Tuesday, September 29, 2009

We May Get 4 - 6 Weeks of Sideways Gold Trading, Bound by 980 and 1050

Gold Price Close Today : 993.10
Change: 0.60 or 0.1%

Silver Price Close Today : 16.156
Change: -17 or -0.1%

Platinum Price Close Today: 1,263.10
Change: 0.0 or 0.0%

Palladium Price Close Today: 286.55
Change: -2.00 or -0.7%

Gold Silver Ratio Today: 61.47
Change: 0.102 or 0.2%

Dow Industrial: 9,742.20
Change: -47.16 or -0.5%

US Dollar Index: 77.05
Change: 0.13 or 0.2%

Think of life with Ben Bernanke at the money supply helm as driving with a drunk. He mashes the accelerator to the floor and you scream, "Slow down!" He responds by slamming on the brakes. "No, not that!" you cry, so he mashes the accelerator to the floor again.

Last fall he flooded the system with new money (to save his and Paulson's buddies in the banks, but that's another story). Then he slammed on the brakes early this year, so now the money supply's growth is no longer growing. First inflation, then the deflation scare, to which he responds with more inflation. Note closely that he never really deflates, but always inflates, and thus it will ever be. As Steve Saville of speculative-investor.com comments, the Fed exists to manage inflation expectations, not to manage inflation. They are always going to inflate, but to keep everyone from catching on to the game, from time to time they and their media monkeys pump up a deflation scare.

If you understand all this, you grasp where we sit right now. The dollar is rallying, largely because Bernanke is not inflating fast enough. His response will be -- more inflation. But 'twixt now and then, deflation will be the rage. Since SILVER and GOLD PRICES have been rising primarily against the US Dollar, that will slow their rise. However,technically both metals have already fulfilled a 38% correction, sufficient for the preceding rise. If the GOLD PRICE breaks $950, it means not that the bull market is over, but that we will spend numerous months in sideways trading. On the other hand, if the dollar rallies but gold refuses to go below US$975, then we may get 4 - 6 weeks of frustrating sideways trading, bound by 980 and 1,050. Either way, the deadlock will end with gold and silver prices shooting up.

The SILVER PRICE is confirming gold's solidness, remaining above $16.00. Low today was $15.97 (gold's low was $985.42). That's positive, but expect the gold/silver ratio to rise more, which implies mathematically either a lower silver price with gold steady, or higher gold and silver steady.

US DOLLAR INDEX today stands at 77.049, up 13 basis points and continuing its rally. Expect the scrofulous dollar to keep on rising, bit by bit, at least to 78, the 50 DMA.

The rally in STOCKS surely is not long for this world. It has nearly reached the 50% level, has lasted since last spring, and is moving to the deadly seasonal spot. I hope you have taken advantage of this rally by selling your remaining stocks. Or, if you just want to keep on losing money, hold on to them.

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.