Monday, March 05, 2007

Gold and Silver are Resting on their Bottom Channel Lines

Let's think about the GOLD PRICE from the standpoint of the moving averages. The 50 DMA stands at 644.34, the 200 DMA at 623.80. Today's low was 632.90, just about the bottom of gold's trading channel. Since it's resting right there, on a trap door, so to speak, if it breaks down it would probably revisit the 200 DMA. There's plenty of support from 634 all the way to 618.

The SILVER PRICE, too, is resting on its bottom channel line, so could break up or down, either way. We've come this far, so I'd be surprised if it didn't at least during the day kiss its 200 DMA at 1226.15. Today's low was 1237. Fact is, silver & gold must be somewhere near a bottom. Otherwise a much greater correction is in the offing.

The GOLD/SILVER RATIO climbed above 50 today to close at 50.61. 200 DMA stands at 51.11. Here is another contribution to the case for a bottom being near in metals. If the ratio does NOT stop there, then look for that much bigger correction.

Surprise of the day came from the US DOLLAR INDEX which rose 42 basis points to close above 84.16. A good place for this reaction to stop would be 84.75. Call me hard-headed, but I don't think the dollar's downside is over yet.

How about those STOCKS, huh? Last Thursday the Dow made a low close at 12,059. Against this relentless downward bias and building panic in the investing public clearly 12,000 has become the line the Dow must hold. If not, next stop 11,200.
Twould be surprising -- & a sign of great weakness -- if stocks did not stage at least an anemic rally this week.

How is a 200 day moving average figured? Take the last 200 days' prices and divide by 200. Next day, drop the oldest price and add today's.

Moving averages give us a measure of market extremes. The farther a market (headed up or down)pulls away from its 200 day moving average, the greater the likelihood it will switch directions. From time to time, markets always re-visit those 200 day moving averages. With that in mind, let's look at metals.

The DOW in GOLD DOLLARS has climbed off its recent low of G$369.25 (17.86 oz) to G$391.67 (18.95 oz). Sorry, it's not a sign of life. That only raises the DIG$ high enough to touch its 200 day moving average. Trend remains irrevocably down. Look for a further drop this week.

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.