Friday, May 30, 2008

This Correction in Silver and Gold Prices is a Gift

Gold Price Close Today : 887.30
Gold Price Close Last Friday : 925.60
Change: -38.30 or -4.1%

Silver Price Close Today : 16.827
Silver Price Close Last Friday: 18.241
Change: $1.414 or -7.8%

US Dollar Index Today: 72.880
US Dollar Index Close Last Friday: 73.047
Change: -0.167 or -0.2%

What a week! And on Friday we get this unusual comparison, from last week's high to this week's low.

After my crow eating yesterday, I'd like to make clear what my mistake was, and what it wasn't. SILVER and GOLD PRICES had gotten ahead of themselves, but I thought they were ready to continue their rally. They weren't, so when they hit those support areas ($900 and $17) they both dropped like your car keys dropping out of your shirt pocket into Lake Michigan. But . . .

I do not believe that I am mistaken about 2 things.

First, the SILVER and GOLD PRICE lows hit on 1 May 2008. They are behind us. Silver and gold will not see lower prices, ever again, although they may get close enough to scare them to death. This correction was a gift, yea, a great gift to you procrastinators who have been putting off buying gold and silver until the "perfect" price came. Better get at your buying.

Second, I am still convinced that this correction differs from 2004 and 2006 in that it represents not the end of a move, but the continuation. That means the rally begun last August will pick up again, perhaps in June but certainly by beginning of August, and carry silver and gold prices to a new, higher peak in the fall. Very much higher.

On the other hand, instead of casting an eye at your future and making changes to your assets, you could just forget what some Tennessee hillbilly says and listen to the Wise and Great Ben Bernanke, because you know as the sagacious Chairman of the Board of Governors of the Federal Reserve Bank he actually serves no purpose in life but to protect and serve your financial future. Likewise Hank Paulson and all the rest of those Holy Monks of Government Trust in Washington. And they would never tell you everything is all right and to hold on to your US dollars unless it was best for you. Would they?

Stocks may still rally once more, but they are running out of time as they have run out of steam. Rally might carry the Dow up to 13,100, but probably not much above that. A rally that fails before it reaches that point would be worse still. Y'all may have missed my saying this before, but don't miss it now: Swap stocks for silver and gold.

DOW IN GOLD DOLLARS since the low last March failed to rally even half way to the overhead downtrend line. High has been about G$316(15.603 oz) while the 200 DMA stood at G$332 (16.061 oz). Clear message is that stocks remain weak against gold, very weak. Since the DiG$ now has turned down, it appears that we are entering a time when gold will once again strongly outperform stocks.

The US DOLLAR INDEX, traitor that it is, flaked again this week. It traded up as high 73.13, then today turned around and dropped 15 basis points to close below 73 yet again. I suspect the dollar will rally for several months, but it has not yet sent the short-sellers fleeing for cover. As Steve Saville of the Speculative Investor observes, if oil breaks and the dollar rallies 'twill give gold a tough time -- briefly.

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.