Wednesday, March 07, 2007

Watch For Silver & Gold To Clear 667 & 1330 Next

A reader asked me why it seemed the SILVER PRICE and GOLD PRICE were moving in step with stocks, instead of contrary to them. Answer is, stocks & metals don't move in lock step against each other every single minute, but generally over time in a primary trend lasting decades. It's not unusual for them to run together, even for quite some time. The recent selling panic in stocks probably induced gold selling as investors threw profitable investments into the fire to meet margin calls or just to flee to cash.

Silver & gold performed exactly as needed today to confirm they will move higher. However (there's always one of those, isn't there?) neither one has cleared the woods, and won't until they beat recent highs, namely, 686.50 in gold & 1469 in silver. Until then, the chance always hangs over our heads that this might be part of a much larger correction.

Life isn't often easy, is it?

Meanwhile, watch for silver & gold to clear 667 & 1330 next. Closes below yesterday's would be very bad juju indeed.

Another reader asked me how the Nice Government Men on the Plunge Protection Team work to manipulate the stock market. Basically, they panic the shorts (those who have sold stock they don't own, betting that the market will drop much more and they can buy back the stock they sold cheaper than they bought it) & create a buying panic.

Rather than buying stocks, I suspect that the NGM buy futures contracts for stock indices. As the index futures contract rises, watching arbitrageurs see a discrepancy growing between the price of the index futures contract & the underlying stocks, making the stocks appear cheaper than the index. It's a locked-in profit to buy the undervalued stocks and simultaneously sell the overvalued index futures contract.

As stocks rally, the shorts begin to panic, first puking into their wastebaskets, then rushing to buy & cover their shorts at any price. Then watching bulls see the market rising, & they start buying again. The buying panic has taken hold.

How do the NGM get out? Simple. After a few days of rising prices, just sell the futures contracts they are long. There's ne'er a fingerprint left.

This is the same trick that the Fed used in 1987. To suppress gold, they waited until the market closed, then sold platinum futures in the very thin aftermarket. Seeing platinum drop scared off potential gold buyers & gold longs. Again, no fingerprints.

So, after yesterday's big rise stocks took a breather today. The Dow's performance was instructive -- all that effort only to have stocks fall below their starting point. The rally will continue, but weakly as the buying runs out of steam. The definitive break has already occurred; the rest -- the long, bloody decline -- is just cleaning up and following through.

Once again, take this, your last chance, & swap stocks for silver & gold.

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.