Friday, October 24, 2008

I Would Be Buying Gold and Silver Right Now - Before the US Hyperinflation is Over, You'll Be Glad You Did

Gold Price Close Today : 729.10
Change: -15.80 or 2.2%

Silver Price Close Today : 9.295
Change: -20.5 cents or -2.2%

Gold Silver Ratio: 78.44
Change: 3.356 or 4.5%

US Dollar Index Today: 86.46
Change: 1.56 or 1.8%

Okay, so here's yet another week like you've never seen before, & probably never will again -- yet with changes. I have what may be momentous news, but more of that later.

Like Dagon of old, the god of this world -- the state -- keeps falling on its face. Despite the best efforts of Olympus/Washington, the stock market keeps on falling, and right now at least, nobody much believes it will ever rise again, at least for now. Stock markets overseas are taking the failure of their god very hard -- Euro markets dropped 10-1/2% today, I heard.

STOCKS have not finished crashing yet -- crashes run six to eight weeks, and this one only started at September's close. Oh, my, once 8000 gives way, the waterfall will begin. This could reach all the way into the 6000s [sic].

The US DOLLAR INDEX rose today 155 basis points to 86.46. It will probably go higher, but remember that markets that go straight up also come straight back down. Not much telling how high it will go logically, but around 87.75 it will begin hitting heavy resistance. Will that be enough to stop the panic into dollars? Who knows, but this won't last forever, & when the panic ends, gravity will take over.

The GOLD PRICE may have bottomed today. Right. Here's the evidence from today. Early today (9:30 EDT) it traded to a new low for the move, $691.85. From that bottom the daily chart does not "recover", it exploded, gapping up through $700 all the way to $712. More, the few trades at the low occurred after a small gap down, leaving an island reversal. Then the gold price closed at US$729.10, up 15.80. Setting aside the gap & island reversal, the break to a new low with higher close fulfills two of the three marks of a key reversal. Only missing ingredient is a higher close the next trading day, which must come on Monday. On top of this, gold's low this week could be a double bottom with the 11 September low at $744.10 (or it could be the head in a reverse head & shoulders bottom.)

Add to gold's performance silver's antics this week. The Gold/silver ratio turned down and dropped sharply( Down -5.89 or -7.0% from 84.33 on the 17th of October to 78.44 today), an encouraging sign. Then the silver price rose on days when gold sold off. That pattern changed today, when the silver price actually dropped in the face of gold's rise, but caught near the last low ($9.31 on 17 October). Remember also that in June 2006 the low off the spring 2006 high was $9.595 not far from this week's lows.

So we have a possible key reversal in the gold price (watch Monday's close for final confirmation) & a possible double bottom in the silver price. This is a clearer, and better, technical picture than we've had in three weeks.

Physical gold prices have still de-coupled from paper (futures) gold prices, a suspicious circumstance that smells like the stink of the Nice Government Men manipulating prices. The paper silver price closed today at $9.295, but physical silver at wholesale one ounce silver rounds cost $11.53, while US 90% silver coin cost $13.938 an ounce. The only silver we can get is US 90%, silver rounds, and thousand ounce silver bars.

Decoupling has occurred in gold as well. With the paper gold price at $729.10, the only forms of physical we can find are Mexican 50 pesos, Austrian 100 coronas, British sovereigns, French 20 francs, & one ounce .9999 gold bars, and most of those are on 8-12 week delivery. If you want to wait 12 weeks, you can buy physical gold for $756.70 (as 1 oz bars or Mex 50s). If you want immediate delivery (as sovereigns) you'd pay US$816.69 at wholesale. Forget getting American Eagles at any price until next year.

So while the crisis tornado appears to be gaining speed for stocks, silver and gold prices may (I stress "may") have bottomed this week. Bottomed or not, I would be buying gold and silver right now. Before the US hyperinflation is over, you'll be glad you did.

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.