Monday, March 02, 2009

Gold's Present Correction Should End this Week

Gold Price Close Today : $939.00
Change: -2.50 or -0.3%

Silver Price Close Today : $13.050
Change: -3.5 cents or -0.3%

Gold Silver Ratio: 71.95
Change: 0.01 or 0.0%

Dow Industrial: 6,830.04
Change: -232.89 or -3.3%

US Dollar Index Today: 88.90
Change: 0.73 or 0.8%

In his commentary today Bill Murphy of remarked that the Talking Heads were talking hogwash, claiming that the rising dollar and T-bond show that investors were fleeing to safety, while gold dropped. He smelt Nice Government Men
at work. After all, they wouldn't want the headlines to read,"Dow Tanks While Gold Soars." That might make some peasants nervous.

Time to think about stocks. In 1929 from the high for that year, which happened to be the all-time high as well, the Dow fell 48%. From its 1929 high to its ultimate low 8 July 1932 (at two oz. of gold, by the way), the Dow lost 89.2%, but that was only after it had rallied from Nov. 1929 - April 1930 by 42.5%.

From the Dow's all time high in October 2007 until today, the Dow has lost 51.8%. From its 2008 high in May until today, the Dow has lost 47.5%. Since the presidential election for change 4 Nov. 2008, the Dow has certainly changed: down 29%.

But here's the odd thing: the Dow trades at its lowest level since 1996, but doesn't make a new low against gold today. That could mean the Dow is near a bottom. Still could fall to 6,250, however.

Fear sends people fleeing into cash, and face it, the US dollar is the international cash. Hence the US Dollar index profited today, gaining 73.2 basis points to close at 88.9. Yep, that is over the old 88 peak, but to satisfy the 3% rule that proves a breakout, the Dollar Index needs to close above 90.50. Makes little difference, as we have already seen the decoupling of gold & the dollar.

The present correction in the Gold Price should end this week. Whether it falls to 920, or 905, or 890, I can't say, but the low should come this week. Relief in the stock market will relieve pressure on gold.

Most disturbing about gold was its fall from 939 at closing time to 923 -- suddenly -- in the aftermarket. Moves like that would scare a sleeping Rent-a-cop. Buck up, though, little Buckaroos -- buying on market declines is our job, never mind that it feels like your stomach is busy boiling old socks.

The Silver Price didn't fall quite as badly in the aftermarket, from 1305 to a low of 1284 (that I saw), then back to 1296 now.

Despite all the fear, these are merely classic buying opportunities.

If you are ever going to swap gold for silver, now is your time, from here (71.75:1) all the way to 75:1. Only decent buy is 100 oz. off brand silver bars at 90 cents over spot, but even at that the potential is gargantuan.

Weather here is treacherous as the stock market. Last week it was 72 degrees. All the daffodils were out in my yard, and Saturday night we had a 7 inch snow fall, and drop to 14 degrees. Those daffodils were drooping and crying this morning.

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.