Monday, June 01, 2009

Silver and Gold Prices Appear to Have Begun Not Just a Small, but a Huge Rally

Gold Price Close Today : 978.60
Change: 0.20 or -0.0%

Silver Price Close Today : 15.725
Change: 0.125 cents or 0.8%

Gold Silver Ratio: 62.23
Change: -0.511 or -0.8%

Dow Industrial: 8,721.44
Change: 221.11 or 2.6%

US Dollar Index: 79.13
Change: -0.22 or -0.3%

Looked like the end of the world this morning, with the US dollar index down 54.2 basis points to 78.586. Somebody came in and hit gold and silver hard at the open, either the Nice Government Men or all the black-shirted floor traders coming back to work and taking short positions at week's beginning. With the dollar dropping like your car keys over Hoover Dam, you guess who the culprit might be.

Gold and silver prices both held up well despite the attack. At Comex close the gold price was down 20 cents to US$978.60 and the silver price actually rose 12.5 cents to 15.725. Looking at their charts today I gasped to see what had before been unclear to me: silver and gold prices appear to have begun not just a small, but a huge rally. It would take closes below 13.00 and US$920 to persuade me otherwise. It's barely possible that the next few days will see a correction before silver and gold take off again, but once they breach 15.80 cents and US$980, they'll never look back.

Buy any decline in silver and gold. Buy they breakout above 15.80 and US$980.

At last STOCKS broke through 8,600 resistance, and to nobody's surprise, they jumped a long ways. Yet stocks' future is not bright. Top of rally is limited to 9,000 - 9,500. Don't let today's performance distract you.

Here's a quick lesson in cagey gold and silver buying. To figure what you're paying per ounce, divide cost by content. The French ten francs I offered last week contain 0.0934 troy ounce of fine gold. Divide their $101 cost by 0.0934 and you see they cost $1,081.37 per ounce. Spot gold was about $980, so they had a 10.3% premium. Is that a good price? Depends on what everything else costs. When one oz. coins carry a 6 or 7% premium, & 1/10 American Eagles 23%, then 10.3% looks pretty good for
a small coin.

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.