Friday, July 27, 2007

If Gold and Silver Were Good Buys at 680 & 1330, They are Great Buys at 1264 & 660

Gold Price Close Last Week : 683.90
Gold Price Close This Week: 660.00
Change: -23.90 or -3.5%

Silver Price Close Last Week : 1331.5
Silver Price Close This Week: 1264.3
Change: -67.20 cents or -5.0%

Outlandish as it may sound in y'all's ears, the drop in Silver & Gold Prices this week make me more and not less bullish on both. If they were good buys at 680 & 1330, they are great buys at 1264 & 660.

This reaction has carried both down to a 61.8% correction of their latest highs. Yesterday's silver low was 1266, today's was 1267. Good. Silver's 300 day moving average stands at 1262, & today silver touched off that 300 DMA for the second time since June, and only the third time since this bull market began in earnest.

Yes, I know yesterday's drop made y'all want to reach for your wastebasket to puke in it, but that's exactly the time you have to discipline yourself to think, and to buy. Gold has also reached its 200 DMA, a great time to buy because bull markets spend almost all their time above their 300 DMAs.

Several readers have e-mailed asking why gold has followed stocks down, since stocks & gold (they thought) moved opposite to each other. Answer is, they do move opposite each other, but over time, not every day. Since August 2000 the Dow has dropped about 50% against gold, but this week they moved together. Why? If gold is money & panicking people are fleeing to safety, why not to gold? First, the dollar & not gold is the major currency in this country, so you ought to expect people to flee to it first. Second, when panic hits, people sell everything, trying to raise dollars. If they have to meet stock margin calls, they'll sell gold, so it's not surprising to see gold follow stocks down in the first downdraft. Just be patient: the bull market in gold (and silver) is just beginning. The really wild waves lie just in front of us.

The Dow & other stock indices dropped spectacularly this week, but in fact didn't do worse than precious metals, except for gold. But the resemblance stops there, because metals (especially silver) are much more volatile than stock indices. The S&P lost five months' gains in one week, nearly 6% from the high.The Dow lost 677.95 points this week alone, & 735 points from its all time high last Thursday. Methinks the top is in. Swap stocks for silver & gold.

The Dow in Gold Dollars fell again today, to G$415.49 (20.010 oz). Stocks are headed much, much lower against gold. Get out while you still have time.

The US DOLLAR INDEX has risen nearly 100 basis points in the last three (3) days. It begins to meet resistance at 81.25, then 81.70, and a big brick wall at 82.35. It is not clear yet whether the dollar is rallying, or just bouncing off 38-year support at 80 before it drops through the floor to 78.

Pondering the stock market last night, it was almost as if I had a vision (I didn't, but it seemed that way). In front of me spread the whole economy, like paper dolls. In fact, it was paper dolls, and above them all stood carnival barkers who looked just like Bush & Paulson & Bernanke, shouting, "They're real! They're real! They're real!"

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.