Wednesday, September 10, 2008

The People Who Own the Physical Silver Won't Sell at the Paper Price of $10.62

Gold Price Close Today: 757.90
Gold Price Close Yesterday : 787.10
Change: -29.20 or -3.7%

Silver Price Close Today: 10.817
Silver Price Close Yesterday : 11.64
Change: -82.3 cents or -7.1%

US Dollar Index Today: 79.98
US Dollar Index Close Yesterday: 79.52
Change: 0.47 or 0.6%

No matter how dreadful things seem, it's always a good idea to go back and check the numbers. I did just that with silver and gold prices. In spite of what seems terrible, irredeemable damage in the gold market, the real loss from the 18 March high at $1,003.20 has been US245.30. Figuring that gold began its run at 255.10 in February 2001, that US$245.30 loss amounts to only a 32.8% correction of the gain.

A Fibonacci 38.2% correction would take gold to 717.43. (That's not my target, I'm just playing with numbers).

For silver, the 975.7 cent correction of the 1654.8 cent rise from 402.6 on 26 November 2001 equals a 59% correction. Tough, but a possible 61.8% correction would take silver to 1034.73 cents.

These aren't my targets, as I said. Today gold closed at 757.90, down 29.20, and in the aftermarket dropped another 6 bucks. Silver close at 1081.7, down a huge 82.3 cents, and fell off another 20 cents in the aftermarket. Weak, weak, weak.

But I watch premiums on physical silver and gold items for a clue where the market is headed. Premiums continue to rise. US 90% silver coin which sold at a 25 cent per ounce discount on 18 March at the top, today command an 85 cent per ounce premium. Premiums on other silver items are simply impossible, never before seen: 200 cents on hundred ounce bars, 200 cents on 10 ounce bars, 325 cents on one ounce silver American Eagles. Clearly, the people who own the silver won't sell at the paper price of 1062.5. That spells very, very strong support beneath silver.

So where will they stop? I'm sick of guessing, and this has been going on over 40 days. Here's another "possibility": gold drops to 750 tomorrow, even 720, and stops. Silver drops to 1050 or 1025.

And just musing upon the Conspiracy That Doesn't Exist, if I were US Government appartchiki and I wanted to add $5 trillion to government liabilities, I wouldn't want to do that in the face of a collapsing dollar and exploding silver and gold prices. So first I would convince my central banking buddies to buy lots of dollars (which they did in the week before Georgia invaded Russia [sic, regardless what US politicians and media say] and then I would slam gold and silver. More than that, I would slam silver harder than gold, because it's a smaller market where I would get more bang for my manipulating buck. After all, everybody watches the gold/silver ratio, and if silver drops much more than gold (the ratio rises), then arbitrageurs will sell more gold. Ahh, but I'm just thinking out loud. Those nice government men would never meddle in markets -- Why, they're all free marketers, aren't they?

(For those of you who thought we had given up hope on ever receiving your Confederate general silver rounds, they have been pouring in to our office and we've been mailing them out as fast as possible. You ought to receive yours soon. I apologize for the delay.)

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.