Tuesday, September 05, 2006

Gold Close Over 655 Argues Higher Prices

Welcome back! Surprising even myself, I survived my "vacation." On Friday I was musing about the gold and silver conundrum. Well, today they pulled back the veil. But first, the more plebian markets, and then we shall climb to the empyrean. The US DOLLAR lies range-bound, trapped since last may between 83.60 and 87.33. Lately the range has narrowed markedly, to 84.39 - 85.75. In August's latter half the dollar has virtually gone catatonic. The range can't narrow forever. The narrower it gets, the more it assures a breakout, up or down, so expect some explosion -- or at least some movement -- soon.

STOCKS are entering what is historically a rough time of year. They've been reluctantly trending up sinc ethe fall of 2004, but oh! How reluctantly. The likes of last May's Dow high at 11,670 haven't been seen all summer. Range now is 10,685 & 11,670. I expect to see stocks trend higher for another two weeks or so, but will be surprised if they greatly pierce 11,670. They could drop off sooner than two weeks. Watch that 10,685, because when it breaks big losses will follow. The Dow is tracing out a deadly rising wedge on the chart, a sure bearish sign.

Stock strength has not show in the DOW IN GOLD DOLLARS. Even with recent stock "strength" the DiG$ remains below G$400 (19.35 oz) & keeps on piddling in the G$370 (17.90 oz) - $380 (18.38 oz) range. I am still looking for the DiG$ to drop below G$40 (roughly 2 oz). Therefore, swap stocks for silver and gold, as fast as you can.

GOLD PRICE broke out today -- sort of. It climbed above 635 resistance, but not quite over 640. From here to 676 the way is strewn with roadblocks and resistance, but if this is a breakout it targets 720. How can we tell what's happening? A gold close over 655 argues for the higher target, and a close above 675 clinches it. It appears that I was wrong expecting lower prices yet in this correction, but that's still possible. Growing less likely, but possible.

SILVER PRICE in recent weeks has wrenched leadership from gold's path and moved upwards. The first problem here is the long non-confirmation with metals moving opposite directions so long. The taste of that lingers, casting doubt. Silver meets big, big resistance at 1340 cents. We'll see that fight this week, perhaps tomorrow. Should silver clear 1340, it can run. If not, it clinches another leg down.
The GOLD/SILVER RATIO leaves us now with no swaps to make. It stands in mid channel. If it reached 55 we would swap gold for silver, or if it turned and fell to 40 we would swap silver for gold. But alas! At a mid-channel 49, there's nothing to do but wait.

I'm glad to be back. I missed y'all.
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.