Central Banks Can’t Stop Gold’s Rampage

It was less than a week ago that the Wall Street Journal reported that the central banks of the world, even Russia’s, were acting in concert to prop up the U.S. dollar.  With gold’s powerful thrust to new all-time highs yesterday, however, it looks like the bankers will have to come up with a new plan.  Our longstanding target for the Dollar Index is 72.93, implying the dollar has a further 2.5 percent to fall before it is likely to find traction for a rally attempt.  (Please note that a bounce from 74.05 could also provide bulls with temporary relief.) More important than the dollar prediction, however, is an 1174.90 target for Comex December Gold that has been in play since spring. This “Hidden Pivot” price objective was triggered in May, and it and a lesser target at 1134.50 have kept Rick’s Picks subscribers properly bullish even as gold swooned, careened and flailed its way higher during the summer months and early fall.

We hadn’t expected December Gold to push past 1134.50 so easily yesterday, but the fact that it turned this “hidden” resistance into suet in less than twelve hours is testimony to the tireless enthusiasm of buyers. Their easy penetration of our target makes a follow-through stroke to at least 1174.90 as close to a sure thing as any market-driven event we could imagine.

After 1174.90, What?

So what do we expect after 1174.90 is hit? As is our wont, we’ve pushed expectations aside, ahead of the actual event. We’d prefer to let gold tell us what it will do next, based on how it interacts with the target. Because it has been so long in coming, however, and because the price pattern that produced it is so clear, we’re pretty sure that the 1174.90 pivot will not be a pushover. To take advantage of this prediction, we have advised long-term gold bulls to lighten up when the target is closely approached. It can also be shorted by day traders with a very tight stop-loss. If the futures should simply barrel past 1174.90 without much effort, though, the “chopped liver” rule would be in effect. Basically, it says that if a clear target shows little or no discernible resistance, we should infer that the underlying trend still has plenty of power behind it. We’ll say more about that when December Gold hits 1174.90. Until then, we should simply sit back and enjoy gold’s romp in the face of a probably doomed effort by the central banks to suppress it.

Rick Ackerman

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Rick Ackerman is the editor of Rick’s Picks, a daily trading newsletter and intraday advisory packed with detailed strategies, fresh ideas and plain old horse sense. You can subscribe by clicking here.