Thursday, February 26, 2009

The Gold Price Closed Down $23.90 at $941.80

Gold Price Close Today : $941.80
Change: -23.90 or -2.5%

Silver Price Close Today : 12.95
Change: -92.5 cents

Gold Silver Ratio: 72.73
Change: 3.13 or 4.5%

Dow Industrial: 7,182.08
Change: -88.81 or -1.2%

US Dollar Index Today: 87.81
Change: -0.08 or -0.1%

The Gold/Silver Ratio jumped today to 72.73, up 4.5%, which tells you all you need to know about silver and gold prices today. Ratio fell because the silver price is more volatile -- and that means weaker in a correction -- than gold, so it drops further, faster and makes the ratio climb. By now y'all ought to be used to how these corrections unfold, slowly and grudgingly at first, then falling in great gulps for a few days, then grudging again, and a bottom.

Yet the aftermarket took a remarkable turn -- up. The Gold Price closed down 23.90 at 941.80, but the aftermarket traded up over $5.00. The Silver Price lost an aching 92.5 cents to close at 12.95, but in the aftermarket it traded up to 13.20. What meaneth the contradiction? Looks like strength underneath both to me, people who want to buy coming out to gobble up supply at lower prices. Very good.

I still have no firm opinion on which downside target is the most likely, but gold could fall as low as $890, although $920 and $905 could stop it, too. The Silver Price is looking at $12.25 or $11.80. Of course, I could be overestimating the correction's depth as well. Talked to a friend today who said he looked for weakness in metals until the fall. That I cannot see because I don't think silver and gold have made their spring high yet. If I'm right, this will be a short and shallow correction. If it stretches out more than four weeks, I might be wrong.

US DOLLAR INDEX still cannot push thru 88. A break above that point would bring longer dollar strength.

Barnum said nobody ever went broke over-estimating the gullibility of the American public. To that proverb we ought to add, nobody ever made money following the American financial press. In my nearly 62 years I've read a lot of stupid stuff (started reading when I was 4) but today's article about Gold, taken from Money Magazine, probably took the cake. It was as full of lies, half-truths, and bland ignorance as a Christmas turkey is of -- awww, never mind. This "senior writer" wrote that the inflation rate in 2008 was just 0.1%. Now here is stupidity compounded, for the "inflation rate" is confused with the "rate of price rise", and worse yet, accepts US government statistics as true. Since inflation is in fact "increasing the money supply", and since the government has done that to the tune of some $8 trillion in bailouts, I'd say the true inflation rates, is, well, somewhere north of 0.1%.

Here's another reason the article gives for not buying gold. It's only trading above $900 an ounce, not even near it's inflation-adjusted 1980 gold price of over $2000 an ounce. Right, hon, that's the reason not to BUY it, because after a 20 year bear market it hasn't even approached its last bull market high yet. And what is the "safer way to hedge against inflation"? Why, buy US Treasury Inflation-Protected Securities (TIPS). Right, sounds like a good idea to me: trust your money to the US government.

Is it any wonder we're suffering a nationwide financial crisis, when poltroonry like this is passed off as financial advice?

One might let one's mind run wild chewing on what stocks have done lately and spring on the idea that the Dow had made a V-bottom. Well, it dropped to the V, but can't seem to climb out of it. 'Tain't normally how V-bottoms work. Normally the market climbs right back out of the V. Nope, I'd say stocks are just as likely to drop as to rise from here. Where are those Nice Government Men when you need them?

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.