Tuesday, September 30, 2008

Silver and Gold Remain in a Bull Market - Keep on Buying on Every Dip - Get out of Stocks and US Dollars

Gold Price Close Today : 874.20
Change: -$14 or -1.6%

Silver Price Close Today : $12.231
Change: -75 or -5.8%

US Dollar Index Today: 79.49
Change: 1.77 or 2.3%

Listen to the latest from the Looney Bin. I've been hearing the whining and whinging about the terrible bank-burdening accounting rule called "mark to the market." They're blubbering that if it weren't for the mean-old mark to market rule, they wouldn't have balance sheet problems.

Now mark to the market is an accounting rule that says,"What you paid for it doesn't matter, what you think it's worth doesn't matter, only what somebody is actually willing to pay today." Otherwise, how could you ever know what a business is worth?

What are the banks saying? "We have rotten MBS that we paid 100 cents for. Nobody wants the stuff so today it's only worth 15 cents on the dollar, but we want to value it on our balance sheet at 100 cents."

Think about this. Abandoning mark to the market means you can never know what a bank is really worth. It is the accounting equivalent of running naked through the woods with your thumb in your mouth, blind running drunk. And the powers -- the SEC & the Fed & the Treasury -- are seriously talking about junking mark to market. No, I'm not drunk and I'm not joking. These are not serious people.

Well, passing from the contemptible to the somewhat less contemptible, let's look at what the Nice Government Men accomplished today, but first, a lesson in manipulation.

Say the Plunge Protection Team doesn't like the Dow dropping 777 points in one day. So the next day even before the market opens they go into the futures market and buy Dow futures and S&P futures. Traders see those futures rising and assume the market will rise, and so buy stocks. Arbitrageurs also sell the futures and buy the underlying stocks to profit from the value divergence, raising the Dow & S&P in the process.

And since it wouldn't do for the price of gold to blast through US$1,000 while a financial crisis loometh, the NGM must also control price of gold. How to do that best, easiest, cheapest?

Sell platinum and silver, or better yet, platinum and silver futures (so you don't need to own any actual metal) to drive those markets down. Traders see them falling and assume the gold price will fall as well. Bingo! Manipulation accomplished.

In the outcome, the Dow rose 485 points to 10,850.66, "on the expectation the bailout plan will pass." Right. Gold came under attack and lost US $14 to close at $874.20 while the silver price dropped 75 cents to $12.2310 But those were just the futures markets spot month closes. In the aftermarket the gold price today traded as low as $865, the silver price as low as $11.70.

So what happened? The wholesale premium on US 90% silver coin rose from 185 cents an ounce over spot to 280 cents over spot by day's end. In other words, the paper price dropped while the physical price rose. The fix ain't working.

NGM aren't taking any prisoners here, so y'all will have to play the man. I told y'all volatility would increase, and that the NGM would attack silver and gold. However, this will pass, just as the bailout will pass in a couple more days. Don't expect any silver/gold correction to last more than 4-5 days, and I doubt it will go lower than this. Today marked a double bottom with silver's last low in paper prices, but in physical prices it was a higher low.

Silver and gold remain in a bull market. Keep on buying on every dip. Get out of stocks and US dollars.

Y'all know probably that Abraham Lincoln stole his Gettysburg address line -"government of the people, by the people, for the people" -- from John Wycliffe (d. 1385). Now we are finally free of the quotation & the notion, because now we have a government of the banks, by the banks, and for the banks.

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.