Friday, August 07, 2009

Gold Price Will Pierce $1,000, Just a Matter of When

Gold Price Close Today : 957.30
Gold Price Close 24 July: 953.70
Change: 3.60 or 0.4%

Silver Price Close Today : 14.661
Silver Price Close 24 July: 13.933
Change: 72.80 cents or 5.2%

Platinum Price Close Today: 1,258.50
Platinum Price Close 24 July: 1,211.40
Change: 47.100 or 3.9%

Palladium Price Close Today: 274.10
Palladium Price Close 24 July: 263.00
Change: 1.050 or 0.4%

Gold Silver Ratio
Today: 65.30
Gold Silver Ratio 24 July: 68.45
Change: -3.15 or -4.6%

Dow Industrial: 9,372.49
Dow Industrial 24 July: 9,171.61
Change: 200.880 or 2.2%

US Dollar Index: 78.955
US Dollar Index 24 July: 78.317
Change: 0.638 or 0.8%

My, my, my, how events do twist and turn!

Y'all know that I am watching the US Dollar Index for a surprise rally. This week, the buck followed through downside on its weak close last week. Today it climbed back through 78.33 resistance/support to close at 78.955, up a hefty 97 basis points. What signifieth this uproar? Maybe not much. Maybe only traders closing out dollar positions so they can drink their martinis in peace out on Longisland (spoken as one word) this weekend. Or, it could mean that the dollar's plunge this week finished its long downward trek and it's ready to rally. The market will tell us next week, but I lean toward "dollar-decline-isn't-over-yet" because the dollar should have fallen at least to 76 to make the move appear complete. But the market rules, not my expectations, so I humbly await its word.

Significance my watching is that either (1) dollar will stage surprise rally and slow down silver and gold prices for three to six months, or (2) dollar will keep falling and the gold price will pierce US$1,000 early this fall. Either way, the gold price will pierce $1,000, just a matter of when.

In spite of stocks' big gains, the Dow in Gold Dollars is only barely managing to make a new high at G$202.39 (9.761 oz) against last high at G$202.15 (9.779 oz). And this comes on a day when gold has fallen smartly and stocks have rallied over 116 points. Stocks are (in short) still barely making headway against gold.

STOCKS completed a shallow correction this week and resumed their upward flight toward destiny. Now they are nearing my minimum target of 9,700, which the Dow should reach next week. Next possible target lies above 11,000, and next week will tell us whether that is possible or not. Stop thine ears to the siren's song! Heed not voices from Wall Street! Use this rally to sell any stocks you have left, and put proceeds into silver and gold.

Look at the table above and ponder silver's course this week against gold's. The Silver Price gained 72.8 cents this week (5.2%) to close at 14.661 (up 2.3 cents today). The Gold Price meanwhile rose US$3.60 or 0.4%, to close the week at US$957.30 (down $3.40 today). Now in fairness, the gold price bounced off a much higher US$970 this week, but the end of the week is the end of the week, just as the score at the end of the footbal game is the final score.

This disagreement or non-confirmation hides a very good, or a very bad, secret in its breast. The silver price is tugging higher while the gold price refuses to accompany: bad juju, sign of bad things to come. Or, in spite of gold's weakness, silver keep on rising, sign of good things to come. Are there other witnesses? Yes, the gold price has not been driven lower than 954-955 support, after three days' attack. Relative strength indicators (weekly and daily) look over bought, but MACD says, "Still plenty of room to climb." All this leaves me concluding that this has been a week of correction for gold, with silver refusing to participate. Notice that even the dollar's starchy rise today didn't stop silver.

Silver and gold dealers seem a bit nervous, a bit forward to trim inventory. That suggests caution. However, they've been burnt twice already this year at US$980, so their caution is no surprise.

Unless the dollar continues to rally, next week should see rising silver and gold prices. The gold price would become suspect if it closed below US$940, but otherwise its rally continues undiminished. I would rather buy silver and gold at lower prices, yet I would rather buy at these prices than not at all. It's just my gut feeling, but this gold market feels stout. It still has plenty of wind.

According to a Reuters item on 6 August (quoting Deutschebank) the percentage of US homeowners who owe more than their house is worth will nearly double to 48% in 2011, from 26% in March [2009]. from 26% in March [2009].

Think about that: one out of four homeowners is underwater on their mortgages. Friends, hard times haven't even begun yet. Pay no attention to the men on the cathode ray tube, they're clueless.

Speaking of whom here's another one of their stimulus victories: Cash for Clunkers. Having exhausted the first zillion bucks congress voted, they have now voted more because this is such a great program, has sold so many cars, yak-ayak-ayak-ayak. Can these people even count? The veriest infant knows that Cash for Clunkers is only cannibalizing future sales. When tomorrow arrives, auto sales won't merely be worse than they otherwise would have been, they will vanish altogether. Yet another glorious victory of socialist economic thought, Comrades!

On this day in 1789 congress established the US War Department. In those days before George Orwell's 1984 governments were handicapped by using all sorts of truthful names for their departments. So before the days of "War is Peace, Freedom is Slavery, Ignorance is Strength" they called the War Dept. "the War Department" instead of the "Defense" Department. Aren't you glad we have doublethink now?

Y'all enjoy your weekend.

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.