Tuesday, March 31, 2009

Confused Markets Usually Don't Go Anywhere, and Silver and Gold Prices Were Confused Today

Gold Price Close Today : 922.60
Change: 0.8 or 7.10%

Silver Price Close Today : $12.975
Change: -4.8 cents or -0.4

Gold Silver Ratio: 71.11
Change: 0.807 or 1.1%

Dow Industrial: 7,608.92
Change: 86.90 or 1.2%

US Dollar Index Today: 85.53
Change: -0.09 or -0.1%

News reported today that the California state treasurer is rolling out a new bond issue and will try to sell it to European banks. One wonders just how inclined they will be to buy bonds from bankrupt California after Wall Street already shucked all those trash mortgage backed securities on them. Not very inclined, I would guess.

The Gang of 20 will soon meet in London. There will be preening & posturing, but not much action.

Today let's think about 50 day moving averages.

US DOLLAR INDEX bounced off its 50 day moving average (DMA) at 86.24 yesterday, & dropped today. That may be the end of that.

The Dow rose 86.9 to 7,608.92 & the S&P500 rose 797.87 to 10.34. If the Dow has in fact reached its 50 DMA (7,569.87), then we will get a spirited rally before it crashes again. More likely, the Dow will reach 7200 or so before it turns around to continue its rally, and then crash again.

Confused markets usually don't go anywhere, and silver & gold prices were confused today. Gold rose 7.10 to 922.60 while the silver price fell 4.8 to 1297.5 cents. Oddly, silver really looks stronger than gold. Its 50 DMA (1298) has finally, after last fall's debacle, crossed above its 200 DMA (12.87) again, a bullish sign. Two days after that happens, it falls below its 200 DMA. Silver's low today was 12.58, which argues that's as low as this move will go, since it's strong support.

Gold is riding along just above its 50 DMA, just cruising there. If it crosses seriously below that 926.14 mark, we can expect gold's correction to stretch out several months. So far, though, it has defended itself handily against sellers.

Today I was comparing the complicated & the simple. I know a lot of silver & gold investors who don't know sic 'em from come here about technical analysis, international funds flows, bank reserves, & all the rest. They just stood back, took the long view, & bought. Right now, after stock investors lost 30 - 50% last year, that looks like a pretty sound plan.

Keep on buying silver & gold on dips. The market is handing you a gift -- take it.

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.