Tuesday, February 27, 2007

As Long as the Gold Price Remains Above 650 and the Silver Price Above 1380, the Rally Remains in Force

Today's terrible fall in stocks gives me no pleasure; it brings too much pain to too many people. The three major US stock indices -- Dow, S&P500, & NASDAQ - fell about 3.5%, losing all they had gained so far this year. This was the worst fall since September 20, 2001, after the 9/11 attacks, and the biggest volume ever for the NYSE & NASDAQ. At once point the Dow was down 546 points. From 2:45 to 3:00 it lost 200 points. Yes, this is what a panic looks like. Wonder how much it would have fallen without the Nice Government Men in the Plunge Protection Team?

The DOW IN GOLD DOLLARS plunged nearly half an ounce to G$369.25 (17.86 oz) but, as I'll explain below, silver & gold dropped after the closes. Based on the current price, the DiG$ stands at G$381.47 By the way, the DiG$ behaviour has been pointing to a big drop in stocks. I hate to say it today, because it sounds like "I told you so," but y'all still ought to sell stocks for silver and gold.

Technically the Dow has support at 12,000, and then at 11,000. Not much in between. Expect the NGM to be busy supporting stocks tomorrow.

The US Dollar plunged 47 basis points today to close at 83.46.

When one market experiences a strong crash, the panic inevitably bleeds over into other markets. The margin-called throw everything they have onto the fire, trying to raise money. Silver and gold had not done badly by closing time (1:30 Eastern) with silver down 14.5 cents to 1454.50 cents & gold down 2.70 at 683.90. In the aftermarket, however, they were whupped. Gold ended the day at 662, down 24.60, and silver wound up at 14.155, down 54.5 cents.

Y'all calm down. As long as the GOLD PRICE remains above 650 and the SILVER PRICE above 1380, the rally remains in force. In fact, I seem to remember mentioning those numbers and warning that a correction loomed shortly ahead.

Thinking back on the April 2004 high and the May 2006 high, and the breaks that followed them, you would have done well to buy after the first few days of the break, when things looked absolutely the most devastated. Market proverb says, Buy when there's blood in the streets. Watch closely now. First target to buy if it drops gain tomorrow for silver is 1380 and for gold is 650, if they go that low. Of course, this might have been a one day phenomenon, but that will be evidenced by much higher prices tomorrow, if that is the case.

That the break came from China adds to the poignancy. Bear always in mind that no economy makes the gains claimed by the Chinese without lots of buried corpses in the form of malinvestment. Because it is state run & state-run enterprises are state-financed, there are huge bad debt/investment problems that have so far been covered up. The Chinese miracle has never been all it's been cracked up to be. Stink isn't over there yet.

News stories today mentioned US buyers were running into bonds for "Safety"? Disinformation planted by the NGM? With the US $ down 50 basis points & panic rampant, I wouldn't be surprised. Anyway, running to US Bonds for "safety" is like running to Vlad the Impaler for "mercy." Won't find it there.

Will buyers run into gold for safety? Possible, but I'm not sure we are deep enough into this bull market, or that enough of the public recognizes that bull, for them to run into gold for safety now. It they do, it will be a mess, and gold will run to $1,000 even faster than I expect.

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.