The number 901 looks like nothing special in the chart below, but we’ve kept it prominently in mind as the trigger point for a potentially explosive move to at least 972. Both numbers are what we call Hidden Pivots, and we have come to regard a breach of these resistance points as a very reliable sign of more strength to come. In this case, to avoid a false signal, we’ll stipulate that February Gold close above 901.00 for two consecutive days before we infer the big surge is under way. Of course, if and when the futures get to 972.20 (the exact target), they undoubtedly will feel the magnetic pull of $1,000, which was last tested in mid-July.
It seems obvious in retrospect that there were just too many cocky bulls at the time, since, the day after the futures poked above $1,000 for a couple of hours, they began a devastating two-month plunge the took them all the way down to $688. There was one decent rally along the way as autumn began, but the 26 percent gain achieved during those four weeks evaporated in mere days. This time, however, the suspicion grows that the opposite could happen -- i.e., would-be buyers who hesitate on the approach to $1,000 will find themselves choking on dust when bullion starts the New Year with spectacular and largely anticipated lurch. The tipoff is that precious metal shares have been outperforming bullion for the first time in a long while. Something has changed, for sure, and we think it portends a rollicking 2009 for gold bugs.
