Monday, August 17, 2009

The Next Few Days Will Set the Trend for Gold and Silver Prices for the Next Few Months

Gold Price Close Today : 934.30
Change: -12.70 or -1.3%

Silver Price Close Today : 13.971
Change: -74.4 cents or -5.1%

Platinum Price Close Today: 1,219.60
Change: -26.00 or -2.1%

Palladium Price Close Today: 267.35
Change: -7.00 or -2.6%

Gold Silver Ratio
Today: 66.87
Change: 2.518 or 3.9%

Dow Industrial: 9,135.34
Change: -186.06 or -2.0%

US Dollar Index: 79.34
Change: 0.51 or 0.7%

Owch! I warned y'all that Monday might not be pleasant for metals investors, unless they wanted to buy on a dip.

Clearly the next few days will set the trend for the dollar, stocks, and SILVER and GOLD PRICES for the next few months. But wait! No foregone conclusions here! Wait to see what the market says.

As I feared Friday, gold and silver took it on the chin today. At Comex close gold was 12.70 lower than Friday at US$934.30. The SILVER PRICE dropped 74.4 cents to $13.9710. Right now silver is following the GOLD PRICE, so I am most interested in what gold is doing. My friend, Bob the Technical Genius (no kidding, he really is), called today and reminded me of the long, narrow even-sided triangle gold has formed since the February high. Today's gold low was US$929.05, just about dead on the bottom side of that triangle. However, it spent no time there, and for the most part remained above US$930.

Bob the Tech Genius opined that we might yet see one more down day for gold, close on the bottom side of the triangle ($920 at most), then whiplash around to close over $961 and higher without ever looking back.

Another alternative is that gold remains above $918 - $920 support. The worst alternative is that gold breaks its last 300 DMA upward crossing at $909. If so, gold will see six months of lower prices and zig-zagging frustration. Watch markets closely the next couple of days, because they will explain themselves.

Here's another arresting gold nugget that Steve Saville of quarried lately. In the gold bull market since 2001, gold has always risen from 15 August to 31 December, that is, closed the year higher than its August 15 price. Another seasonal pattern that points to a shallow (not deeper than $900) gold correction.

More volatile silver rises faster than gold but also suffers more than gold in these downside episodes. Today silver hit both the bottom of its upward trading channel and its 50 DMA ($13.99), but traded up in the aftermarket to $14.04-$14.07. If that bottom channel line with $13.80 support (low today was $13.81) doesn't hold, we have to reckon silver may drop to $13.25 cents. Another interpretation is that silver has formed an inverted head and shoulders bottom with a downslanting neckline from $14.30 in June to about $13.90 today, and we are witnessing only a touchback to the neckline, which will stop there.

The US DOLLAR INDEX today is challenging its 50 day moving average (now 79.55). It closed at 79.344, up 51 basis points. The dollar index appears to have formed an upside-down head and shoulders bottom. Now it must confirm that by closing (1) above the 50 DMA, then (2) above 81.50. If the dollar can do that without collapsing -- closing below 77.43, the last low -- it should head for 82.50 at least, 84 at most.

STOCKS are correcting their run up from 8200 - 9400. First target for a shallow correction would be 9,125. there is support also at 8850, and the 50 DMA stands at 8,773. I still view this as a correction in an upmove, because stocks have not yet made plain that the upmove has ended.

A recent exchange with a subscriber has left something on my mind. You all must realize that the economy and the monetary system, and those goofs who run it, are now in uncharted territory. No central bank has ever before taken such extreme measures and survived. Therefore you have to expect the most extreme volatility in markets. Those waves will wash you out of your position unless you have a firm grip on first principles and where they will take the economy. I am thinking of this: suppose we get another big liquidity panic that runs the dollar up and gold and silver down, something like last fall. It could happen. What will you do then? Whine and moan because your silver and gold have dropped, or suffer with patience because you know that the Fed and the yankee government have set their feet on the path of dollar destruction, guaranteeing that your silver and gold will in the end prosper?

If you don't have a vision of the future, and an understanding of monetary cause and effect, fear and confusion will drive you out of your position. Face that now. Also, you ought to be cleaning up your house from top to bottom, shedding debt if you can, selling every unneeded asset to get liquid, and making all preparations to take your family through the toughest economic times. If you don't believe they are coming, you have deluded yourself. Believe those liars in Washington and the media at peril of your survival.

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.