Thursday, September 06, 2007

The Gold Price Broke Out Above its Downtrend Stretching Back to the May 2006 High

The GOLD PRICE broke out today above its downtrend line stretching back to the May 2006 high. This breakout must close higher tomorrow, & then exceed 710 to signal a genuine breakout & rally.

The SILVER PRICE has risen above its 17 day moving average, but remains below its 50, 200, & 300 DMAs, sign of a major correction.

The non-confirmation here is silver. For a real breakout and rally, silver and gold ought to line up. On the other hand, silver is climbing & could be simply lagging gold in this rally, as it sometimes does. Still, it's difficult for me to see a major metals rally beginning without the gold/silver ratio declining, or at least hand in hand strength.

The US Dollar Index hardly moved today. Yesterday the European Central Bank left its interest rate unchanged. Since markets widely expect the Federal Reserve to lower rates on 18 September at its next meeting, the unchanged Euro rate would give the Euro a price advantage that ought to force the dollar down. However, the heads of the major central banks meet monthly or six-weekly at the Bank for International Settlements in Basel for supper. Now, what do you suppose they talk about? Bass fishing? Nascar? Or how they will work together to fix exchange rates & keep their worthless currencies afloat? One guess -- only one.

Big break! Today the Dow in Gold Dollars (DiG$) dropped below G$400 (19.35 oz) to close at G$397.13 (19.211 oz). On the way up G$400 offered stiff resistance, so support awaits there now. However, on 15 August the DiG$ closed at the same spot, so on this second visit it will probably drop further tomorrow.

Stocks rose a piddlin' amount today, still unable to conquer 13,500. Y'all know now I'm changing my mind about stocks, well, about their nominal performance. After all, in a hyperinflation the Dow could go to 36,000, but whether it drops to 3,000 or rises to 36,000, here's the important point: against gold it will drop to two ounce to the Dow or less, & against silver to 18 ounces or less. Stop looking at the numbers & look at the realities. Swap stocks for silver & gold.

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.