Monday, April 06, 2009

Nothing in this Silver and Gold Price Move Changes the Long Term Outlook

Gold Price Close Today : 871.50
Change: -24.10 or -2.7%

Silver Price Close Today : $12.105
Change: 62 cents or -4.9%

Gold Silver Ratio: 72.00
Change: 1.614 or 2.3%

Dow Industrial: 7,975.85
Change: -41.74 or -0.5%

US Dollar Index Today: 84.72
Change: 0.52 or 0.6%

Watching the Nice Government Men play with silver and gold prices the last few days has sent me back to re-examine basic strategy. What you've witnessed amounts to nothing more than their Pyrrhic victory forcing down the price for a few days when it is already weak. This temporary win does them no good long term, as the price will shortly pop back up. But they don't care about that, they only care about today. They are trying to contain gold's rise, since they know they can't beat it. So they fight it knowing they can't keep the gains under 15% a year. They had also been defending the $1,000 mark. A friend with good connections tells me they have probably thrown in the towel on that line and raised it to $1,200.00.

What, then, is our best long term strategy, since we know the NGM will continue depreciating the dollar? Simply to keep buying silver and gold as steadily and rapidly as possible. Yes, I would rather buy price declines, but if I miss those I don't get upset. After all, it's a bull market, and a rising tide raise all boats and erases our timing mistakes. Eventually they will lose control.

The GOLD PRICE dropped 24.10 today to 871.50, Significant is that it fell through 889 which had contained declines for so long. Therefore we must reckon with lower prices. Targets are the 200 day moving average, now at 861.87, or the 25 year resistance at US$850. Today's gold price low was 865. I would expect the fall to be sharp and short, lasting not longer than this week, but it's early to judge that.

The SILVER PRICE dropped 62 cents to $12.105 cents. Today's low was $12.07, and silver is already below the 200 DMA (now 12.78). Possible floors for this move are 12.00, 11.80, and possibly 11.00. Nothing in this move changes the long term outlook.

I don't know whether these declines will prove short and sharp, or whether they will last several months. If the February high was the seasonal spring high for the year, then silver and gold could fall into June or July. If February was not the seasonal high, then that will come in May. I haven't formed an opinion yet which outcome seems more likely.

Lower prices only make silver and gold more attractive. Keep buying every new decline. Or, you could trust your future, and your family's, to the Nice Government Men, because you know already they want what is best for you and they're there to help you.

The US Dollar index today rose 54.8 basis points to 84.724, which no doubt did not help silver and gold. Dollar is still a mess, and should see 70 before it sees 90, if it ever does again.

Stocks backpedalled for a touchback today, after the breakout through Dow 8,000 Friday. They will keep on rallying. Look for a top at 9,000 to 9,300. Swap stocks for silver and gold. This is your last chance.

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.