Friday, February 08, 2008

If Gold Prices Merely Matched the Performance in the Last Bull Market, they Would Climb to $11,260

Gold Price Close Today : 918.40
Gold Price Close Yesterday : 908.70
Change: 9.70 or 1.1%

Silver Price Close Today : 1707.5
Silver Price Close Yesterday : 1682.4
Change: 25.10 cents or 1.5%

US Dollar Index Today: 76.651
US Dollar Index Yesterday: 75.484
Change: 1.167 or 1.5%

Friends, silver & gold prices have astonished even me!

Trying to digest the SILVER PRICE over $17 and the GOLD PRICE over $900 has me thinking. Back in 1973, seven years before the last bull market ended in 1980, nobody would have thought gold would climb from US$69.30 then to US$850 seven years later, a 12.266 increase.

From here, this bull market probably will run another seven years, to 2015. If the gold price merely matched its performance in the last bull market, it would climb to (US$918 x 12.266) = $11,260. I know, that sounds ridiculous, but so did US$850 gold in 1973.

Here's another little thought. If the gold price trades to US$11,260, and the gold/silver ratio again tops at 16:1, then the silver price would be trading at $703.76. Yeah, that sounds nuts, but I wonder how $50 silver sounded in 1973 from the standpoint of $2.20 silver?

The silver price closed today at $17.075, after a high of $17.18. However, in the aftermarket silver rose to $17.205. Against a gold price close of $918.40, that's a GOLD/SILVER RATIO of 53.776. Now think: On 1 February the ratio made a new low at 54.012, then rose, & came back down by 7 Feb. to 54.144.

Today it closed at 53.776, & that makes it a breakdown! The 200 DMA now stands at 53.678, which the ratio will likely cross on Monday, & then drop like your car-keys out of your shirt pocket when you lean over to look down a well. Start preparing to swap silver for gold. This also signals that the rally is about to speed up as it enters it last part where silver outperforms gold.

STOCKS have probably bottomed, but will likely revisit that bottom before they rally much. Today the Dow gave up a measly 64.87. Use any rally in stocks to sell, and put the proceeds in silver & gold. Time's running out.

The Dow in Gold Dollars made a new low today at G$274.20 (13.265 ounces). Unless it turns around quickly, stocks are headed down while gold runs wild. The Dow in Silver Ounces has dropped from 754 oz on Monday to 713 oz today, a new low.

The US Dollar today gave back 24 basis points of its 65 bp gain yesterday, to close at 76.65. A higher dollar hand in hand with higher gold ought to demonstrate that both gold & silver trade as independent alternative currencies, and not mere mirror images of the dollar. By the way, the dollar won't fall out of bed any time soon, so breathe a sigh of relief -- if you hold silver & gold, that is.

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.