Monday, January 12, 2009

The Gold Price Dropped US$34 to Close at 820.30, the Bottom Line Support

Gold Price Close Today : $820.30
Change: -34 or -4.0%

Silver Price Close Today : $10.725
Change: -57 cents or -5%

Gold Silver Ratio: 76.48
Change: 0.850 or 1.1%

Dow Industrial: 8,473.97
Change: -125.21 or -1.5%

US Dollar Index Today: 83.20

We've been renovating our office, and with all the furniture moved out and changing computer systems, we haven't been to contact -- sorry. In cleaning out some old files I came across charts and tables from June 2002, when I was trying to figure how far gold might correct from its US$327.80 high, after the 15 February 2001 low. Would it drop to 300? Or 291.45? Or 282.90?

Guess what? The difference between gold at $327.80 and gold at $282.90 looks ridiculous today. I would be glad to brag that I bought at either price.

What's the point? That a rising tide raises all boats, and a bull market makes good mistakes of timing. For a bull market (primary uptrend) the best strategy is to buy, and keep on buying. Over time, the little zigs & zags in price just won't make that much difference.

More: don't confuse short term price movements, meaningless noise, with long term price movements that signal trend changes.

The GOLD PRICE dropped US$34 to close at 820.30, the bottom line support I warned last Thursday was possible. Silver closed at $10.725, down 57 cents, and then fell further in the aftermarket to the $10.50 support I was watching. This could mark the lowest extent of the metals' decline, or they might drop a little lower. As long as they don't drop much lower, say 25 cents for silver and US$10 for gold, no great damage will be done. Of course, this is the sort of situation where you can stare at a chart and imagine all sorts of horrors. Back off! Relax! This correction should have ended by the end of this week. In a bull market, every price decline offers you another opportunity to buy. Take it this week.

On expectations that the European Central Bank will be forced to lower interest rates -- and with Spain's credit rating about to be lowered -- the dollar hit a one-month high against the euro and yen. That doesn't help gold, silver, or stocks. However, when you look at the chart, nothing dramatic has happened with the dollar. Yes, it's rallying, but that should end this week.

STOCKS continued to lean over the abyss. If they break through 8300 - 8200, look out. Continuing weakness makes stocks look even worse, when they long ago ought to have begun rallying.

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.