Friday, June 29, 2007

Get Ready to Buy Gold and Silver, and No Small Amount

Just to keep us sober for the rest of this commentary, let's look at this week's scores: down were gold prices, silver prices, the dollar, platinum prices, & palladium prices; up were stocks & the Gold/Silver Ratio. The Dow in Gold Dollars also rose.

SILVER & GOLD PRICES slapped us around this week pretty badly. In one of those spectacular nose dives for which volatile silver is justly famous, it dropped 72 cents this week. Gold, always less volatile, dropped only $5.40.

We are caught on the horns of the market. Either metals will catch here, perhaps drop off a little more, & turn around, or they will begin a four month or longer correction that could carry silver as low as 1080 & gold to 570. If we are to see lower prices, we should see them very soon. Silver's pattern on falls is to fall very fast to an extreme bottom, then spend the next few months working higher by working sideways. Wears on the nerves, but if you have courage to buy on that first plunge, you may profit handsomely.

Both silver and gold are firmly in a downtrend. We have to see positive evidence of an upturn or a bottom before we can pronounce them "turned." However, I have never minded anticipating a bottom, so I am steadily watching. I certainly wouldn't be short here, and I would keep a careful eye on the market. If you aren't ready to buy yet, then get ready to buy, and no small amount. Saying all that, I warn you still that gold may very well have bottomed. Buying while the world is proclaiming the death of silver & gold, as they most certainly will, will require all your nerve. Use it. Go ahead, puke in the waste-basket, and then buy.

Although stocks rose slightly this week, they were rising off a panic low, and their performance was not precisely inspiring. In fact, stocks tried to rally on Monday & Tuesday, and fell toward the close. Wednesday they bottomed, but Thursday & Friday repeated the pattern of gains slipping away by closing time. Rising interest rates & fear over Bear Stearns two wobbly hedge funds suggest stocks have a hard, hard summer in front of them.

Speaking of jitters about Wall Street, did y'all hear about a federal court in Chicago freezing the assets of Lake Shore Asset Management, a hedge fund run by a former chairman of the Chicago Mercantile Exchange? It seems that Lakeshore's director Laurence Rosenberg & others said that LAM was managing $1 billion, when in fact it was managing about $466. Whoops! Where did the money go? Money heaven? On 14 June LAM committed the ultimate faux pas by refusing to allow CFTC regulators to see its accounts. Bureaucrats don't like snubbing, so these ran to mama in federal court & got an order freezing $228 million of investor's money at LAM. La, la, tales such as these certainly build confidence in our financial system, don't they?

The Dow in Gold Dollars tried again this week to break through resistance around G$430 - G$432, but failed again. Time is running out for stocks. We need to see a close below G$415 to confirm, but it appears that whatever happens, stocks will not be outperforming gold in the near future. Only a DiG$ close above G$436 (21.092 oz) would negate that.

The US DOLLAR INDEX, hanging by its fingernails on the edge of the cliff, slipped today & dropped 31 basis points, closing where it began its rally. If it fails to hold here, it will sink & sink & sink, say, to 80.50. La, la, wonderful to live under such a currency, no?

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.