.1036.  We had time to move stops to breakeven, but profit potential was small, so let's call the trade a wash.  The D target and subsequently the round number of 1.1000 were breached, suggesting that the 1.0903 midpoint pivot from a large daily pattern is now in play.

The Euro has been frozen in a narrow range for the last half-day, as if gathering energy for a move.  It is hovering just below a cluster of external highs on the hourly chart, meaning that the already-bullish tone of this market could intensify quickly.  A print above the highest of these, at 1.3840, would not only be very bullish but would cancel two daily patterns with targets at 1.3398 and 1.3344.  Until and unless that happens, committed Euro bears have something to shoot for. ______ UPDATE (01:27 a.m. EST, Feb 18): Committed Euro bears carried the day. The beleaguered currency failed to take out any of its key hourly highs and instead plunged to a level near its low for the big move that began above $1.50.  The targets below $1.34 were not reached but remain in play.