Friday, February 09, 2007

Gold and Silver Broke Out - Gold May Challenge $700 Next Week

Lo, & behold! SILVER and GOLD PRICES have broken out! Note how dramatically things have changed in just one week. Last Friday silver & gold appeared to collapse -- the day after the Dow hit another all time high. But what happened in a week?

On 14 July 2006 the GOLD PRICE made its highest high during this post-May correction: 666.60. Today, it beat that high, closing at 667.50. Not by much, but higher. This final confirmation blows back in the croakers' & doubters' faces all question whether the gold price really is rallying. Wait, wait -- obviously gold cannot stop here. It must make good its gains by continuing to rise. That we ought to see next week.

However, if the gold price falls back next week, it would only signify that it needs breathing space for one more try and final breach of 666. That's not what I expect to see. I expect to see the gold price gaining next week, perhaps even challenging 700.

In December 1381 - 1386 stopped the SILVER PRICE cold, & again last week. Therefore 1380 became the number the silver price had to beat, and today it did, closing at 1387.9. Next week, probably early, silver ought to challenge 1406 (the post-May high) & plunge through. Recall, if y'all will, that for a long time I have been repeating that very little resistance lies between 1500 and 2400. Y'all ponder, yea, weigh what that means. Right, that once the silver price clears 1500, it will run like a scalded dog for 2400.

STOCKS made a double close this week, always a fishy manoeuvre that smells of "turnaround." Turnaround they did. Whether this signifies the end of stocks' rally I don't know, but they are certainly ripe for a huge correction. 11,200 will be the key line to hold for stocks, because beneath that lieth only -- air.
Today the DOW IN GOLD DOLLARS dropped to G$389.62 (18.85 oz), only gold-cents from its 200 day moving average at G$388.71. Dropping through that 200 DMA will strongly confirm that the DiG$ is locked in a downtrend, and that it will not revisit G$475. That drop the DiG$ ought to see next week early.

The US DOLLAR INDEX continues to fiddle back & forth between 84.50 & 85.20. Nothing happens until it breaks out of that range -- upside bringing higher prices, downside lower.

The GOLD/SILVER RATIO has been dropping all week, in harmony with the metals' upmove. About the only worry on the horizon is the mushiness of premiums on physical silver & gold. On the wholesale buy side US 90% silver coin has sunk to a 65 cent an ounce discount, while American Eagle gold coins have dropped to 1-3/4%over gold. These mushy prices don't settle the question, but they do raise one. Where is the physical demand that ought to be raising the bids wholesalers are willing to offer to cover rising investor demand? Maybe it means nothing, but it is one of the signs I watch. By the way, no immutable law of nature decrees that those premiums must rise as metals rise. However, they seem awfully low for the start of a big rally, & so flash a caution light.

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.