Friday, May 29, 2009

If the Gold Price Breaks $1,000 it Might Reach $1,200 Before it Stalls

Gold Price Close Today : 978.80
Gold Price Close May 22: 958.50
Change: 20.30 or 2.1%

Silver Price Close Today : 15.60
Gold Price Close May 22: 14.683
Change: 91.70 cents or 6.2%

Gold Silver Ratio : 62.74
Gold Silver Ratio May 22: 65.28
Change: -2.54 or -3.9%

Dow Industrial: 8,500.33
Dow May 22: 8,277.32
Change: 223.010 or 2.7%

US Dollar Index: 79.317
US Dollar May 22: 80.041
Change: -0.724 or -0.9%

Last week I forecast that gold would break $1,000 this week. I was a mite previous, but gold still lit up the sky -- almost as much as silver.

STOCKS remain range--bound between Dow 8,600 and 8,200. No enthusiasm, no direction, just running out of steam and grinding to a halt. Then comes the drop.

US DOLLAR INDEX has been fueling the Silver and Gold Price rally. After falling 300 basis points last week, it fell a full 120 bps today to 79.317. Hard to conceive it won't go lower, although this leg of the decline ought to have nearly ended. 78 is about the limit of it.

The gold price is approaching its last (February) high at $1,000, and the 2008 high. Today it jumped nearly $20, and hit US$980.17, although the Comex close was US$978.80. Other indicators show gold could easily move higher. RSI is not yet quite overbought, and the MACD has much further to run before topping.

Buyers are pouring in. If the Gold Price breaks through US$1,000 it might reach $1,200 before it stalls -- but first it must pierce $1,000.00.

On the weekly chart silver stands well above its 50 DMA (12.95) and 200 DMA (12.71). It's also aboe the march reaction high. Last fall the big drop began at 16.80, but only after pounding support at 16.00 for a while. Therefore look for 16.00 as the first resistance. Above that the whole area between 17.00 and 18.00 is clogged.

You know a market has risen when you have to move the scale on your chart, and that's where we find silver. The RSI is entering overbought territory, but the MACD can stand to rise higher. Remember, "oversold" can drag on for a long time.

Big question is, can silver and gold price rally against the average seasonal pattern. They have already answered that "YES!", but can they continue next week? If they open higher Monday, gold will hit $1,000 before week end, and probably break through.

The GOLD/SILVER RATIO dropped a gigantic 0.72 today, and will fall further next week. After all, it was a good idea to favour silver when the ratio was so high. (Every now and then I have to pat myself on the back. Sorry.) The silver price rose three times as fast as the gold price this week.

It's not clear to me what's driving metals up and the dollar down behind the curtains, but something big is happening. We had the big metals' premiums drops back at end-April. That was very odd, as if somebody dumped large inventory on the retail market. Now the US bond market is beginning to reflect investor distrust in the dollar. In the world of secretive governments we live in, who knows what else is falling apart? Of this much I am certain: the depression is years from its end, the dollar's depreciation has barely begun, and silver and gold prices as yet are only hinting at their eventual highs.

Small fractional gold coins have been so scarce on the market that I've taken to buying what I can get when I can get it. I took the opportunity to buy 290 French TEN francs. This is a coin we almost never see, and they usually cost much more than the larger, common 20 francs, but I got these at a much better rate, about an 11% premium over their 0.0934 troy ounce gold content. All were minted before 1915, most are the Rooster type but some Louis Napoleon. If you'd like to buy some at $101 each, here's how:

Send an e-mail to with "Ten Francs" in the subject line. E-mail must contain (1) your name, address, and phone number and (2) Number of coins you want to buy. Add $30 shipping to each order. (3) Please mention in your email. These are sold on a first-come, first-served basis: first e-mails to arrive win. If you win an order, we will send you a trade confirmation & you'll need to send payment in 2 days. Sorry, no credit cards accepted and minimum order is $1,500.

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.