Mining stocks generally rose on Friday while bullion quotes fell, but the burden of proof remained with the bulls.  Price action in Comex February gold was particularly telling, since, for the second straight day, the futures trounced a hidden-pivot support – this time at 420.80 -- that should have produced a discernible bounce. Instead, they smashed through the pivot like an anvil dropped from a roof.  Even worse, the February contract settled below the 420.80 pivot, near the bottom of the day’s range. On the evidence, we now expect it to fall to around 405-415 for a consolidation of at least 4-5 weeks’ duration.

If there is reason to give gold the small benefit of the doubt for the moment, it is the failure of two mining-sector bellwethers, Newmont Mining and the Gold Bugs Index (HUI), to reach downside targets I’d proffered for each. In fact, the latter closed modestly higher, and Newmont was down just slightly after spending most of the day in positive territory. Both are within 2-3 days of their respective downside targets, but their unwillingness to cede that last inch may provide a rallying point for gold bulls in the week to come.  

Dim Ray of Hope

Also, silver skirted the edge of a canyon last week without falling in, providing the prayerful with a dim ray of hope when trading in precious metals resumes Sunday evening. I’ve reproduced a chart below that shows how close March silver is to the edge of an abyss.  Strictly speaking, it has already suffered a hair-raising slip, breaching a 6.400 “midpoint pivot” last Tuesday by two cents.  We can give the bull the slight benefit of the doubt for now, but the two-cent overshoot was probably sufficient to imply that the futures are fixing to dive anew.  If so, it will be to at least 5.73, a hidden pivot whose provenance, as the chart makes clear, is quite compelling. Were this to occur, we should expect the entire precious-metals complex to fall as well.

What would it take for silver to get out of jeopardy? From a hidden-pivot perspective, the March contract would need to surpass 7.180 by no later than Thursday.  A tall order, for sure, since it implies the dollar will get kicked to hell. If that’s the case, perhaps bullion bulls should be careful what they wish for.

(Click on image to enlarge)