Monday, June 22, 2009

Gold Price Momentum is to the Downside, but How Far?

Gold Price Close Today : 920.60
Change: -15.00 or -1.6%

Silver Price Close Today : 13.694
Change: -39.5 cents or -2.8%

Gold Silver Ratio: 67.23
Change: 0.820 or 1.2%

Dow Industrial: 8,339.01
Change: -200.72 or -2.4%

US Dollar Index: 80.27
Change: -0.30 or -0.4%

Big news today were the drops in silver and gold prices. Well, big news if you are a goof who listens to CNN and the others, and therefore didn't already know that silver and gold prices were correcting.

Looking closer, the metals move was widely blamed on the rallying dollar, but as y'all know, because y'all have been watching it with me, a 46 basis point move for the dollar, even a 46 bp move up, is nothing big for the dollar lately, so other forces must have been active, fullness of time or Nice government Men, I don't know which.

Today at the Comex close the Gold Price dropped 15 to close at 920.60, while the silver price dropped 39.5 cents to close at 13.6940. In the later market the gold price has risen to 922.20 and the silver price to 13.77.

The gold price dropped US$10 about 5:30 a.m. Eastern time. It fell to 918 support, then was stopped rising at 922. Clearly gold's momentum is to the downside, but how far? It will probably end about the same time the US Dollar tops, so another 1 - 4 weeks. The gold price barely broke its 50 DMA (924.38) and bias in a bull market is to remain above the 50 and 200 DMA. SO if the gold price holds on here, it won't revisit its 200 DMA (now 870.14). A more likely target is 906, but there is also support at 890, and rock solid support at 865. I don't expect to see 900 breached.

The Silver Price broke $14.00 about 5:00 a.m. EDT, hung at 13.80, then about 14:00 broke to $13.70. 13.50 promises to be the solid support. The silver price now stands at its 50 DMA (13.88) while the 200 DMA lies far below at 12.12.

GOLD/SILVER RATIO reached 67.23 today. If it trades above 68:1, swap gold for silver.

I have been recommending that y'all buy silver and gold on any decline -- well, here's a big one. We have to be somewhere near a bottom. Remember that silver and gold are in a primary bull market, and they will be rising again after this correction.

The manic-depressive US DOLLAR INDEX had another manic fit this morning and rose 46 basis points to end the day at 80.846. Looks to me there remains another 2 - 3 weeks on the dollar's manic spurt, then it drops again. First resistance stands at 81.50, then 82, then 82.60. Don't y'all get tired of this? Hogwash pouring in a tidal wave across media and markets, tugged first 180 degrees one way, then the next day 180 degrees the other. It betrays the massive fear, terror and uncertainty in markets.

STOCKS already stood beneath their 200 day moving average (DMA, now 8,553), & now they've fallen below their 50 DMA as well (8,378). If stocks break Dow 8,200 they will no doubt fall to the next support level, 7,800.

I intend to remain grouchy all week. All the women in our family, including my wife, have fled to a cabin on Pickwick Lake with all the children. For a week. I am always grouchy when my wife is away, but I won't get anything to eat all week, either. Nothing to look forward to until she returns.3

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.