First, some context. Last summer gold broke, and broke hard. After reaching a high of $1267 on June 21, gold corrected all the way back to $1163 on 7/27. That's 8.21% in 5 weeks. Ouch. By late July and early August, many of my friends at ZH were apoplectic, dispeptic and, frankly, pathetic. Constantly goaded and ridiculed by trolls, some even gave up and sold their gold and silver.
I, your humble correspondent, knew that the secular bull market in the metals wasn't over. Not even close. We were simply in a corrective phase and corrections happen all the time. They are, in fact, healthy for the long-term life of the bull. Talk is cheap, however, so I knew I need to make a bold prediction. Put it out there and repeat it often in order to provide, if I could, some measure of confidence to those in need.
If memory serves me correctly, August 13 was the date I first issued my "1350 by Halloweeen and 1500 by 12/10/10" proclamation. On that day, gold closed at $1218.20 so this was, by no means, a lay-up. I was certain, however, that gold was in a long-term bull market and that the late summer correction had run its course. As it turns out, I was right.
Many have asked how I cam up with the numbers. It probably won't surprise you that it wasn't complicated. The $1350 price target was only about 6% from the high of 6/21 and maybe 16% from the low of 7/27, so it really wasn't asking much. Plus, 1350 was a nice round number and Halloween was an easy date to remember. We made it! Gold reached $1352.60 on 10/6/10, more than three weeks ahead of schedule. My reasoning behind $1500 by 12/10 was that gold would likely rally another 10% from there before some year end profit-taking. We almost got there. In fact, there was still hope just this past Tuesday when gold traded as high as $1432.50. Close...but no cigar. However, considering we've moved UP almost $300 from the lows in July, I still feel vindicated. The naysayers and trolls will always be there. Ignore them. Always ignore them.
So, where do we go from here. As you all know, Santa has maintained for years that gold will reach $1650 by 1/14/11. Wow, if he's right...whew, that would be great. As for The Turd, I'll just continue to play the percentages. If gold were to finish up 2010 around this level, we'll put another year in the books at +25% or so. This is about the average annual gain since the current bull market started back in 2001. With no end to QE and its incumbent currency wars in sight, there's no reason to think 2011 won't bring more of the same. $1400 + 25% = $1750
Hmmm....where did I hear that $1750 price target before??? Oh, now I remember...Goldman Sachs!
Isn't it amazing that you can do some simple math and come up with a gold target but if you put a GS logo on it, people will voluntarily pay you millions in fees and commissions? Jeezo pete, this "industry" is such a sham. But I digress, that's a topic for another day.
For today, some BS economic "news" has provided the dollar with a little bounce and given Blythe the opportunity to raid gold once again. Two things we have going for us:
1) There should be a lot of support between 1370-75 and lots more at 1365. Blythe will fail and when she fails, she will have unwittingly painted a very nice double-bottom for us on the chart. Thanks, Blythe! Also, let's watch the $1374 closing level as that is still important on the weekly chart.
2) Silver is hanging tough. Currently $28.39. The EE'd have to take it through 28 to do any real damage.
Remember this, too, from Dan Norcini earlier this week:
"There is a band of congestion support in silver coming in near the 26.75 – 26.45 level. From a technical perspective we would not want to see it violate 25 to the downside. Good technical action in the grey metal would be for it to hold above the recent breakout level near 27.90 and work sideways for a week or so."
Ole Dan has forgotten a lot more about metals trading than The Turd currently knows so he provides some excellent advice here. Sit tight. Let's see what happens next.