Monday, August 24, 2009

Like a Spring, the Gold Price is Coiling for a Break Out

Gold Price Close Today : 942.30
Change: -10.90 or -1.1%

Silver Price Close Today : 14.195
Change: -3.1 cents or -0.2%

Platinum Price Close Today: 1237.80
Change: -18.70 or -1.5%

Palladium Price Close Today: 283.75
Change: 2.50 or 0.9%

Gold Silver Ratio
Today: 66.38
Change: -0.915 or -1.4%

Dow Industrial: 9,509.28
Change: 3.32 or 0.0%

US Dollar Index: 78.22
Change: 0.18 or 0.2%

Sorry to keep starting every day with the scrofulous US DOLLAR, but right now that's where the action is. After breaking through 78.33 support on Friday, the dollar recovered 18.1 basis points today, rising to 78.221. Y'all will immediately perceive that 78.221 is not as great as 78.33, so the dollar remains below support in a downtrend. Unless it closes above 78.33, nothing changes in the outlook.

STOCKS today gave mixed messages, some indices up & some down. Confused markets don't usually rise. The Dow rose 3.32 to 9,509.28, while the S&P500 fell 0.56 to 1,025.57. Something new did pop up here: the Dow In Gold Dollars (DiG$) went to a new high for this lackluster rally, G$208.61 (10.091 oz). Because stocks have only very slowly and with great difficulty gained on gold, I don't take that as a sign of anything more than the DiG$ nearing a peak in its rally. I don't expect it to better $215.00 (10.401 oz).

Speaking of confused markets, the GOLD PRICE today fell US$10.90 to close at US$942.30 on Comex, while silver rose 3.1 cents to a Comex close at 14.195. Now y'all understand why I hedged my comments Friday. The gold price needed to follow up with a higher close today, but fell instead. Isn't that weak? Not really, because it didn't fall out of the triangle it has been trading in. I'm tempted to say (with Ned Schmidt) that gold is in the hands of traders, who are taking it back and forth to scalp small scalps. However, the technical pattern doesn't lie. Gold continues to trade within that triangle; falling out of the triangle would have spoken of terrible things, but gold has not fallen out of it. And even-sided triangles can break out up or down. Like a spring, the gold price is coiling for a break out. It's a bull market, so it will most likely break out to the Upside.

The SILVER PRICE rose today, refusing to confirm gold's drop. Since silver is the more volatile metal and the smaller market, that might be a bullish sign. Downside silver might fall to 13.60 without falling out of its upward channel. On the upside, silver needs to climb above 14.25, then challenge 15.00 again.

Responding to my lecture last Thursday, one reader sent me a quotation from Wikipedia that defined deflation as falling prices. Friends, y'all have to learn to distrust Wikipedia as much as any other big media outlet. Wikipedia is just a committee production, and the product is no better than the committee. When the committee cannot define basic terms like "inflation" and "deflation" correctly, the committee doesn't know much and you'd better handle their information accordingly. Wikipedia is handy for some things, but grossly subject to uniformed, partisan articles. "Deflation" is not falling prices, it is a decrease in money supply that MAY cause prices to fall.

For the first time since 1994 my family is taking a vacation the week of 13 September through 19 September. This presents logistical problems roughly equivalent to Napoleon's Grand Army retreating from Moscow in wintertime, yet we will persevere. I will not be publishing commentaries that week, or the following week due to more travelling. But God willing, I will return on 28 September.

You wonderful readers prayed for my granddaughter, Caroline Sanders, when she had two heart surgeries last year. Now she is two, thriving, and must have one additional heart surgery on 13 October 2009. I would deeply appreciate your prayers on her behalf once again.

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.