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Comex Gold’s Peak a Reason for Caution

11 comments

Our immediate outlook for gold turned cautious yesterday when the February Comex contract pulled back sharply from within 40 cents of a Hidden Pivot target at 1227.90. The target was reiterated in an analysis that went out Wednesday night, as follows: “Bulls should have been heartened to see gold so resilient on a day when the dollar stood firm. The payoff appears to be coming this evening, with a bullish thrust by the February futures above the day’s range. I still like 1227.90 as a minimum upside target, or perhaps 1230.00 if any higher, but we should turn cautious when that range is reached. It seems likely to show some stopping power, but if none is discernible that would sharpen the focus on the 1337.00 target given here earlier.”  

Will-this-be-the-correction

Subscribers had been alerted to the possibility of a tradable top at 1227.90  before the futures first poked above 1200.  With yesterday’s thrust to within a hair of our number, we are now focused on an unachieved target of larger degree at 1337 (as noted above).  That is our minimum upside objective for the next 10-14 days, but as is our custom, we won’t consider it a done deal until certain technical benchmarks are met. The first would be a successful test of support at exactly 1198.80, a little less than $3 beneath the correction low as of 7:30 p.m. EST Thursday. That number is a Hidden Pivot, and it is sufficiently compelling to imply that it will provide a tradable bounce if and when the February Comex contract touches it. If there is no bounce, however, it would be akin to the groundhog seeing his shadow : six more weeks of winter, or something like it, for this correction in gold. 

A Number to Watch: 1198.80 

In recent months, gold’s corrections have been relatively shallow, consistently failing to reach their Hidden Pivot targets. This is a bullish sign, and it is why Rick’s Picks has been bullish as all get-out during gold’s blitzkrieg thrust above $1000. But we have been cautious at each rally target, since you never can tell when a bull market is going to go into a nasty corrective dive. The logical time for a correction to start is immediately after the futures have kissed a Hidden Pivot resistance, as they did yesterday. Will this correction be the one that shakes out the excess of confidence that has accumulated among gold investors as precious metal prices have soared?  We’ll be better able to answer this question when we have seen February Gold interact with the 1198.80 Hidden Pivot flagged above.  (Bulletin:  As we went to press at 9:00 p.m., the correction had gone as low as 1201.40.) 

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  • Gus December 6, 2009, 10:54 am

    Most of the article by Nick Guarino is rubbish not just the bit about Formula 1. Anyone intersted in what he has to say should do a background check on this guy and basically ignore anything he has to say.

  • Tom UK December 5, 2009, 11:16 am

    Rick, please be careful with the link to the email describing some of the less edifying aspects of Dubai. Your correspondent does himself a disservice with regards to the Formula 1 race he claims took place on October 9. There has never been a race in Dubai. There was an event in Abu Dhabi, a neighbouring emirate, on November 1, which was generally considered a great success.

    Regardless of the reservations many people, including myself, have about staging races in the Middle East, it is wildly misleading to describe the track as a “death trap”, having been required to pass all the stringent FIA safety checks. And the comments about the sand and the tyres not being able to cope with the heat are nonsense, as is the assertion that the pit lane exit tunnel is remotely unsafe.

    I agree with the correspondent’s general sentiments about Dubai but he must check his facts before throwing around these kind of accusations if they are to be published – you never know where lawyers are lurking.

  • FranSix December 5, 2009, 6:17 am

    I’m a little shocked that a very aggressive headline may be repeated: ‘Traders selling their risky assets like gold and panicking into the dollar.’, to which I would have responded: ‘Traders panicking into the Yen and holding on for dear life to their risky assets like copper and oil.’

    But the Yen has reversed quite sharply, though I would still place some confidence in silver/gold ratio moves, that commodities themselves have had much sharper rallies, and that gold will not correct as severely.

  • Paul December 5, 2009, 3:12 am

    Is it just a coincidence that we heard rumblings earlier in the week from Chinese authorities about gold having run up too fast? Aren’t they the ones trying to buy gold and dump dollars? Sounds like their prayers were answered today with cheaper gold and a stronger dollar.

    Along the same lines, I think Kitco’s Nadler is always talking down the gold market so he can buy cheaper. He’s got to retire some day with his hoard.

    Has anything really fundamentally changed with a drop from 10.2% to 10% in the unemployment rate? Long term all of us and the dollar are dead. I’m not sure I want to be around for the dollar’s funeral though.

    The banksters have major gains on Wall Street and in the commodities this year. I can understand them wanting to lock in gains. It’s bonus season and Baby needs a new pair of shoes.

  • TahoeBilly December 5, 2009, 12:54 am

    The powerz that be condition everyone through the media with their talking points. Therefor the country beleives a dollar backed by nothing because the powerz grilled that into them.
    Many beleive the wars are 100% based on fighting terrorism. The constant conditioning keeps them firmly in control, that and using “infinite liquidity” to short the PM markets.
    Obey obey obey the all mightly Fed! Please sir may I use your beautiful dollar, for I am but your humble servant!

  • Senor Cuidado December 4, 2009, 8:29 pm

    Japan intervention plus US jobs report plus Bernanke grilling. Could be the turn for the dollar.

    $1225 was plenty for this gold thrust was it not? I’d like to see it calm down instead of an insane parabola right here.

  • FranSix December 4, 2009, 8:25 pm

    Well, it seems that we have reached our rally point with a reversal of the silver/gold ratio, a stamp of authenticity on the reversal with a credit market default in Dubai, and that the moves in gold prices reflect the same moves made in the last run up. Of course, a ‘true’ reversal of the silver/gold ratio would probably come with the longterm monthly target of +$1500/oz. range. These numbers correspond with Jim Sinclair’s. What happens afterwards in anybody’s guess. I assume that gold prices in monetary terms will be making their adjustment with their real price.

    Weekly Analogous Gold Chart

    http://stockcharts.com/h-sc/ui?s=$GOLD&p=W&b=5&g=0&id=p34298577235&a=156853006&listNum=2&listNum=2

    So my guess would be that the bullion price pulls back to the 13-week EMA in the next couple of weeks, to consolidate for a few weeks afterwards.

    Monthly Chart

    http://stockcharts.com/h-sc/ui?s=$GOLD&p=M&b=5&g=0&id=p68616833438&a=182333562&listNum=2&listNum=2

    F6

  • Rich December 4, 2009, 6:07 pm

    $1005 gold might blow the margin out of a few accounts…

  • scott hood December 4, 2009, 1:39 pm

    hi rick
    very interesting article on the dubai debt crisis, what i wanted to ask is your take on the gold miners de hedging part, as nick guarino has a take on it that i hadn,t considered . regards scott

  • Senor Cuidado December 4, 2009, 11:26 am

    Just to clarify: My previous comment describes the mood on certain other high profile websites and media outlets. (not this website)

  • Senor Cuidado December 4, 2009, 11:21 am

    Oh man, the gold bashers are fuming all across America these days. Spitting, sputtering and spewing venomous hatred toward real money.

    Is this hatred of gold just an American thing? The entire “gold bug” perjorative probably doesn’t fly in a place like, say, India. But I guess this syndrome could emerge in any society spoiled by world reserve currency status for decade after decade.

    We are still years away from the top in this gold bull. The ancient lessons are being relearned.


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