Gold has rebounded sharply in the last two days, recovering nearly two-thirds of Tuesday’s savage decline. Yesterday’s peak came within three ticks of a 570.70 hidden-pivot target I’d said would be reached if a lesser pivot at 565.90 was exceeded. And so it was. Despite this impressive show of strength, the burden of proof over the near-term will remain with the bulls, since the April contract must chew through ponderous supply ranging up to 580 in order to demonstrate convincingly that buyers are truly in command. I’d put the odds of success at no worse than even, although it’ll probably take at least three to four days of voracious buying to push past the old highs.

Please note as well that there remains an important hidden-pivot resistance at 581.40 just $1.90 above last week’s 23-year high. That’s not much difference, but it’s sufficient for us to infer that the hidden pivot must still be tested. That’s why I wouldn’t celebrate if the April futures merely exceed the so-far high without conquering the pivot as well. That might prove to be a false breakout. We could be more confident that a push to $600 is under way if the 581.40 pivot is exceeded on a closing basis, or if it’s exceeded intraday by more than $1.00.

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Troubled by ‘New’ Dollars

Long-time subscriber Ben Woo is disconcerted by the thought that the U.S. government might someday issue “new” dollars in the event of a severe financial crisis. I  leave it up to you, dear readers, to reassure him that it wouldn’t necessarily be the end of the world.

“I'm not an economist, nor do I have a sound grasp of the basics of the hyperinflation/deflation debate, so it has been hard for me to follow a lot of the essays. I tend to be more practical, so I have been reading most of them with an eye towards trying to figure out what all this means for me - the average guy - when it all hits the fan. Near as I can tell, many writers (regardless of where they fall in the hyperinflation/deflation debate) feel that the end result will be a new U.S. currency.

Survival at Stake

“I have a great deal of trouble wrapping my mind around this concept.  I mean, I don't see how our society will survive it. Most writers have said any new currency would not have a 'conversion' from the old one, so all 'old’ dollars would be worthless. Everyone without hard assets starting again from 'scratch'!? And the FDIC essentially defaulting on all savings - since it was all denominated in old currency, and old currency would be worthless? 

"I fail to see how the government could make this decision.  It would be suicidal.  There would be blood in the streets, and the first targets would be the government officials who decided to start the new currency.  How could this not lead to anarchy?  Just wondering if you or any of the other writers has thought about what the 'practical' effects of a new currency would be.”