Tuesday, June 24, 2008

Silver's Weakness Suggests Silver and Gold Prices Will Move Lower Before They Move Higher

Gold Price Close Today : 889.20
Gold Price Close Yesterday: 884.80
Change: 4.40 or 0.5%

Silver Price Close Today : 16.627
Silver Price Close Yesterday: 16.78
Change: -15.5 cents or -0.9%

US Dollar Index Today: 73.25
US Dollar Index Yesterday: 73.46
Change: -0.22 or -0.3%

Were I the Nice Government Men (those sainted and selfless monks who keep us from hurting ourselves financially by steering all our money to Wall Street's coffers) I would be getting busy saving the stock market. The Dow dropped again today, after trying to get into positive territory, but just couldn't hold that ground. If the Dow closes below 11,750, the trap door will give way. If you STILL haven't swapped stocks for silver and gold, do it now.

The US DOLLAR INDEX needed one more down day to finish a corrective leg (if that's what it is, and not another collapse into oblivion), and posted that today, down 22 basis points to 73.25. Tomorrow will probably take it lower before it finally reverses and tries once again to reach higher ground above 74.

The GOLD PRICE gained $4.40 today, but the SILVER PRICE fell back 15.5 cents. I don't like that at all, don't like the indecision of one up and the other down, don't like silver's weakness. It suggests silver and gold prices will move lower before they move higher.

HOWEVER, don't get all lathered, this ought to be contained by the current triangle, not movements to new lows.

The GOLD/SILVER RATIO moved to 53.479, just a breath from the 200 DMA at 53.642. Frankly, I'd be glad if it hit the 200 DMA, because it would confirm my expectation that silver and gold have bottomed.

Remember that the Gold/Silver ratio (the number of ounces of silver needed to buy one ounce of gold) falls in a bull market because silver tends to rise faster than gold (not every day but over the long term). When the ratio corrects, of course, it moves up to its 200 DMA.

If y'all wonder why I keep talking about the 200 day moving average, it's because markets tend to return to that 200 DMA from time to time. In bull markets, the market normally trades above they 200 DMA and for corrections occasionally revisits or drops below the 200 DMA. That's the perfect time to buy more. In bear markets (like the Gold and Silver ratio right now) the market is normally dropping, so the 200 DMA stands above it. Whenever the market rallies up to the 200 DMA, that's the time to sell more.

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.