Friday, May 15, 2009

The Gold Price Shot Thru the Major Resistance at US$920

Gold Price Close Today : 930.9
Gold Price Close 8th of May: 914.6
Change: 1.8% or 16.30

Silver Price Close Today : 13.99
Silver Price Close 8th of May: 13.935
Change: 5.50 cents or 0.4%

Gold Silver Ratio: 66.54
Gold Silver Ratio 8th of May: 65.63
Change: 0.91 or 1.4%

Dow Industrial: 8,268.64
Dow 8th of May: 8,480.65
Change: -212.010 or -2.5%

US Dollar Index: 82.916
US Dollar Index 8th of May: 82.640
Change: 0.276 or 0.3%

Momentum has disappeared, markets are wallowing without resolution. Is anybody watching market any more?

STOCKS have taken a real beating. The narrower blue chip Dow lost only 2.5% ("only" 2.5%) while the broader S&P500 lost five percent. Indicators all feel toppy, not to mention the "I'm rolling over before I fall off the bed" look of the chart. Will the Dow even reach its 200 DMA before its "rally" dies? Could it make it to 8,920? Looks more doubtful daily.

The US DOLLAR INDEX suffered its "dolours" this week. Ah, yes, it looks like a basically flat week, as long as you leave out that 100+basis point drop last Friday, and the fall through 83. This is just torture, watching it wallow back and forth, knowing
the end is foregone: much lower dollar prices.

Since April the DOW IN GOLD DOLLARS (the Dow Jones Industrial Average measured in dollars of gold, each equalling 0.048375 troy ounce) has made a double top at G$194.935
(9.43 troy ounces), and has turned downward again, closing today at G$183.62 (8.882 oz). Long term target here is the Dow at less than $41.344 (two oz), and you will see it.

SILVER and GOLD markets are behaving so strangely that it is beginning to look like the Nice Government Men have been active again. Usually when a market breaks through
resistance (or support), it jumps ahead like a paper wad out of a rubber band. The pent up strength pushing it up is at last loosed, and shoots ahead. If the market approaches a resistance area and stays a couple of days without penetrating, usually it falls back.

Not the silver and gold markets, not this week. The Gold Price shot thru the major resistance at US$920, but instead of shooting ahead or falling back, it has edged up a couple of bucks a day all week. Odd. Add to that silver's perverse performance, dancing around 14.00 all week, as high as 14.20 and as low as 13.80.

More mystery is added. The premiums on physical silver and gold last week seemed to say, "Oh, well, let's fall back to normal." Then they did it all in three days, after acting abnormally for 8 months (since September last), dropped to where they were a year ago. But this makes no sense, because nothing happened in the price movement to justify such changes. It simply doesn't add up. And although the public is not buying (I keep checking the phone to see if it's been disconnected), somebody big is buying, on balance, because the gold price rises two bucks or more every day.

So what do we know when things don't make sense? The government is probably behind it somewhere. For now things appear to have simmered down and resumed an even keel Well, wait -- just wait. Silver and gold stand a good chance of another run at $1,000 next week, but even if they don't, they will later this year, and will puncture $1,000 and leave it on the side of the road like a cast-off innertube.

I'm running out of metaphors, short of similes, and slap out of alliterations, so I'd better close. Keep on buying silver and gold. If the gold price breaks out above $930 and holds one day, count that a breakout and buy. If it falls below 889, give it 3 or so days to settle, then buy. Time your silver purchases off gold.

Argentum et aurum comparenda sunt -- -- Gold and silver must be bought.

- Franklin Sanders, The Moneychanger

© 2009, The Moneychanger. May not be republished in any form, including electronically, without our express permission.

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.