Tuesday, July 08, 2008

Will Silver Outperform Gold?

Gold Price Close Today : 921.30
Gold Price Close Yesterday: 927.30
Change: -5.40 or -0.6%

Silver Price Close Today : 17.880
Silver Price Close Yesterday: 17.833
Change: -4.2 cents or -0.2%

US Dollar Index Today: 72.98
US Dollar Index Yesterday: 72.72
Change: 0.26 or 0.4%

Time to re-arrange our outlook for everything. Try to picture this: short counter-trend corrections in metals & stocks, offering opportunities to shuck stocks and buy gold and silver. Dollar index continues to trade sideways, fooling friends and enemies alike.

The Dow climbed 152.25 today, taking stocks up to 11,384. S&P gained even more. Evidently stocks have washed out their negative sentiment and intend to rally. First target is 11,650, then 11,750, then 12,200. The Dow will surprise everyone if it proves able to close above 12,200. At least, it will surprise me. Any rally in stocks offers you a chance to swap stocks for silver and gold. Don't miss this, probably your last, chance.

SILVER and GOLD PRICES dropped today. Gold's low came at $912.05 and silver's at $17.44. I never saw that price, I saw $17.52, so if you didn't grab it fast, you didn't get it.

Here's my guess about what we'll see. Silver and gold prices will spend a few days correcting, rally once again nearly to the last high, then drop once more, casting everyone into consternation. Low might carry as low as the 50 day moving average (now at 17.14), but that guess doth NOT constitute a recommendation to wait to buy silver when it reaches that level. The possible gain of buying 50 - 60 cents lower is not worth the risk of missing silver below $18 altogether. (Ditto gold, for the chance of dropping to $905. Not worth missing it at 915.)

Somebody pointed out to me that some analyst made the statement, "Gold will outperform silver." Maybe in the short run, but not over the bull market's life. Before it ends, indeed, about the time it ends, you will see only sixteen ounces of silver buy one ounce of gold. Because the gold/silver ratio drops faster when stocks are doing well, I am somewhat nervous about silver in the short run. But all sorts of things could happen (that is, government surprise parties) to buoy stocks up briefly. But long term, I'm as sure that silver will outperform gold as I am about any future event.

On this day in 1932 the Dow Jones Industrial Average reached its low for the Great Depression at US$41.22, at that time almost exactly two (2) ounces of gold. On 3 September 1929 the Dow peaked at US$381.17 (18.439 oz of gold), so in about 2-1/2 years the Dow lost 89% of its value. (Remember that then, a ounce of gold equalled $20.6718, gold dollars.)

Measuring in the same gold dollars, on 25 August 1999 the Dow peaked at G$925.42 (44.767 oz). Today it closed at G$255.44 (12.357 oz), for a loss of 72.4%. Sort of takes out the mystery when you use an unchanging yardstick, doesn't it?

By the way, before it ends the Dow will again trade at two ounces of gold or 32 ounces of silver -- or less.

Caroline feels better today. They moved her to a still lower grade of critical care, the Red Pod (sounds like a science fiction movie). Oxygen levels are good & this afternoon she will be moved to a regular care floor! She's not as mad as she has been, and she's really improving. Thank you all for your continuing prayers.

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.