Friday, August 25, 2006

Silver and Gold Prices Refuse to Confirm Each Other

Here's the Silver and Gold Prices scorecard for the week:

18-Aug 25-Aug Change % change

Silver, cents/oz. 1201 1235.9 34.90 2.9%

Gold, dollars/oz. 612.10 622.00 9.90 1.6%

Gold/silver ratio 50.97 50.33 -0.64 -1.3%

Silver/gold ratio 0.01962 0.01987 0.00025 1.3%

Dow in Gold Dollars (DiG$) $384.37 $375.02 $(9.36) -2.4%

Dow in gold ounces 18.59 18.14 -0.453 -2.4%

Dow in Silver Ounces 947.67 913.02 -34.643 -3.7%

Dow Industrials 11,381.47 11,284.05 -97.42 -0.9%

S&P500 1,302.30 1,295.09 -7.21 -0.6%

US dollar index 85.09 85.42 0.33 0.4%

Platinum 1,208.60 1,215.00 6.40 0.5%

Palladium 333.30 344.80 11.50 3.5%

Contradictions, contradictions!

Silver, gold, Dow, dollar -- they're all swirling around seemingly independent of each other. "Pride goeth before a fall," so it's cheapest just to admit bewilderment, rather than having to dine on crow later.

Gold Prices
Chief riddle is the metals refusing to confirm each other. I look at GOLD'S chart and have to say at first glance it is a chart that has broken down out of an equilateral triangle and so should pass on downward. Yea, but it refuseth. Last week it dropped below the 50 day moving average (DMA, then 617.80 now 621.15), then promptly popped back above 620. Great, but all week it has failed to penetrate 625 resistance. What else can I say? It remains in a downtrend unless it can close above 625-630.

The worst catastrophe for me is to counsel people to wait for lower prices to buy silver or gold, only to see it roar upward. Still, I believe gold will trade lower yet. Buy some on a break through 620, then more at 600, and load up below 600. The week of 13 August offered another example of lightning spike bottoms in metals, with gold spending only two days below 620, and only hours below 610.

Looking topside, I would have to buy some gold on any breakout over 635, if only to assuage my nervousness.

Silver Prices
SILVER, bad girl she is, has been contradicting gold. Looking at silver's chart, I can only see an upside breakout from an equilateral triangle with a target over 1500 cents. Wretched man that I am, I find that hard to believe. If silver is pointed over 1500 (right away), then why laggeth gold? More likely is that silver threatens, parades, then fails at next big resistance, 1350. Later we'll get a chance to buy near or below 1100.

But honestly it leaves me very nervous to write those words. Silver and gold are moving into the yearly time frame when they begin to wake from their summer slumber. I am staring in the teeth of that, expecting metals to go lower into September/October, when they usually are peaking. Therefore I wouldn't discourage anyone who said, "Forget all your waiting. I'm loading up right here."

STOCKS, as represented by the Dow, beget in me no awe, no deep respect, no nothing. Yes, the Dow appears to have broken out to the upside, yet only with singular weakness makes any progress above 11,300. This "rally" will tease, tantalize, & titilate, but in the end fail. Oh, the pain later this year! Save yourself some trouble and swap stocks for silver and gold, now.

The DOW IN GOLD DOLLARS measures the Dow's performance in dollars of gold (=0.048375 troy ounce). Here the tale becomes clearest, when we look at the long downtrend since the August 1999 peak, lower, ever lower. In spite of all the "strength" in stocks, the DiG$ remains below G$400.00 (19.35 oz.). In the past few days it has broken above the downtrend line and 17 day MA, but shows no spunk. Probably just reaching toward the 200 DMA before collapsing again.

The US DOLLAR INDEX continues to move sideways and say nothing. Don't expect it to collapse, but don't make friends with it either. It's the weakest of reeds, and most changeable.

Here in middle Tennessee it has been hot and dry. We're panting for rain, fighting foxes & skunks for our poultry, and trying to build houses. This vacation is about to kill me.

Ich bedanke mich dem Unbekannten, der mir das Grabert-Verlag- Blatt nachgeschickt hat.

Y'all enjoy your weekend.

Argentum et aurum comparenda sunt -- -- Gold and silver must be bought.

- Franklin Sanders, The Moneychanger

To avoid confusion, please remember that the comments above have a very short time horizon. Always invest with the primary trend. Gold's primary trend is up, targeting at least $1,250.00; silver's primary is up targeting 16:1 gold/silver ratio or $78.13; stocks' primary trend is down, targeting Dow under 2,900 and worth only one ounce of gold; US$ or US$-denominated assets, primary trend down; real estate in a bubble, primary trend way down.


The US DOLLAR INDEX is a average exchange rate for the US dollar against the Euro, Yen, Pound sterling, Canadian Dollar, Swiss Franc, and Swedish Krona, weighted for each country's trade with the US. It gives a general measure of the US dollar's performance against all other currencies.

The DOW IN GOLD DOLLARS measures the Dow Jones Industrial Average in gold dollars (0.048375 troy oz. by law). The DiG$ depicts the Primary (20 year) Trend of stocks against gold. When the DiG$ is dropping, gold is gaining value against stocks in a trend that should last 15 - 20 years. The DiG$'s chart is identical to the Dow in ounces of gold, but gives us one unvarying measure all the way back to 1896. Because it shows the primary trend ("tide") of gold against stocks, for investors it is the single most important financial chart in the world today. Since its August 1999 high at G$925.42 (44.8 ounces), the DiG$ has trended down, targeting a G$80 - G$20 (4 - 1 oz. of gold will buy the whole Dow).

The DOW IN SILVER OUNCES shows how many ounces of silver are needed to buy the entire Dow. The DiSoz is trending down with a target of under 36 ounces.

The GOLD/SILVER RATIO is the gold price divided by the silver price, & shows how many ounces of silver it takes to buy one ounce of gold. The Ratio shows us the Primary (20 year) Trend of gold's value against silver. When the Ratio's trend is dropping, silver is gaining value against gold. This trend targets a gold/silver ratio of 16 ounces of silver to one of gold within the next 5 - 10 years. That implies that silver will massively, vastly outperform gold before this bull market ends. When both metals are rallying, the ratio often (but not always) drops, confirming the rally.