Saturday, September 16, 2006

Silver & Gold Prices Rallied Sharply Off New Lows

What a week! Silver dropped almost as many cents as the Dow rose points. Was it enough to make me abandon metals & fly to stocks? When pigs fly. The markets are handing metals buyers a gift. Take it.

STOCKS have rallied almost back to the point where they failed in May, but appear to be tiring out. Why are the Dow Transports so far behind? It offers clarity to the soul to view stocks through the lens of gold, and the DOW IN GOLD DOLLARS. After falling to G$331 (16.01 oz) in May of this year, the DiG$ has laboured to stay off that low. It has failed to pierce G$400 (19.35 oz) until this week. 200 Day Moving Average (DMA) stands around G$390.50 (18.89 oz), so all things considered, I have to consider this merely re-visiting the 200 DMA in the midst of a long term bear market. It should stop around G$425 (20.56 oz). This is simply a better opportunity for you to swap stocks for gold. The end of this stock market rally can't be more than 4 weeks away, and when it starts to fall, 'twill fall fast.

The US DOLLAR shows nearly unchanged from last week, unable to break through 86 although it has broken out of its tight August trading range. Time's a-wasting - dollar can't straddle the fence forever. I lean toward thinking it will clear 86 next week and make its final fling in the next few months, before revisiting 80. By the way, sneer when you hear anyone say the present silver & gold troubles were precipitated by a strong dollar. That's just silly. Mayhap the Nice Government Men who manage the dollar have been monkeying with silver & gold, kicking them while they're down, but not the dollar. That piece of junk couldn't hurt a fly.

SILVER & GOLD PRICES spiked down today to new lows (1042 & 570) but they rallied sharply off those lows. True, they didn't close higher, but that recovery argues there are lots of buyers willing to put their money where their mouth is when silver drops below 1050 and gold below 575. The line has been drawn in the sand.

What's the worst possible outcome? Grab your wastebaskets & start puking: 475 gold price and 700 silver price. Now, do I believe that will happen? No. Is that possible, and the metals remain in a bull market? Yes, quite. More likely is a silver low from 1000 - 945 & a gold low around 542. However, today's performance was strong & encouraging, and we may have seen the bottom. What I am looking for is a rally and failure. Once we see where that failure stops, a double bottom (or not) will be obvious, and a low risk buy.

But all that is just chin-boogie and wool-gathering. When any long term bull market returns to its 200 DMA, you just have to buy it, or stop investing in the market. Buy.
How much longer can this go on? If we haven't already seen the bottom, the worst should be over in two weeks, but it will be November before metals begin to climb again. After the bottom they'll move frustratingly sideways.

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

- Franklin Sanders, The Moneychanger

"Buy Silver and Gold Coins at the Best Prices"

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.