why $509.25 us is important...

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Why $509.25 Is Crucial for Gold

By: Rick Ackerman, Rick's Picks


Rick’s Picks

Thursday, November 10, 2005

For investors who’d rather be smart than lucky

We’ve had excellent success recently using hidden pivots to predict important swing points for gold, which is now inches from a bullish breakout. Recall that on October 12, the Comex December contract peaked at 483.10, a single tick above the $483.00 target that had been projected here several weeks earlier near $467. The subsequent decline from $483.10 was nasty, hitting a low of $456.10 on November 4. This bottom also had been anticipated by way of a $457.30 forecast – a hidden-pivot support. However, our attempt to bottom-fish was stymied because of the extremely tight stop-loss ($456.90) that had been advised.

At the time, we assumed that the slight breach of the $457.30 support implied further downside to the next pivot, at least: $451.20. That target remains valid in theory, and we’ve been looking to buy down there if the opportunity should arise. But yesterday’s strong rally has lowered the odds that we’ll be able to get aboard so cheaply. In fact, if December Gold were to exceed yesterday’s 469.00 high by a mere three ticks, it would be signaling a likely test of the watershed high at $483.10. That’s because, in bettering the two prior peaks that I’ve labeled on the chart immediately below, it would create a bullish impulse leg of hourly-chart magnitude.

Once above $483.10, the December futures would begin to feel the magnetic pull of $500 -- a very crucial barrier. The word “barrier” is appropriate here for two reasons. First, it is a round number that is very important psychologically; and, second, it is also a precise hidden pivot. However, a query from a subscriber during yesterday’s real-time Q&A session led me to some long-term charts at Kitco that suggest why $509.25 will be even more important. That was where the futures made a bear-rally peak about three years into what would later become a 25-year bear market. Technically, at least by my runes, we are still in that bear market and will remain so until such time as $509.25 is exceeded. The rally that achieves that feat would, by surpassing both the 509.25 peak and a second at 499.75 recorded in mid-December 1987, create a bullish impulse leg of yearly-chart magnitude.(See chart below.) That is why I consider $509.25 the most important number gold has faced in more than a generation.