July 2011

Ah, what a day!  Even George Soros has decided to throw in the towel, so difficult has it become to find a winner one can stick with and still satisfy the regulators. The $25 billion that Soros had working in the markets returned just 2.5% last year and has lost 6% so far this year.  Judging from the numbers, it’s probably safe to say that he’s been underweighted in bullion. Very underweighted. But why?  Does he perhaps know something that Rick’s Picks readers do not?  Hard to say just what that would be, since the fundamentals that have been pushing gold higher were cemented in place when the Federal Reserve System was created in 1913.  Soros doesn’t strike us as the kind of guy who would be unmindful of the dollar’s 95% depreciation since then – especially since some of his biggest scores have been leveraged bets against various currencies. And what easier bet could there be than to pile up ingots against the day when the most endangered currency of them all receives its coup de grace? We don’t imagine he would have been socking it all away in real estate. Even a fool can see not only that real estate prices, both commercial and residential, are being propped up by government bailouts, Fed sleight-of-hand and malfeasant accounting, but that they still have a long way to fall. Not the kind of thing that would interest someone as savvy as Soros. Anyway, we don’t envy him the task of managing all of his billions privately, since one false move could wipe out 20% of his net worth overnight. Imagine the stresses of having to keep jockeying huge sums of cash around when it’s an absolute given that only the bold contrarian will win in the end.  Not that we

A new 'New Deal' proposed by the indomitable Sultan Knish would break up the government monopoly on nearly every aspect of our lives. "There is no reason why the hard work of the American people should be funneled back and forth between politicians, allied companies, unions, non-profits and the rest of the gang," he writes. Click here for the full essay.

It's one thing for mining share to get hit on days when the broad averages are getting savaged, but quite another for precious-metal prices to fall, especially with the fiscal world on the brink of chaos, if not collapse. Yesterday's moderate reversal in no way affects the 1652.00 target that has served as our minimum upside objective, but we should pay heed nonetheless if bearish impulse legs start cropping up on the hourly chart. It would take a print at 1607.10 today to do that, so let's set an alert at that price to warn us if it becomes necessary to reef the sails. Please note that yesterday's reversal came within 1.00 of the 1627.80 midpoint associated with a secondary target at 1648.30 (still valid in theory) and that a fall to 1607.10 would negate both.

The Gold Bugs Index has made balky progress toward a 604.70 rally target flagged here more than a week ago, but the Hidden Pivot now looks likely to achieved, and soon. That would refresh the bullish energy of the hourly chart by surpassing a daunting 'external' peak at 598.09 recorded on April 21, but it would take just a little more -- specifically, a push above the look-to-the-left peak shown in the chart -- to clinch significant new highs above early April's 609.22.

With the futures trading early Wednesday morning well above a midpoint resistance at 40.990, its 'D' sibling at 42.110 is well in play. That Hidden Pivot can serve as our minimum upside objective for the moment, but as I noted during yesterday's impromptu trading room, there are no external peaks remaining to 'camo' ourselves aboard the easy way. Night owls should pay heed at 41.110, a lesser 'D' target noted during the impromptu (15m, A=40.715 at 6:30 on 7/26); B=41.010, and C=40.815).

A new number for August Gold emerges in today's tout -- something to shoot for if and when a lesser target at 1652.00 promoted here earlier is realized.

Although pullbacks are tending to be nastier than our midpoint guideline would encourage, those extra inches and feet of downwardliness are obviously intended to inspire whatever doubts and disappointment are needed to thwart most of us from becoming effortlessly rich.  A clear target at 1652.00 remains my minimum upside objective nonetheless, but another, just as clear, at 1727.60 beckons if and when the lower resistance yields. That last Hidden Pivot is tied to a midpoint at 1595.80, so any seemingly ill-tempered retracement to it should be viewed as opportunity, not punishment.

I alluded in a recent commentary to a mining stock that I'd recommended for immediate purchase by my 91-year-old mother (who, by the way, has always been a great stock-picker).  The company I have in mind is Baja Mining Corp., and this is not the first time I've mentioned it. Back in March, when it was trading for 13 cents less than the current 1.31, I saw easy potential to 1.66 once it got above a Hidden Pivot midpoint at 1.31. This it did, but the stock has gone sideways since, presumably developing thrust for the push to at least 1.66.  My renewed interest in Baja is not based on technical considerations, however, but on the phone call I received from the analyst who touted it to me originally. This is no hot tipster either; rather, he's one of the most knowledgeable and thorough analysts I know, and I completely trust him when he says Baja offers great value. The company's "story" remains as bullish as ever, says the source, and that's why it appears in today's list of touts. Incidentally, Pivoteers may notice that the tip of Monday's spiky rally offers great camouflage relative to the May 10 peak at 134.50 that it surpassed. You can buy the cautiously if you wish, but officially the recommendation is to buy a thousand shares market-on-open. _______ UPDATE (5:21 p.m. EDT):  We bought 1000 shares on the opening for 1.32. For now, do nothing further. Please be aware that if the stock breaches a midpoint support at 1.20, it could fall to as low as 1.14 in search of traction.

Our elected leaders need only look at the chart below to see how the budget stalemate will turn out.  Gold has been rising at an exceedingly steep pitch since early July, implying that whatever deal emerges from the sausage factory on Capitol Hill, it will not much affect the ongoing destruction of the dollar that began in earnest in 1913 with the creation of the Federal Reserve System. The Fed, as we know, was charged with conducting monetary policy and supervising the banking system. However, events of the last few years have allowed the central bank’s directors to expand its mandate to….as Buzz Lightyear would put it, infinity and beyond. The dire implications of this for the U.S. dollar have not been lost on bullion investors and traders, even if conventional thinking would deign to suggest that precious-metal prices have come too far, too fast. But compared to what? Over the last decade, bullion has outperformed just about every asset class you can name. The fact that it is now moving away from the pack of investment also-rans suggests not that buyers have run amok, but that the destruction of the dollar has entered a new and perhaps cataclysmic phase. What will replace the dollar when it utterly fails, as it must? Although gold may not pass political muster right now as America’s and the world’s next choice for money, no one can be certain that it won’t be drafted into the role.  After all, how many tried and true alternatives are there? In the meantime, we think the bull market has barely gotten started and that penny stocks that have languished for years will trade at ten or perhaps even a hundred times their current values before the bull has run its course. We’re so confident about this that