Friday, June 12, 2009

Monday or Tuesday Ought to Mark the Gold Price Low

Gold Price Close Today : 940.10
Gold Price Close June 5th : 961.70
Change: -51.10 or -3.3%

Silver Price Close Today : 14.865
Silver Price Close June 5th : 15.376
Change: -21.60 cents or -2.2%

Gold Silver Ratio: 63.24
Gold Silver Ratio June 5th : 62.55
Change: 0.70 or 1.1%

Dow Industrial: 8,799.26
Dow June 5th : 8,763.13
Change: 36.130 or 0.4%

US Dollar Index: 80.197
US Dollar June 5th: 80.677
Change: -0.480 or -0.6%

This week only proved that the US Dollar is rallying (temporarily) while silver and gold prices are correcting a bit and stocks are dithering at 8700. As a friend said to me today, this summer may be your last chance to buy gold under $1,000 and silver under $16.00.

Before we go further, look at the Dow In Gold Dollars (DiG$) It rose G$5.12 (0.225 oz) this week, to rest today at G$193.49(9.360 oz). That's intriguing, because the DiG$ has stopped above $193 four times since 17 April, and afterwards immediately fell back, as if it had been hit in the head with a hammer. The DiG$ of course, shows us how stocks are performing against gold. Those repeated rises to G$193+ might leave you remembering what I have said so often about markets: up or down, the more times a market tests a level, the greater the likelihood it will eventually break that level. So, Moneychanger, why isn't the DiG$ telling us now that stocks are about to soar against gold?

Because on the chart the DiG$ has painted out a Broadening Top, with highs at nearly the same place and a series of lower lows. Looks like a megaphone pointed right. It's generally a dead-on indicator that a market will plunge, although it takes a while to work out, slow but reliable.

Conclusion: stocks have reached a peak against gold, and gold will shortly begin outperforming stocks again soon.

I've been expecting that this precious metals correction would be a short, shallow affair. If the February silver peak (about 14.50) doesn't hold, though, silver could drop to 13.00. That's not what I expect -- I expect $14.50 to hold -- but that's a small possibility. Long before that, however, comes in support at $14.00.

Today confirmed my suspicion that the metals rally last week was the 2nd leg up ("B" leg) before the 3rd and final leg down ("C"). Most likely that means silver will see a bottom below 14.74 and the gold price below 940. Of course, these are merely my fine guesses what will happen. Don't let the best become the enemy of the good. Silver and Gold are in a bull market: that rising market will easily bail out all your timing mistakes. So don't snooker yourself by not buying at 14.75 because you expect it to fall to 14.50.

For both gold and silver, Monday or Tuesday ought to mark the low.

GOLD PRICE today dropped $21.20 to close at US$940.10. Next support lies at 930. The Silver Price dropped 61.6cents to close on Comex at 14.8650 (low at 14.785). At 1700 Central time they are trading at 939.3 and 14.85 -- not too enthusiastic.

The US DOLLAR index was pressuring metals today. The[shabby] paper dollar rose 63.3 basis points to 80.197. Look for this rally to slam into 82 like Wile E. Coyote slamming into a brick wall, in 3 - 4 weeks at most.

STOCKS have dithered around 8700 all week, climbing at last today to 8,799.26. I have still been waiting for the Dow to reach 9,000 - 9,700, but it's running out of time. Stocks don't like a rising dollar, either, but if they don't begin rising again on Monday, will they ever? As I have long advised get out of stocks and stay out. Still holding stocks? Sell from 9,000 to 9,700.

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.