Friday, January 23, 2009

The Gold Price Not Only Crossed 857 Resistance, but Blew Right Past 880 to 900, Quicker Than a Fox Can Cross a Road

Gold Price Close Today : $895.30
Change: 37.10 or 4.3%

Silver Price Close Today : $11.932
Change: 57 cents or 5.1%

Gold Silver Ratio: 75.03
Change: -0.532 or -0.7%

Dow Industrial: 8,077.56
Change: -45.24 or -0.6%

US Dollar Index Today: 85.47

Whoa! I knew that silver & gold were under a lot of pressure, and I expected a quick rise, but nothing had prepared me for today.

Gold today burst its sublunary bonds and flew skyward. A US$37.50 one-day rise is stout by any measure, stouter since the gold price not only crossed 857 resistance, but blew right past 880 to 900, quicker than a fox can cross a road. High was 903.50, but at the close it settled back to US$895.30. That gigantic rise whispers to me that huge buying power underlies the gold market, and shorts are scared to death.

I buy breakouts over longtime resistance, so I bought gold today. Now frequently after a breakout a market will touchback, same way in baseball the runner has to touch back to base on a fly hit. That might happen on Monday - Tuesday, but don't let that worry you. The breakout occurred today, and that cat can't be put back in the sack.

Logically the gold price should rise strongly next week, challenging 920.

SILVER performed as brilliantly as gold today, rising 57.5 cents. It blew past 11.50 and through 11.80 all the way to 12.08 before it slowed. Closed at 11.932. Very little resistance stands between here and 14.00, so next week silver ought to rise very strongly.

More and more now it becomes plain that last spring's peak in silver and gold was the peak of the first wave up in the bull market. This correction has been long and violent, sharpened by the financial crisis, but now the lows are behind us and a rally has begun that should carry into late spring and take gold above US$1,200 and silver -- who knows where? -- $28.00 or more.

Against silver and gold both the US dollar and stocks will continue to lose value, probably for at least 6 more years.

Odd, you can search for specific news items that might have acted as catalysts for today's moves somehow, but find nothing. Nothing, that is, except the by-now usual litany of disasters, bankruptcies, and defalcations. Today Canifornia is about to be foreclosed by whomever owns the mortgage. GE's profits dropped a modest 46%. Harley-Davidson is cutting 85 jobs (how did that rate a mention?). Fiat, the car we used to laugh at, is about to take over Chrysler, and Aflac needs capital so badly they're thinking about auctioning off the duck.

Never mind the news. The US DOLLAR INDEX, whose rise we have watched with as much confidence as mouse has in a cat's humanitarianism (mousatarianism?), stalled today and lost 3 basis points, basically a double close. Double closes often signal turnarounds. Technically the Dollar Index could reach the last high at 88, but I suspect it will stop before that point. In any event, I expect the dollar's rally to end by end-January.

Stocks appear confused today, with the Dow closing lower and the S&P rising, but a glance at the 5-day chart for the Dow this week blows away the confusion. Today made a low slightly lower than Wednesday's. The Dow has traced out a reverse head & shoulders, and save for the details, so has the S&P500. Next week should be much kinder to stocks. I continue to expect a 4 -6 month rally, which will give you your last chance to dump stocks at any price near 10,000.

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.