Wednesday, March 04, 2009

900 - 905 Level Holds the Key for the Gold Price

Gold Price Close Today : $906.00
Change: -6.90 or -0.8%

Silver Price Close Today : $12.90
Change: 20.5 cents or 1.6%

Gold Silver Ratio: 70.23
Change: -1.678 or -2.3%

Dow Industrial: 6,875.84
Change: 149.82 or 2.2%

US Dollar Index Today: 88.57
Change: -0.62 or -0.7%

GOLD and SILVER PRICES left me scratching my forehead today, but I think I see what's happening. The gold price fell 6.90 to 906 while the silver rose 20.5 cents to 12.90 and platinum rose 11.20 and palladium rose 6.65. Not quite unanimous. The gold price made a lower low today, by about five bucks to 899.45, then rose. The silver price made a higher low today than yesterday (12.66 v. 12.41) and closed up. Since the year began the silver price has been leading upmoves -- maybe we're seeing that now? No question this 900 - 905 level holds the key for the gold price. If it gives, the gold price will hit 888. In any event, I expect to see gold's low this week. If it breaks 900, it will happen tomorrow. A close above 927 would take away all doubt that the bottom has been made.

Yes, this IS a correction, and, yes, I would still be buying.

Recent Coin World article about counterfeit gold & silver coins coming out of China has people panicked, and the panic-mongers on the Internet are swarming. Relax. In 29 years' dealing with silver and gold, I have had only one experience with counterfeit bullion coins. On the other hand, pre-1934 gold coins are not-infrequently counterfeited. For your peace of mind I am posting tomorrow a downloadable chart showing gold coins' gross weight in grams. Most likely counterfeit will be light-weight gold-plated brass, or gold-shy alloy. To reach correct weight crooks must use platinum (too expensive) or lead, but lead goes "thud" when dropped.

Today the US DOLLAR INDEX fell 62 basis points, and other indicators are whispering that the dollars tee-tiny push through the old top at 88 was merely a double top, and not a continuation of anything.

Apparently stocks like a weak dollar (good thing for them, since they're going to get plenty of weak dollar for a long time), because today the Dow rose 149.82 to 6875.84 while the S&P500 rose 16.54 to 712.87. I had to laugh at a Market Watch headline that read, "Stocks lock in a solid 2%." Right, after falling a solid 50% from their high. But the point is that stocks have been falling for five straight days, and after a stretch like that, some sort of rebound is likely, and doesn't mean a thing until they rebound over some meaningful level -- like the Oct. 2002 low 375 points above today's close.

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.