Gold quotes rose sharply yesterday, supported by heavy fund buying that included a million-ounce purchase by one player. I’d told you to expect a rally to at least 436.80, which is precisely where the August Comex contract topped before taking a 90-minute breather. A subsequent two-dollar retracement left the futures sufficiently recharged for a further push to 438.50, portending still higher prices over the next 5-7 days. If so, you can use the 447.80 target disseminated via bulletin as your minimum upside objective. I also provided a “Hallelujah, brother!” target well above this objective if it is breached decisively. The exact number, a hidden pivot, is given in the Intraday Notes section of Friday’s edition, so check it out if you want something to feel good about.

There are other reasons as well why gold bugs should take encouragement from yesterday’s surge. For one, the rally dramatically exceeded a hidden pivot that had been two weeks in coming. Although it was not a major pivot, neither was it an insignificant one, and the fact that it gave way in a mere two hours came as a bit of a surprise. What this suggests is that buying interest is unlikely to peter out soon, even at moderately higher prices. No less bullish was the speed with which the 436.80 target was achieved. I had expected the ascent to take from four to six days, but it took only one. And here’s one more thing to consider, perhaps the most bullish factor of all: June’s rally from lows near $416 has occurred at a time when news concerning inflation has been relatively benign.

All of which gives us good reason to be optimistic. But I would caution against getting too revved up, since we’ve been disappointed more than a few times before. Regardless, we hold tracking positions in three gold stocks – Canyon Resources, Bema and Coeur d’Alene – that all were acquired within just pennies of their respective mid-May lows. With the profit-taking we’ve done so far, it will be nearly impossible to lose. But whatever happens, don’t concern yourself with whether bullion’s long-awaited moon shot is finally under way – just continue to trade ‘em up, and enjoy the ride.