Thursday, March 06, 2008

Gold Price Will Need Two or Three Runs to Break the $1000 Barrier

Gold Price Close Today : 975.80
Gold Price Close Yesterday : 986.2
Change: -10.4 or -1.1%

Silver Price Close Today : 20.170
Silver Price Close Yesterday : 20.685
Change: 51.5 cents or -2.5%

US Dollar Index Today: 72.88
US Dollar Index Yesterday: 73.48
Change: -0.6 or -0.8%

I should have known better than to say that yesterday's trading answered questions from the day before: markets always speak out of both sides of their mouths.

So what do we make of this mess today? Let's try to unravel this Gordian Knot, & if it gives us too much trouble, we'll just cut it.

The European Central Bank & the Bank of England left interest rates unchanged today, which promptly pulled 60 basis points off the dollar. It landed at a new low of 72.878. Unless that's merely a wash-out bottom spike (a strong possibility), then the dollar has much much further to fall. However, with markets 80% bearish on the dollar, one wonders who is left to sell? Ultra bearishness makes me as nervous as ultra bullishness, because the "ultra" in both signals a price extreme.

Now, here's where interpretation gets sticky: how extreme is extreme? Overbought can get more overbought, and then more overbought still. Nonetheless, this extreme bearishness is flashing a yellow light for a coming dollar turnaround.

But that raises a kindred question: what is driving silver & gold? Is it a panic out of dollars, or panic over credit crunch, or panic over the Euro's sustainability (Italy & Greece are sinking into recession & their bonds are diving)? Only price will tell us when the panic has ended.

US STOCKS dropped 214.6 points on the Dow, to land at 12,040.39, just 40 points off the mystical 12,000, which crossing passeth over into the land of witches & warlocks & plunging stock indices. Silver & gold may pain us with volatility, but leastways it's up & down volatility, & not one way down. Get out of stocks. Swap them for silver & gold.

The GOLD/SILVER RATIO rose a bit today, to 48.379, up from 47.670. Whew! We need time for this. I'm thinking that the silver & gold peak in April 2004, followed by a peak 2 years later in 2006, has people trigger-happy & may bring that peak early this trip. Watch the end of March.

SILVER and GOLD PRICES both dropped today, to US$975.80 & $20.17. Who is surprised that the gold price hit 992.50, nearly US$1,000, & then backed off? Raise your hand. The gold price will need two or three runs to break the $1000 barrier, but it will. Silver faces a similar challenge at $21, & will similarly meet it. Higher prices coming still. At the same time, never forget we might be staring the peak in the eye.

Platinum & palladium took body blows today, dropping 100.10 & (Mercy!) 45.45. This volatility argues that a top is nigh.

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.