Saturday, August 23, 2008

Three Outcomes are Possible from here for Silver and Gold Prices: Another Drop, a V-Bottom, and a Touch-Back

Gold Price Close Today : $827.40
Gold Price Close August 15th: $786.00
Change: 41.4 or 5.3%

Silver Price Close Today : $13.47
Silver Price Close August 15th: $12.801
Change: 66.90 cents or 5.2%

US Dollar Index Today: 76.798
US Dollar Index August 15th: 76.798
Change: -0.512 or -0.7%

Here we are seven days after the last waterfall day in silver and gold prices, and the world hasn't ended yet. Neither has the bull market.

Note that silver & gold rose over 5% last week, while stocks fell about 0.4%. The mighty US Dollar Index, once the wonder of the civilized world, dropped 0.7%. Maybe if Putin invaded Nebraska the dollar would jump again? Rhode Island?

Anent the dollar, it's not clear to me yet that the highs seen so far mark the upper limit of the dollar's rally. So far it has only reached the the December 2007 high, and must close higher than 77.85, really 78, to break out upside. The theatrics pulled by Bernanke, Paulson, and their Band of Travelling Tricksters are not much -- coordinating a central bank dollar buying spree, jawboning, etc. O, these are sad old dogs, amd plumb worn out.

STOCKS must be a painful frustration to own. The Great Rally from 10,00 has reached a max of -- 11,867, but mostly it has clung to the underside of the 50 day moving average. This will not inspire any technical analysts to sell their children & invest the proceeds in the stock market. More than ever I repeat, sell stocks and put the proceeds in silver & gold.

My recommendation stands soundly on the Dow in Gold Dollars and the Dow in Silver Ounces. Last Friday's high has remained the high water mark of stocks rise against gold, and it has since fallen back below G$300 to G$290.33 (14.044 oz). Last week probably marked stocks' peak against silver as well at 910.86 ounces to buy the Dow. Today, it is 48 ounces cheaper.Sell stocks, buy silver & gold.

For SILVER and GOLD PRICES it's been a touch and go week, with both metals licking their wounds. Yesterday saw the first single-minded rally, taking gold up to $833 & silver to $13.719. Today, not to anyone's great surprise, both metals fell back as short-term speculators took profits at the end of the week.

Three outcomes are possible from here for silver and gold prices: another drop, a V-bottom, and a touch-back.

Another drop means that after a modest rally off recent lows, both silver & gold prices continue to drop because the bull market has ended, after only seven years. Unless I see the gold price close below $540 and the silver price below $10.35, I categorically reject this possibility.

A V-bottom means that last Friday we saw the wash-out, exhaustion bottom in the metals, & they will steadily (if not terribly speedily) climb from that low. This is the less frequent outcome after a waterfall decline. You'll know a v-bottom is happening if next week the gold price slices clean through $845 - $850 and keeps on moving up.

A Touch-Back is more frequently seen in a recovery rally. The market makes a first low (last Friday), then rallies modestly, then falls off with scary weakness. It bottoms (a) slightly below, (b) same place, or (c) slightly higher than the first bottom. Whenever you spot this constellation & recognize it, the market has just handed you fist fulls of hundred dollar bills. It is practically a risk-free place to buy, especially if the bottom takes place slightly higher than the first bottom.

Where are silver & gold prices now?

Either climbing up out of a v-bottom, or making that rally off the first low. Either way, it won't make much difference where you buy, viewed from the long term perspective of this bull market. Both silver & gold are going much, much, much higher.

(Watch gold's behaviour this week as it moves towards $845. It could slice thru, or it could fall back. Buy any close over $850, or on any decline near $800.)

If y'all have not yet pared your bank accounts down to a maximum of $100,000 in any one bank, you'd better get busy. Big banking trouble is just around the bend, & the smaller banks will be savaged, scavenged, & swallowed without mercy.

A red-wattle pig is a rare breed that's nearly extinct. They're a ginger (red) pig, with two little useless tufts of flesh hanging from their throat. We bought two bred red-wattle sows a couple of months ago. Late this afternoon my grandson Bedford walked in carrying a tiny, silky red piglet,and sure enough, she had little wattles hanging from her neck. Handsome pig!

On this day in 1775 England's King George III declared that his American colonies were in a state of open rebellion. Keen observer, that George.

My wife Susan's heart surgery has been re-scheduled for 27 August, next Wednesday. Please keep praying for her healing, & if you have any prayers left over, you might remember her uxorious husband, too.

Y'all enjoy your weekend!

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.