Monday, May 11, 2009

If Markets Break Down, the Gold Price Could Drop to 890 and the Silver Price to 12.50

Gold Price Close Today : 913.00
Change: -1.40 or -0.2%

Silver Price Close Today : 13.890
Change: -4.5 cents or -0.3%

Gold Silver Ratio: 65.73
Change: 0.112 or 0.2%

Dow Industrial: 8,418.77
Change: -155.88 or -1.8%

US Dollar Index: 82.78
Change: 0.25 or 0.3%

Both silver and gold are acting strangely. Gold has fought hard to break through 920, without success. Yet instead of falling back and fading, it just keeps knocking on that 920 door.

Silver's behaving the same at 14.00. Other indicators point higher still.

So there's a fight going on, and it's still hard to tell which way it will turn out. Metals have not quite enough steam to break through, but enough to stay in place and take a slugging. That points to strength under the market, but where is it? All the retail and wholesale dealers I talk to are complaining that business has slowed. Never mind -- somebody is buying somewhere, otherwise both markets wouldn't be holding steady.

If markets break down, the gold price could drop to 890 and the silver price to 12.50, but if they break out, Oh, my! Hello, $1,000 gold and $18 silver.

As a few weeks ago stocks were stuck under 8,200, now they are stuck under 8,600. The whole picture is not too inspiring. The Dow will probably reach its 200 day moving average (DMA, now 8,981), push a little further, then quit. Clearly, legions and more legions of sellers greet every new high with -- more selling.

On Friday the US DOLLAR INDEX took a 100+ basis point dive. Owch! It now stands below its 200 DMA (82.95), precisely where it belongs to be in a bear market. The dollars rally has definitely been finished, and it has also broken its previous low (82.63). If the buck doesn't stop here and turn around, it will revisit 77.7 or lower.

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.