Friday, June 15, 2007

Gold & Silver are Stuck in Trading Ranges- The Longer They Stay There, the More Likely They Will Fall & Correct Before Rallying

Let's tally up for the week, then look more closely. Both SILVER & GOLD rose this week, but so did stocks and the dollar. In fact, everything but platinum rose this week. So much for the lockstep relation between the dollar and precious metals.

GOLD & SILVER are stuck in trading ranges, & the longer they stay there, the more likely they will fall & correct before they rally. Odd, isn't it, that both keep on refusing to drop further than they already have. But silver needs to close above 1325 & then 1340, while gold needs to clear 667. Since it's not the time of year for silver & gold to climb, in fact, the time of the seasonal lows, and since they've languished so long, it would be a perfect time for a rally to knock everyone's teeth out. But unless they begin climbing next week, both are locked in downtrends.

The moment of truth is coming soon for silver, which is forming a triangle. Shortly it will break out one way or the other, so there's liable to be some fun next week.

The US DOLLAR INDEX, which had promised so strongly to rally, broke through 82.35 last week & through 83 this week, and today fell 25.5 basis points, back to roughly where it stopped upon first breaking through 82.35. Take heart, it's a correction. Unless the buck breaks badly through 82.60, perhaps lower, it will climb higher yet.

Strangest story this week is the Dow in Gold Dollars. Last week, y'all will remember, after hitting G$431.51 (20.874 oz) on 30 May, a challenge of the standing G$436 (21.092 oz) high, the DiG$ fell all week, through G$425 support and down to G$415 (20.076 oz). From that perch, next stop is G$400. But the DiG$ didn't keep on falling, it shot back up on Friday to G$429.91 (20.800 oz), fell off Monday & Tuesday, then rose to G$429.97 (20.800 oz) on Wednesday, G$429.99 (20.801 oz) on Thursday, and G$430.79 (20.840 oz)today. At this level -- G$429 - G$431.51 -- stocks are struggling against a mighty headwind, & just don't have the strength to break through. Of course, if they do manage to break through, & breach G$436, then they'll run at least to that G$475 (22.978 oz) which marks the half-way point of stocks rise against gold 1982 - 1999. That would constitute a major correction of the whole move, after which stocks will begin falling against gold yet again.

To give you a proper idea how overvalued against gold stocks really are (even though they have already fallen from G$925.42 in 1999 to G$430.78 today), think about this: Stocks today are only G$49.61 (2.400 oz) higher than their high in 1929! Yes, you read that right. In 78 years, stocks have managed to gain less than 2-1/2 ounces on their 1929 high. And, in the last 4 months, the Dow has been below that 1929 high. The 1932 low was G$41.63 (2.01 ounces). I expect that before this gold bull market/stock bear market ends, y'all will again see the Dow selling for four ounces or less. That's why I keep on telling y'all to swap stocks for silver & gold. (Against silver, the Dow should fall to 18 oz or less.)

Ponder this, attentive ones: a flurry of hand-wringing,wailing, moaning, & crying has been going on lately because (1) the dollar is rising & (2) interest rates are rising. This, the wailing, moaning, growning hand-wringers tell us, will drive down silver & gold. Don't be ridiculous. The Dollar was conceived in inflation, raised in inflation, and wallows yet in inflation. There's as much chance that inflation will stop as there is of my being elected Grand Poobah of the Faithful Order of Raccoons. Second, go back & look at interest rates in the late 1970s, when gold hit its last bull market peak. Tell me whether they were falling or rising -- hint: they were rising.

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.