The outlook for Gold is a pressing concern in the Rick’s Picks chat room on most days. Indeed, if bullion prices move merely a few dollars either way, I’m likely to be asked whether my outlook has changed significantly. Take yesterday, for instance. The December Comex contract was in the throes of a $10 rally, seemingly bucking my prediction in the day’s commentary that gold would continue to move more or less in tandem with oil.  But with oil down and gold up around mid-morning, did this mean the two had un-coupled? In a word, no. I still think that lower crude oil price over the near term are going to pull the POG down, notwithstanding occasional periods when these two commodities will appear to be going their separate ways. (In fact, gold got back in step with oil by day’s end, giving up most of the gains from earlier in the session.)

Readers will already know that I have flagged a Hidden Pivot target at $513 as my minimum downside objective for the December contract. That’s a little more than 10 percent below current levels, and I estimate that the target has about a 75 percent chance of being achieved. Could I be wrong? Of course I could. But even if so, we would not necessarily miss much of the next big rally, provided I am able to see it coming.

(Click on chart to enlarge)

The “Bull-o-Meter”

The chart above shows exactly how subtle a turn it would take to register on my “bull-o-meter”. Read the comments below before you peruse the chart. For me, at least, the coldly objective criteria I use to determine which way the wind is blowing provides a worry-free outlook not just on gold, but on the entire precious metals complex, as well as stocks, indexes and commodities. Using a rigorously rules-based system allows me to be wrong sometimes, but not very. Judge for yourself. Below is the verbatim discussion from the chat room. It explains, in the context of the chart shown above, exactly what it would take to get me a little excited. It also makes clear why yesterday’s little thrust looked like a dud from the start. Here’s the transcript:

Chat Room Transcript

RickA: This morning’s gold rally is suspect for a subtle reason, Hidden Pivot-wise. A casual glance at December Gold's 15M chart might give the impression that some visually obvious lows made on the morning of October 6 marked the start of an impulse leg that culminated with tops made, respectively, at 585.20 (10/9) and 585.50 (10/10). In fact, neither of these tops has qualified the rally leg as a true impulse leg, because both fell just shy of the 585.70 peak made on 10/4. We would infer that if Gold were "serious" about turning around, the first impulse leg attempting this would have surpassed 585.70.

I am still allowing the bulls the chance to earn the benefit of the doubt with my earlier analysis calling for a push above 589.50, a tiny peak-let recorded in the morning of 10/3. If a rally leg blasts through both of those highs without taking much of a breather, I would turn bullish on the short- to intermediate term.

Buy the Breakout?

Bobaloo: Does that mean we can place a stop at 589.50 or should it be 589 to allow for breakout?

RickA : This concept was taught at the seminar, but not with the emphasis I am giving it here. This is an excellent illustration of the point itself, and if you can bring yourself to focus on the details, it should alleviate whatever anxieties you may have about Gold. There is no excuse for being "worried" here, since we have reduced the outlook to coldly mechanical terms. I am quite confident in my reading of these factors, allowing me to tune out all other gold forecasts and forecasters, most of whom are pretty het up, befuddled and just fumbling around, as far as I'm concerned.

Colavito: Rick, thanks for the impulse leg gold comment....crystal clear.

RickA : Bobaloo, my trading style, for better or worse, is to initiate trades on the countertrend rather than with the trend. But I'll always envy and admire those who can take my numbers and run with them in the aggressive manner you are suggesting. The (very) nice thing about buying a breakout above 589.50 is that that price (and peak) is meaningless to anyone not familiar with Hidden Pivots and impulse legs. But if a more-or-less unbroken rally leg surpasses both the 585.70 peak from 10/4 and the one at 589.50, that would be evidence to me that we have "liftoff".