Wednesday, December 17, 2008

Gold Price Above the 25-year Resistance at $850 and Above its 200 Day Moving Average $863.24, so it's Off to the Races

Gold Price Close Today : $867.50
Change: $25.8 or 3.1%

Silver Price Close Today : $11.389
Change: 71 cents or 6.6%

Gold Silver Ratio: 76.17
Change: -2.648 or -3.4%

Dow Industrials: 8,824.34
Change: -99.80 or -1.1%

US Dollar Index Today: 78.60
Change: -1.62 or -2.0%

I expected the silver price to jump up once it crossed $10.50 resistance, but I wasn't expecting the Fed to execute the dollar. Yesterday's Fed antics cost the dollar another 155 basis points today to land it at 78.66. That loss drove the silver price wild. It rose 71 cents to $11.389.

The gold price gained $25.80, closing at $867.50. That takes the gold price above the 25-year resistance at $850, so it's off to the races. Most significant here is gold's crossing above its 200 day moving average ($863.24). Bull markets are supposed to remain above their 200 DMA most of the time, dropping back to that 200 DMA only rarely. Driven by the last 5 months' financial turmoil, both silver and gold prices have fallen below their 200 DMAs, even their 300 DMAs. Thus gold's crossover looms all the more important. Not only must it rise above the 200 DMA, it needs to stay there.

The silver price has little substantial resistance between here and $13. That implies the rise to $13 ought to be fast. The silver price now stands above its 17 DMA and 50 DMA ($9.97), confirming that upward momentum. The 200 DMA lies far above at $14.27, but remember silver's mighty volatility and great speed when rallying. That price is possible by end-December or mid-January. Yes, the silver price will move fast, very fast.

The GOLD/SILVER RATIO virtually collapsed today, falling from 78.893 to 73.905, five gigantic points. This alone signals great strength in metals, and fiery demand supporting them. First small support lies at 72.5, then 70.4, but a drop below 68 takes the ratio below the descending top boundary of the triangle the ratio broke out of when this debacle began, that would indicate that this summer's rise to 84.33 was a double top, and not a change of trend. Remember that the ratio shows the value of an ounce of gold in ounces of silver. As a bull market in silver and gold unfolds, that ratio should drop since silver climbs faster than gold over the bull market's life.

Ever notice how long and laborious is the climb to a fifth floor apartment with a large, weighty suitcase, and how quickly it reaches the ground when you push it out the 5th story window? So also the US DOLLAR INDEX chart. Although its rise was fast, still it was laborious, and hard to engineer. On the other hand, just one announcement the Fed is going to start printing money round the clock is enough to send the dollar index back under 79.

Read the handwriting --- nay, neon sign -- on the wall and get out of US Dollars.

Stocks have crossed above their 50 DMA (Dow 8715). 4 to 6 month rally has begun, your very last chance to sell stocks before you get skinned.

Argentum et aurum comparenda sunt -- -- Gold and silver must be bought.

- Franklin Sanders, The Moneychanger

"Buy Silver and Gold Coins at:"

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.