Friday, May 04, 2007

Gold and Silver Precariously Positioned, & Next Week Will Make Or Break Them

Gold Price Close Last Week : 678.70
Gold Price Close This Week: 687.20
Change: 8.50 or 1.3%

Silver Price Close Last Week : 1344.3
Silver Price Close This Week: 1341.5
Change: -2.80 cents or -0.2%

Confusion still reigns in SILVER and GOLD, despite the V for victory spikes in their markets this week. Look above: silver closed down while gold closed up.

Both metals are precariously positioned, & next week will make or break them. The GOLD PRICE jumped over its 17 day moving average (DMA, US$683.14) today, the first sign of an uptrend. In the pro column also was gold defending 670 again this week. However, since the more times anything hits support or resistance, the more likely a breakthrough, that might portend trouble. On the other hand, gold is positioned to knock on 700 resistance again next week. Another failure at 692/695 would guarantee lower prices, perhaps as low as last year's lows at 550. More pros: this week it bounced off its 50 DMA and the trading channel's lower trendline.

SILVER, too, again successfully defended 1320, but I have to ask why it can't close above 1345. The silver price is either about to fall or rally -- spectacularly. It needs to close over 14 early next week. The uptrend on the weekly chart remains intact with no breakdown, so that says silver is going up.

Looking at the Dow, it's hard to imagine the Dow becoming any more overbought than it now is. Volume dropped sharply on this week's latest rise, even though the Dow closed at a new high again today. Buy stocks at your own peril, or burn $100 bills in your hand. End result will be the same: you'll get burnt. Swap stocks for silver & gold.

The DOW IN GOLD DOLLARS this week touched its downtrend's upper channel line, the downtrend line from the G$435.90 (21.09 oz) high on 4 October 2006. A Berakout over that trendline would mean the DiG$ is embarking on a strong correction to the last 7-1/2 years of downtrend. Remember that G$475 (22.98 oz) is the halfway mark of that decline, and the halfway point in bear markets acts like a fulcrum of direction. As long as it stay below that mark, the direction is firmly down. If it stays above that mark, it has a chance to turn around.

Hitting that downtrend line this week may mean the limit of the correction of the 4 Oct 2006 - 27 Feb 2007 (G$369.25) move. If so, it will turn down next week, which I expect (stocks will drop, gold will rise).

The US DOLLAR INDEX is probably forming a bottom, but until it clears 82.35 there's no reason to get worked up. Expect a fairly large rally in the next six months.

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.