Tuesday, June 23, 2009

Gold Price Headed for US$1,300 and Higher, Most Likely by Year End

Gold Price Close Today : 923.90
Change: 3.30 or 0.4%

Silver Price Close Today : 13.834
Change: 14 cents or 1.0%

Gold Silver Ratio: 66.78
Change: -0.442 or -0.7%

Dow Industrial: 8,322.91
Change: -16.10 or -0.2%

US Dollar Index: 79.83
Change: -0.95 or -1.2%

The Silver Price closed today at 13.834, down 14, and is trapped under its 50 day moving average (now 13.81). That might mean that silver will fall to its 200 DMA (now 12.12). Markets tend often to do that, but it's not inevitable. More likely seems to me a drop to 13.00, maybe 13.50.

Why? Because the dollar lost momentum badly today, and I'm not sure it can continue to rally. Besides, time is running out for silver's seasonal low. However, other silver price indicators are not yet oversold, and I recognize that I am so bullish that I will always put the best colour on silver's outlook, as hard as I try to be objective.

Same outlook holds for gold price. It rose today 3.30 to US$923.90, but remains below its 50 DMA at 925.26. Will it drop to its 200 DMA at 870.74? Again, markets do not drop from the 50 DMA to 200 DMA every time. Over the last six months, the gold price has tended to drop back less than I expected, certainly less than the max I expected.

Torture is, you want to buy on a dip, but you can't know whether the dip is dipped out yet -- or not. Worst place to land is twisting in the breeze of indecision, blown first one way then the next, and you end up not buying anything. Keep on reminding yourself that after this correction ends, the gold price will be headed for US$1,300 and higher, most likely by year end.

When something is crazy, it invites comment. The US Dollar is crazy, so I will comment. Today the US Dollar index dropped nearly 100 basis points, 95.2 to be exact, to 79.831. Yes, it has fallen below 80 once again. This rallying project is not going to be as easy as the Nice Government Men thought. Somebody fought back today. Twice now the dollar's rally has been flung back at 81 - 81.50. What was an uptrend has now become a downtrend of lower highs and lower lows the last 7 days. Another new low tomorrow wrecks the downtrend channel and sends the dollar breaking out to the downside, contrary to my expectation.

Wow. Explain to me why the Dow won't drop to 7,800, because I can't see a reason. Indices were mixed today, some up, some down, not much movement. 'Tis a market undecided, but that generally means weakness.

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.