Friday, February 27, 2009

Expect at Least Another Week of Downside in the Gold Price, But How Far Can it Fall?

Gold Price Close Today : $941.50
Gold Price Close 20th February: $1,001.80
Change: -60.30 or -6.0%

Silver Price Close Today : $13.085
Silver Price Close 20th February: $14.485
Change: -140.00 cents or -9.7%

Gold Silver Ratio: 71.95
Gold Silver Ratio Close 20th February: 69.16
Change: 2.79 or 4.0%

Dow Industrial: 7,062.93
Dow Close 20th February: 7,365.67
Change: -302.740 or -4.1%

US Dollar Index Today: 88.097
US Dollar Close 20th February: 86.476
Change: 1.621 or 1.9%

Woe, woe, not a good week for silver and gold prices! Yet it might have
been worse. You might have owned stocks.

The gold price couldn't pierce the $1,003 March 2008 high, so
it has spent the last week correcting. Expect at least another week of downside in the Gold Price, but how far can it fall? Maybe to 927.30 and no further. That would be the mildest of corrections. Other likely targets are 920, 905, and 890.

The silver price has fallen below its 200 DMA again (now 13.31). 50 DMA stands at 11.99. More and more 12.30 is looking likely, although silver might stop at 12.80.

Every time you think stocks have finished their fall, they jump off another cliff. Dow lost 4.1% this week. Every couple of days I have to lower the scale on my graph. I keep on thinking that stocks will rally, but it keeps on not happening.

Some think (with some plausibility) that the gigantic inflation your Friendly Imperial Government has already put into the pipeline will raise stocks, as in the 1923 German hyperinflation. Trouble is, that was a rise without a profit -- big numerical increase, but no value increase.

Never mind all that speculation, if the Dow falls through 7,000 next week (hit a low of 7,033 today), we might see a real panic that wouldn't stop until stocks hit, say, 6250. Mercy! Why doesn't the government DO something? Why? Why? Well, Louise, because the government CAN'T do anything, except mess things up worse than they already are. But wait, sweetheart, just wait -- they are certain to do that.

US DOLLAR INDEX -- Will it cross 88 and keep on flying? That's possible, and wouldn't be positive for silver and gold prices. Dollar is probably strengthening now because the financial-drunks are all awakening to the wet cardboard structure of the euro and wondering how it can possibly survive. Euro's so bad it makes even the US Dollar look good!

The GOLD SILVER ratio will probably rise to 74.25 or 75. If gold fell all the way to 890, silver still wouldn't drop below 11.87. If the ratio rose to its previous 84 high, then silver would fall to 1050. I do not expect a correction that severe. Rather, probably early next week silver and gold will have posted their lows.

The DOW IN GOLD DOLLARS made a new low this week at G$147.87 (7.153 oz on 23 Feb.). It had formed a falling wedge on the chart, which usually foretells an Upside move coming, but it didn't. Fell out of the wedge to the downside. Whooo, sick! But watch for an early warning sign of a stock rally, namely, the DiG$ turning up.

For 40 years or so I have been studying monetary science and watching the economy. In all that time "collapses" and "panics" seemed only possibilities. But the recent crisis has cut deep enough to reveal the rottenness in the financial system's bones. I hope y'all are taking seriously what has happened, and with all urgency are ordering your affairs. If you're in a losing position -- underwater in a mortgage, sunk in debt -- take your losses now. Later you may not be able to get out.

Best thing to come out of this horrible mess is that we may get rid of the banks. Sure, everybody keeps mouthing the mantra, "We must save the banks!" Let me mouth another: "Let the banks die, the sooner, the better. Let's get rid of the banks, and the corporations, and build a just and sensible economy, with a reverent thrift toward the world."

Save the banks? Right, pick up that poor cold, wounded rattlesnake and warm him up in your bosom, right under your tee shirt. Then once he warms up, just watch how grateful he'll be. If all the banks had one head, and I had a hoe, guess what I'd do?

And here's a statement from an Expert that only needed time to come true: "Branch banking . . . will mean, I suggest in all humility, the beginning of the end of the capitalist system." -- John T. Flynn, April 1933

Y'all have a great weekend.

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

- Franklin Sanders, The Moneychanger

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.