Tuesday, September 09, 2008

Where's the Bottom for a Collapsing Market?

Gold Price Close Today : $787.10
Change: -10.40 or -1.3%

Silver Price Close Today : $11.64
Change: -35 cents or -2.9%

US Dollar Index Today: 79.52
Change: 0.12 or 0.2%

The time a long-term bull like me capitulates to a correction is about the time the correction has ended. I look at the charts and there is no logic to them, neither gold nor silver. Where's the bottom for a collapsing market? Go back a long ways to old triangles and see if any apex is a candidate. Look for long term, very long term, uptrend lines. I remain in the same quandary, because I cannot accept that the silver and gold bull market have ended. First, not enough time has elapsed - the bulls should run at least another 7-8 years. Second, the chief driver of the bull -- inflating fiat national currencies -- favours silver and gold as strongly as ever.

Look at the US dollar, & tell me what has fundamentally changed? The government has huge fiscal deficits, the country runs huge balance of payments deficits, the economy is falling into re/depression, which trips all the institutional "circuit breakers" installed since the Great Depression to ramp up inflation whenever any downturn strikes, the Administration wallows in an Iraqi war that's lasted longer than World War II, has a war in Afghanistan (which ate both the Russians and the British before them), and is trying to start a war with Russia. And now the geniuses in Washington have added Fannie & Freddie's half a trillion in debt, adding 50% to its own debt at one fell swoop. Brilliant. Stunning.

Now, explain to this pore ol' natcheral born fool exactly WHAT has changed to strengthen the dollar? Its exchange rates have risen? Sharply? Welcome to the world of bear market rallies, short, sudden, punishing to the shorts. Explain to me also how a system bred and built to inflate, driven by politics which demands ever more inflation, will suddenly deflate? Not possible. And even if debt begins massively collapsing, politics (which runs the system) will force them to inflate and hyperinflate, even dropping bills out of Bernanke's helicopters.

Okay, for those of you who invested in silver and gold since March, think about this. Yes, your silver and gold may have dropped, but how have they done against stocks? They buy about the same piece of the Dow as they did in the spring, and stocks haven't made any great headway against metals.

O, be patient! Veritas filia temporis -- truth is the daughter of time. Gold could drop to $750, even $720, silver to $10, or they might turn 'round tomorrow, but which would you rather hold? Ben Bernanke's IOU, or silver and gold? Which do you trust more? I may be lunatic, but nobody ever went broke betting against the US government's fiscal trustworthiness, at least, not since 1913 (and actually, long before that).

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.