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Black Box
Forecasts: "Six hours ahead of its time" India No Gold HoarderTRADING NOTES: We should assume that the Chinese government has been a size buyer of gold bullion simply because the metal offers the best conceivable hedge against the day -- inevitable, as far as I'm concerned that the dollar is devalued against the yuan. In yesterday's essay I put Japan and India in the same boat, but apparently I was wrong about the latter. Here are the facts, according to a Black Box subscriber from India who is knowledgeable about gold markets and with whom I've corresponded for a while: It is true that India's largest trade partner is the U.S., and India does have huge surplus reserves with its central Bank. But if you look at the gold holdings of Reserve Bank of India (India's central Bank), they have not increased a bit over the years. With respect to private investment, India has extensively liberalised gold and silver imports. There have been no curbs whatsoever on gold imports since 1998; rather, official India doesn't buy gold but makes policies to promote gold holdings by individuals. Even in the last budget, the finance minister has reduced import duties on gold by 60% (from 25 rupees per gram to 10 rupees per gram, where 1 US$ = 45.30 rupees) to facilitate import of gold and make India a "gold hub of the world," to quote the minister himself 'High' Prices Constrain Gold Imports Indians do love gold and depend upon imports, as we don't have worthy mines to saturate our requirement. But since 1998, the imports increased only till 2000; then, after 2001, they declined steadily despite tax sops by the government. Who is to blame? Only speculators, as Indians have always been price-sensitive. You're talk about China and Japan is amusing, since loss in [gold] imports from India cannot be offset by any increase in [gold] imports by China and Japan, even for years. We are more than convinced that bulls don't want to see or even discuss India's large decline in imports, but would rather harp on the marginal increase by China. This is cheating investors and spreading disinformation to suit selfish motives, and commentators of your repute should not be victim of such one-sided reports. Also, to the best of my knowledge, and to recall statistics released on Japan, gold imports there also have declined in 2003. All that I know is, gold bulls have miserably failed to incite investors globally despite the spectacular price rise from USD $255 to USD $390 per ounce. There is nothing to suggest that investors have flocked to buy bullion, notwithstanding the hyping of Australian gold funds, bullion products, electronic gold, Islamic gold, etc. Much of it has come from gold producers themselves, helping to facilitate dehedging programmes that are bound to dry up in days to come. With best regards, D.P. Consumer Goods Burgeoning My correspondent notes in a follow-up message: Private buying of gold has existed in India since time immemorial. My worry is that for last two years, it as been declining despite a huge increase in population and economic growth averaging more than 5%. Demand for almost all consumer items is mind boggling, yet gold which once topped the agenda for citizens has been placed on a waiting list by many consumers and private investors. Meanwhile, scrap is being increasingly utilized, effectively reducing gold imports by 10% to 15% in each of the last three years. *** [The + symbol means we have an open position, while $ means there is actionable advice.] DEC DJIA (9832): A hidden-pivot resistance at 9908 7 points below the 12-month high achieved by the Dow last week remains as an unachieved rally target. I am not suggesting that you try to get short there, only that you take profits if long on your own initiative. DEC E-MINI S&Ps (1058.00): My minimum rally target is still 1070.00, but if that hidden pivot is exceeded by more than a point, I'd infer energy remains to carry the futures to at least 1089.75. Alternatively, there's a hidden-pivot support at 1049.00 that could provide traction if the futures fall. It will remain viable so long as yesterday's end-of-day peak at 1059.00 is not exceeded first. DEC BONDS (109.17): Yesterday's strong rally came close to meeting my criteria for changing the intermediate-term outlook from very bearish to moderately bullish. It'll still take a close above a hidden pivot at 109.27 to do the trick, so let's keep our fingers crossed. OEX (522.99): My rally target is still 537.53. It will be short-able if and when the OEX gets there, but for now sit tight. $ QQQ (35.77): Just a small adjustment in my forecast: If the cubes rally at the beginning of next week, look for a potentially important top to form at exactly 37.29, a hidden pivot. Plan on shorting 200 shares there, stop 37.41. DEC GOLD (394.30): We remain focused on a rally target of $403, but if that hidden pivot is swept aside, the minor-cycle uptrend would likely continue to at least $415.30. DEC NASDAQ E-MINI (1440.00): Any strength in the opening hour should be expected to carry the futures to at least 1057.50. That's a hidden pivot whose value as a place to go short could be compromised by overnight action that is presently unforeseeable. *** INTC (33.78): Hidden-pivot signs are very hard to read here, but my shoot-from-the-hip target for the rally cycle begun in late September is 35.70. FNM (69.90): Mild buoyancy is forecast, but it will likely be manifested in a grinding manner too tedious to trade. Remain on the sidelines. C (47.10): Citi is dropping down into a comfortable cruising range between 46.00 and 47.50. No new action is advised. The stock would need to close above a hidden pivot at 48.57 (this corrects the wildly erroneous number given yesterday) to reignite. $ + GG (15.98): We hold 400 shares with an average cost of 8.04 per share. For purposes of profit-taking, continue to offer a round lot to close at 16.69, g-t-c. $ HL (6.60): We hold ten December 7.50 calls for 0.30. It's highly unlikely the Nov 7.50s we'd wanted to short against them will be in play today, so let's simply hold on to the Decembers for possible sale over the next month. Hecla is surely within easy striking distance of rejuvenating them. $ + RANGY (14.10): We hold 400 shares for an average 10.12. On a g-t-c basis, continue to offer 100 shares to close for 15.65, two cents below a hidden-pivot resistance. The stochastic influences that lightened RANGY's load yesterday are still active. RGLD (19.62): No change. We hold 300 shares with a cost basis of $8.84 per. Immediate upside potential is to 21.78, a hidden pivot, but we'll hold out for $30+ before we do any profit-taking. IBM (91.09): IBM has been oscillating tediously since mid-December, tracing out the sort of pattern that usually gets a stock 86'd from the list of stocks tracked herein. We'll give it the benefit of the doubt, though, since, despite its recent wobble, the stock's weekly chart remains as placidly bullish as it's been for the last ten months. FYI, it would not take much to turn stochastic indicators for the weekly chart decisively bullish. EBAY (56.23): eBay easily breached the two hidden-pivot resistances I flagged here yesterday, but we'll raise the bar a tad before we give the bull a green light: A close of 57.18 or higher will do the trick, turning stochastic indicators for the daily chart supportive for the next 2-4 days. Rick Ackerman ***
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