Tuesday, April 01, 2008

Tomorrow the Gold Price Could Drop to $850, Even $825

Gold Price Close Today : 882.90
Gold Price Close Yesterday: 916.20
Change: -33.3 or -3.6%

Silver Price Close Today : 16.855
Silver Price Close Yesteday 17.30
Change: -42.5 cents or -2.5%

US Dollar Index Today: 72.51
US Dollar Index Yesterday: 71.74
Change: 0.78 or 1.1%

'Twas the great Texas entrepreneur H.L. Hunt who said, "Never get really elated in victory; when times are tough, never get down." Gold and silver investors ought to be pondering Hunt's wisdom today.

Now riddle me this: while both SILVER and GOLD PRICES fell today, the gold/silver ratio didn't change much. That shows equal weakness in both metals. As I warned y'all yesterday, both metals made slightly lower lows today, leaving you feeling like you are flying in an airplane that just lost its floor.

I may be as wrong as a rich boy in love, but I think silver and gold prices ought to turn around within the next couple of days. Decline might extend to Friday. After all, the Silver and Gold Bull wants to shake off as many riders as he possibly can, so here he will apply maximum, puke-in-your-wastebasket terror to lose them. How bad could it get? Tomorrow the gold price could drop to $850, even $825, and the silver price to -- get out the defibrillator! -- $15.50.

Then just as quickly (if I am reading this correctly) both metals will turn and shoot back up, silver rolling over $21 like a stampeding buffalo herd over a busload of tourists.

Pause and ponder a moment: if this was easy, everybody would be rich. If you are not prepared for volatility and the occasional counter-attacks from bears and Nice Government Men, well, go join the socialists.

The US DOLLAR INDEX jumped up 78 basis points today, almost to the middle of its trading channel. Three outcomes are possible. First, and from here most likely, is that the dollar has made a double bottom and will shortly be challenging the last high at 73.19 (intraday). Second, it's another in a long run of false alarms, and the dollar will faint again and go lower. Third, it's just the same old tease, and the dollar will trade sideways longer before it finally rallies in earnest. For now, choice #1 is most likely, provided the dollar gains and moves through 73 within the next couple of days. Knowing the dollar, it might just be a big "April fool!"

Lo, stocks have nearly reached the 12,700 neckline of the head-&-shoulders topping formation, and the Dow today climbed above its 50 day moving average (12,316.14). A move above 12,700 would lead to a longer rally, but time is running out for the Dow, as the old proverb warns to "Sell in May, then go away." Whether stocks rally or not, twill only be to disappoint again, and I want no part of it -- and certainly no part of a primary down trend (bear market) in stocks.

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 $3,130.00; silver's primary is up targeting 16:1 gold/silver ratio or $195.66; stocks' primary trend is down, targeting Dow under 2,900 and worth only one ounce of gold; US$ or US$-denominated assets, primary trend down; real estate in a bubble, primary trend way down.