|
|
Gold and Silver swept
all obstacles aside Monday, pushing already steep rallies into hyperdrive.
Even a firm dollar failed to check the buying spree. At the opening
bell, we were looking for Comex February Gold to
surge to at least $1425; however, by day’s end it had done even better,
rallying $24 to peak intraday at 1429.40. And although March Silver fell 11
cents shy of our minimum projection of 30.465, there was such power behind
the nearly $1.00 rally that the target seems all but guaranteed to be reached
during the night session. All of
this must have come as bad news to technically oriented bears who saw a
head-and-shoulders top forming in February Gold. Look at it now (in the chart
below) and you’ll see that the last two days’ price action have
transformed the pattern into chopped liver.
We hesitate to break
out the bubbly at this point, however, because the steep pitch of bullion’s
ascent is manifestly unsustainable.
This implies that it won’t be pretty when the move swoons into a
correction. Even so, in the days ahead, Rick’s
Picks will try to provide Hidden Pivot benchmarks that long-term
investors and swing traders can use to hedge bullish exposure in precious
metals. We are somewhat exposed ourselves via an 800-share stake in Silver
Wheaton (SLW) that was showing a paper profit of $21,376 at yesterday’s
high, 40.99. Our forecast has
been calling for a minimum 41.65 in the stock, but it has gotten there more
quickly than we’d expected, requiring a likely adjustment today or
tomorrow. Still, certain widely followed gold stocks appear to have room to
move, assuming a 622.78 projection for the Gold Bugs Index (HUI) materializes.
The index topped yesterday at 591.71, driven by a 10-point rally, but the
Hidden Pivot target at 622 implies a further five percent before HUI is due
for a rest.
Bullion’s Anti-Bulls
Bulls should keep in
mind that there are some powerful players with a compelling interest in
seeing gold throttle back. Chief among them are bullion bankers who make
billions of dollars by lending gold that they themselves have effectively
borrowed for nearly nothing from the U.S. Treasury. These players have always
been able to keep a lid on gold by manipulating “paper” gold in
futures markets. However, with
the buying frenzy starting to feed on itself, odds
are growing that some very large buyers, including such sovereign entities as
Russia, China, India and Saudi Arabia, will be eager to take delivery on
futures contracts rather than simply rolling them forward. The futures
exchanges, presumably at the behest of the U.S. government, have been known
to change margin rules in mid-game to put the kibosh on uppity buyers. In
this case, however, the buyers are not mere speculators; rather, they are
central banks and sovereign funds with enormous exposure to dollars. For that
reason, we shouldn’t expect them to be come
discouraged merely because U.S. futures exchanges have increased margin
requirements for precious-metal contracts.
Rick Ackerman
Subscribe to Rick’s Pick
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. Access to it and to all other Rick’s Picks
services is available via a free seven day trial subscription available by clicking here.
|
|
