Tuesday, June 05, 2007

Silver Refuses to Go Down with Gold -Non-confirmation Positive for Both Metals

Today SILVER & GOLD contradicted (in English "gainsaid") each other: gold closed US$1.10 down, while silver rose again, 7.10 cents. Is gold gainsaying silver, or is silver contradicting gold? Because both metals have only recently turned up, because silver has been so strong, with several 20 cent up days, & because silver is unequivocally strong while gold is barely weak, I interpret the non-confirmation as positive for both metals, with silver refusing to go down with gold. If I'm right, then both metals will move up the rest of the week.

Staring at that GOLD/SILVER RATIO chart, I got the sudden impression that the ratio is about to drop off a cliff. As soon as it breaks 48.25 (about 40 basis points lower) it will hit air & drop like a hammer on your bunion. Next big stop is below 35:1, so if you ever want to make a gold/silver swap,
better do it now.

On 30 May I wrote, "If the DiG$ stalls at G$436, then fails by closing below G$425, then G$415, it will be Katy-bar-the-door for gold, & it will rally all summer." Perhaps the "all summer" was a tadge generous, but against stocks gold will certain rally. Today the DiG$ closed below G$420 at G$419.73 (20.30 oz), headed for support at G$415. What I envisioned on 30 May was the DiG$ dropping very sharply from that strong barrier at G$436, and drop sharply it has. We still need that last confirmation of a close below G$415 (20.076 oz) to close the argument, but with the Dow closing down 80 points today & gold holding firm, that looks likely.

Stocks themselves are crazy. The close today below 13,600 was a nasty psychological blow, but it might not be correction time yet. By the way, when stocks finally do break, whether now or 2 months hence, twill be a bloody disaster, 20% or more in a short time. Be warned: swap stocks for silver & gold. Non-confirmations occur when two indicators contradict each other; they can be bullish or bearish.

US DOLLAR INDEX fell through 82 today like it was a trap door, and closed below 81.90 at 81.875. It looks weak -- couldn't stay above its 50 day moving average, couldn't pierce 82.35. The May low was 81.25, and it will probably re-visit that shortly. If it closes below 81.25, it could sink to 80.50. All this is consistent with, but not necessary for, a silver & gold rally.

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.