Tuesday, June 10, 2008

Expect Sharp Up and Down Moves in Silver and Gold Prices, Without Breaking the 1 May 2008 Lows at $16.115 and $848.9

Gold Price Close Today : 869.70
Gold Price Close Yesterday: 894.70
Change: -26.80 or -3.0%

Silver Price Close Today : 16.60
Silver Price Close Yesterday: 17.180
Change: -57 cents or -3.3%

US Dollar Index Today: 73.66
US Dollar Index Yesterday: 72.88
Change: 0.78 or 1.1%

Don't bother throwing rocks at me because SILVER and GOLD PRICES dropped today -- I've been warning you they would be volatile, as in up and down and up and down. For perspective's sake, let's start out by looking at the Dow in Gold Dollars.

The DiG$ dropped from July 2007 at G$434.51 (21.019 oz) to G$247.50 (11.973 oz). A 50% retracement of that fall would take the DiG$ to G$294.50. High came on 1 May (day gold bottomed) at G$316.81 (15.326 oz), but that was far below the 200 DMA (then about G$332), and the 200 DMA in a bear market is an often-seen correction. Point is, for all gold's vacillations, it has remained strong against stocks. Today it stands at only G$292.11 (14.131 oz). So although in US dollar terms gold may appear awfully weak or volatile, against stocks it has remained strong. Silver's performance against stocks has been much the same as gold's, only stronger.

Oil dropped today a little bit, but the real story was the 78 basis point rise in the US DOLLAR INDEX to close at 73.66, a new high close for the move and a close above the magic 73.50 resistance. That gives the dollar a target of 75 - 75.25, where there's resistance, or 72.5, where the 200 DMA lurks. If the Dollar felt really spunky, it might reach as high as 77.50, the last high from back in December 2007. That 75 - 75.50 looks more likely to me.

And at last I come to SILVER and GOLD PRICES. If I could draw a picture for y'all it would make explaining easier. Both the silver and gold price charts show a great peak in March 2008. Looks similar to Spring 2004 and Spring 2006. When those peaks hit, they crash rapidly, within 35 - 45 days, to a low price that is not later exceeded. This is followed by a period as long as 16 months when the metals trade sideways in a narrowing, frustrating triangle, but never reaching a lower price than that first low.

So expect sharp up and down moves, large moves, but without breaking the 1 May 2008 lows at $16.115 and $848.9. Recall, by the way, that $850 marked gold's high in 1980. A touchback to a breakout over a historic high such as that is quite predictable.

So I wish everybody could get rich and good-looking every day, but markets go up and down. The bad comes with the good. Now if silver & gold were to break those 1 May lows, we would have another situation. But until they do, buy every single drop in price. Beginning in August or September silver and gold should begin another stunning rally, this time breaking through $1,000 and $21.

On this day in 1859 one of the richest precious metals finds in the US was discovered, the Comstock Lode beneath Virginia City, Nevada (then Utah territory). Although ignorant analysts and commentators till this day continue to cite the huge amounts of silver from the Comstock as the reason for silver's decline in price in the latter quarter of the 19th century, that's worse than hogwash. Until the 1870s silver traded at a premium to gold in world markets because there was a surplus of gold from new discoveries in California and Australia. Finally, the value of the gold that came out of the Comstock in fact outweighed the value of the silver.

Why then did silver decline in the latter 19th century? Because it was politically demonetized, through active bribery, in the United States, clearing the way for a worldwide gold-only standard, which was only the camel's nose under the tent for central banking & fiat money. Take my word for it, no matter what supercilious propaganda you've heard to the contrary: there can be no hard money unless the system is full bimetallism, with gold valued in silver & silver in gold. Every thing else is a cheat.

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.