Monday, April 02, 2007

Was Today A Key Reversal for Gold and Silver?

SILVER & GOLD PRICES pulled a trick today that should have made them look stronger, but only added to the confusion. Both metals dropped toward their lows of last Thursday (1310 & 655), made lows (1296 & 656.20) and then recovered strongly. Sounds like a key reversal and mark that the correction has ended, but not quite. The silver price dropped to a lower low today, & closed down 9.7 cents on the day, while the gold price closed up 2.70.

But let's see what tomorrow does. Even if it had been a key reversal today, that would only mark the first half of a key reversal: break into new low territory for the move & a higher close, followed by a higher close the next day. Numbers I am watching are 667 for gold and 1340 for silver. Metals need to clear those levels this week.

STOCKS were confused also, most indices up but several down. Dow & S&P500 ended up a few points on the day, but nothing inspiring. I suspect the Dow will break above 12,400, probably tomorrow. Notwithstanding, swap stocks for silver & gold.

The US Dollar index is nearing a point of no-return. It closed today below 82.90, a scant 20 basis points above its last low at 82.64, & not a long way from the December 82.35 low. Trend in effect is down. Dollar needs a close above 84.25 to turn up.

The GOLD/SILVER RATIO has been confused, too. It doesn't want to fall, which it ought to do in a precious metals rally.

These extended slack periods in markets hide tension underneath the surface. Imagine holding your hands in front of you, palms together, & pressing together with all your might. Your hands would be still in front of you, but under tremendous pressure keeping them there. If one or the other weakens, they'll move a lot. Same occurs often with markets that seem "quiet." They're not quiet at all, just well-balanced for the moment. When one side or the other gives, there will be movement enough to satisfy any appetite.

On this glorious day in 1792 the US Congress passed its first Coinage Act, which you can find at 1 Statutes at Large 246. Enacted to give the country a sound monetary system, its "dollar" of 371.25 grains of fine silver was based on the average weights of circulating Spanish milled dollars or pieces of eight. That the "dollar of silver" was intended to be the standard coin cannot be doubted, since the act provided no gold coins denominated in dollars. Rather, it established "Eagles" of about 1/2 ounce valued at 10 dollars, half eagles valued at $5, & quarter eagles valued at $2-1/2. Further proof: when the Coinage Act of 1834 aligned US coinage with the world gold/silver ratio, it was the gold and not the silver coins that were reduced. The silver dollar was then, and remains today, the standard coin of the US.

All of this remains law in force today, but why is no silver or gold circulating? Why is our prosperity ravaged by inflation & government intervention? Because the same congress abandoned the old path & gave a monopoly of creating money out of thin air to a private corporation, the Federal Reserve.

But what about Article 1, Section 10 of the constitution, "No State shall make any Thing but gold & silver coin a tender in payment of debt." Yet daily in millions of transactions states trounce the constitution by making federal reserve (green paper money & bank money) a tender. They know they have a problem.

That's what Tupper Saussy hit with his 1978 book, Miracle on Main Street. He inspired thousands of people to go into courts & demand their monetary rights. Oh, the judges howled & lied, as did bureaucrats, but Tupper very nearly sparked a restoration of law.

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.