Friday, May 11, 2007

Silver and Gold Prices Stand on a Razor's Edge. If They Don't Hold Here & Turn Around, They Will Drop in a Grand Correction.

Gold Price Close Last Week : 687.20
Gold Price Close This Week: 670.60
Change: -16.60 or -2.4%

Silver Price Close Last Week : 1341.5
Silver Price Close This Week: 1321
Change: -20.50 cents or -1.5%

Silver & gold ended last week's confusion by dropping this week.

SILVER & GOLD PRICES stand on a razor's edge. If they don't hold here & turn around, they will drop in a grand correction down to 550 and 1100 or lower. On the other hand, my vote is that both will turn around dramatically. They have spent nearly a year working through a correction from last year's high. I believe they have broken out of that formation, and begun their rally. Right now you are seeing the first correction of that rally.

How will we know I am dead wrong? Next week silver will close below 1250 and gold below 635. How will we know I am right? Both metals will roar back next week, quickly passing the marks they have spent so many weeks labouring over, then pass 692 & 1405 and kept right on marching.

If I am right about metals turning around, then yesterday saw the high in the GOLD/SILVER RATIO and it should move down next week.
There it is. Y'all now know as much as I know, which fundamentally is, "Get right and sit tight: the trend is your friend."

The US DOLLAR INDEX ground steadily higher thru the week, then jumped over 82 yesterday (82.28). Today, after hitting 82.36, it closed at 82.107. No big surprise that, and not weakness either -- it's natural that traders with big gains for the week would close out positions on Friday. Big breaking point in the Dollar Index is 82.35. Once it passes that resistance it will boogie (as in, rise much higher).

Expect the dollar rally to last for several months, but expect not that it will sap morale in silver or gold. They can rise right along with the buck for months on end, although in the long term they move opposite each other. But as that great economic mind John Keynes said, discounting all thought of the morrow, "In the long term we're all dead." Sounds like the spirit of modernism, don't he?

STOCKS took a lick yesterday, but climbed back today to 13,326, not as high as this week's high at 13,365 (basis Dow). Stocks are long overdue for a break and correction. What you are watching now is the greatest bull trap in the history of stocks. Later this year, having drawn in all the unwary & optimistic, the bear will dine on them at his leisure. Before it is too late, swap stocks for silver & gold.

Having said that, might want to put the brakes on looking at the DOW IN GOLD DOLLARS (measuring stocks against gold). The DiG$ has rallied thru the down trend line (about 405) to the resistance area G$415 (20.07 oz) to G$417 (20.17 oz). This advance would suffice as a revisit to the 200 day moving average, and a little above. Overhead there's more resistance at G$425 (20.46 oz) and the very peak of the last upward correction, G$436 (21.09 oz.)

What's at stake here? If the DiG$ doesn't turn down soon, then it could enter a very long correction (where stocks would outperform gold) that could carry as high as G$475 (the 1/2 point of the long fall from the G$922.45 high [44.62 oz]) or even G$500 (24.19 oz). Since the DiG$ has been in a long term downtrend ("bear market") since August 1999, the greatest likelihood rests with resuming the downtrend. In other words, gold has been outperforming stocks for a long, long time & most likely will continue to do so.

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.