Tuesday, May 19, 2009

This is the Third Time the Gold Price has Knocked on the 928-930 Door

Gold Price Close Today : 926.30
Change: 5.00 or 0.5%

Silver Price Close Today : 14.110
Change: 30 cents or 2.2%

Gold Silver Ratio: 65.65
Change: -1.064 or -1.6%

Dow Industrial: 8,474.85
Change: -29.23 or -0.3%

US Dollar Index: 82.06
Change: -0.48 or -0.6%

Just about the time you start believing you understand markets, they pull something wholly unpredictable.

Yesterday silver and gold prices fell away from the very top of their trading range ($930 & 14.20) to the first support level beneath those, 920 and 13.80. When a market weakens like that, you expect at least a day's follow-through, but today silver and gold prices shot up. The gold price traded as high as 929.15, the silver price up to 14.27, and both closed up. Silver rose 30 cents to 14.11 while gold climbed $5 to close at US$926.30. Perhaps it is a sucker rally. Then again, perhaps yesterday (Monday) the bears all came in and established their short positions for the week, forcing metals down. When today dawned without more bears, the buying pressure drove the price up.

Never mind, we are left in the same conundrum that held us last week: both metals are trading at the top of a trading range. That implies that you must wait to buy until it falls, or buy when it breaks out through the resistance at the top of the trading range.

Let's add a mystery to the riddle. The more times a market approaches a support or resistance area, the more likely it will break through. This is the third time the gold price has knocked on the 928-930 door.

There's something we're not seeing. Retail activity is weak, yet metals keep on climbing. The buying isn't coming from the public -- but from where then?

STOCKS today tread -- trod -- treaded water, giving up only 30 points of yesterday's rise. Dow dropped 29.23 to 8,474.85 and S&P 500 1.58 to 908.13. They'll move higher still and get a boost when they cross 8,600.

Poor Nice Government Men! The US DOLLAR must be giving them fits. It fell nearly 50 points again today to close just above 82, at 82.064. When it falls through 82, the hyenas and jackals will all jump on, taking it much further. Standing below the 200 DMA, it only needs a tiny push to fall off the ledge.

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.