Thursday, July 10, 2008

Gold & Silver Prices Have Already Broken Out of their Correction Ranges but they are in that Sticky Break Out Area

Gold Price Close Today : 940.90
Change: 13.60 or 1.5%

Silver Price Close Today : 18.245
Change: 14.5 cents or 0.8%

US Dollar Index Today: 72.51
Change: -0.05 or -0.1%

Normally I don't read the news because it just makes me mad and I can't do anything about it, but this morning Yahoo financial ran a catchy little story: "Fannie, Freddie Stocks and Bonds Plummet. A firestorm of anxiety over the ability of US mortgage giants Fannie Mae & Freddie Mac to get the capital they need to survive sent their stocks & bonds plummeting on Thursday."

Translation: As a sop to banks & the building industry, congress years ago set up two Government Sponsored Enterprises, a.k.a. "engines of inflation," called Fannie Mae & Freddie Mac. For at least the last 10 years both have been really sick with corruption, but both were necessary to have a hole into which to shovel & legitimate the rotten mortgage-backed paper that Goldman Sachs and Bear-Stearns & their ilk were floating, not to mention rotten mortgages from the land's length & breadth. Now that the accumulating gas hath blown the sewer sky-high, the problems with Fannie & Freddie are worsening, and nobody wants their paper. But wait!

It's time to shuck the mortgage-backed credit crisis off onto the taxpayer's back & away from Wall Street. Fannie & Freddie are in trouble, squawk! Save them, save them, congress, or else how will the government bail out the banks that caused this mess?

Bottom line: Does this mean more inflation, or less? Bernanke already bailed out Bear-Stearns and other culprits, & has tossed into the fire about half the Fed's assets. Will he toss in government assets to keep these two beasts alive? Can a duck swim? Is a pig's rear pork? However they work this latest subcrisis of the great crisis out, (1) they will inflate much more, & (2) the taxpayer, not the culprits, will pay.

Having vented, let us now to markets!

STOCKS hinted, whispered, & winked today that they will, after all, rally, rising 81.58 to 11,229 (Dow). Rally will be short-lived and shallow. Doubt it will rise above 12,250. Stocks will, I fear, drop much further. Dow in Gold Dollars today is barely 1/20th ounce off its post-1999 low. Sell stocks while you may yet find a buyer.

The US DOLLAR INDEX, bless its heart, doesn't know which way to turn. It lost 8 basis points today to wind up at an equivocal 72.49. Most likely it is headed up, probably to 74.50, but not fast, & not steadily.

Before I forget: Remember that the Fed (& the government) have two & only two weapons: inflation & blarney. They are already shooting that inflation machine gun, & since that's not working they will shortly blast us with blarney. Paulson, Bernanke, even King George himself will appear mouthing how "the economy is basically sound & recovering, the dollar is healthy, etc." & other laughable incredibilities. But watch for it. That's their next move, to buy time.

GOLD & SILVER PRICES have already broken out of their correction ranges but they are in that sticky break out area where they have not yet revved up the motor enough to pull away from the past. That would mean crossing the last highs at $945 & $18.35 with a two-day close over those levels. I have been thinking we would see at least one and maybe two more down days before that happens, but all that may be past, thanks to Fannie,Freddie, Bennie, and Muffie.

Do not under ANY circumstances short silver or gold. In fact, buy and keep buying all you can get. An enormous upmove is beginning -- don't miss it.

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.