Friday, June 08, 2007

A Gold Close Below 625 Would Bring Much Lower Prices, A Close above 672 Would Carry Higher

Gold Price Close Last Week : 671.20
Gold Price Close This Week: 645.50
Change: -25.70 or -3.8%

Silver Price Close Last Week : 1368.1
Silver Price Close This Week: 1299.9
Change: -68.20 cents or -5%

All in all, it was a pretty dark week, but let's shine a little light on it and see how ugly it really was.

The end week prices don't quite tell the take. The US DOLLAR INDEX only rose 0.4%, but in the meantime it made a trip down to 81.88, & came back in one day & punched clean through 82.35 resistance. The buck now has a clean interest rate advantage over the rest of the corrupt fiat currencies, so when every apple is rotten, the least putrefied one looks best. Dollar's rally should last a while.

STOCKS took a beating this week on fears of higher interest rates. But wait -- what wondrous event played out before our eyes today?! After a flat morning, suddenly at 1:00 as one stock market players all began buying -- or somebody did -- & so closed up 147 points for the day, all earned in the last 3 hours. Can anybody see fingerprints here? Do they look like they belong to Nice Government Men? Like King Canute commanding the ocean to back off, so the NGM stand in the way of markets. Yes, for a while they can pull it off, but one day the tide will rise, & the tips of their noses will sink, unlamented & unmourned, beneath the waves.

Was this week's break the "Big One" for stocks? First, rising stocks now flies in the face of the seasonal pattern, but that in itself doesn't stand in stocks way. This year could be an exception. Worse for stocks is the persistently, insanely overbought market conditions. Nuts. Stocks could just keep on falling from here, or make another feint toward the last top (13,690) and then fall off. Either way, the tide (season) & time (too long overbought) are working against them. Long term, they will be pitifully, monstrously outperformed by silver & gold. Hence my frequent admonition to swap stocks for silver & gold.

My greater worry short term is the Dow In Gold Dollars. This week it fell away from its try toward the old high as if it had been beaten indeed -- fell to support at G$415 (20.076 oz), but today worked toward contradicting that weakness when the DiG$ shot back up to G$429 (20.753 oz). It could blast past the old high at G$436 (21.092 oz), or it could fail there. Whichever happens, 'twill determine the course of stocks against gold for six months or so. The long term trend, however, of stocks against gold, remains down, down, down, until it reaches $G$41.34 (2.000 oz) or lower.

GOLD fell out of its trading channel in May, but wasn't clear whether it would climb back in or not. The last few days' falling away make evident it will not climb back in until it does more penance. Beneath it are nested support around 635 and the 200 day moving average (now 637). If it doesn't stop there, it could drop to 600 or even 550. We ought also to bear in mind that this present up & down could be gold winding up for another challenge of 720, & that's not just me as a gold bug trying to talk my position. It will take a week to two weeks for gold to sort itself out. In the meantime, a close below 625 would bring much lower prices, a close above 672 would carry higher.

SILVER -- interestingly enough -- isn't in the same case as gold. Silver hasn't fallen out of its upward trading channel, but rests on the bottom line, right above its 200 day moving average (1287.3 today). Silver could be sucked down along with gold, but for right now it looks strong. I say that thinking about gold, because the GOLD/SILVER RATIO chart has formed a bearish rising wedge, which threatens to break out to the downside soon. That means silver gaining value against gold, which generally is bullish for both metals. However, the same mathematical result could also be reached by silver's standing still while gold falls.

Am I crazy? Even if a major silver & gold correction are coming (gold to 550 & silver to 1100), I still expect we will see higher prices first, a test of the 2006 highs at 720 and 1500. Rally or not, correction or not, the best strategy in a bull market remains get long, stay long, and get longer. Buy, and keep on buying every time the market gives you a chance, because long term, silver & gold are going much, much higher.

Thank God it rained here today, the first time in so many weeks I can't remember! Our pastures look like they've been blowtorched. Maybe this rain will green them up again.

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.