Friday, October 23, 2009

If The Gold Price Means to Trade Lower, It Must do so Next Week

Gold Price Close Today : 1,055.60
Gold Price Close October 16: 1,050.70
Change: 4.90 or 0.5%

Silver Price Close Today : 17.711
Silver Price Close October 16: 17.405
Change: 30.60 or 1.8%

Platinum Price Close Today: 1,358.50
Platinum Price Close October 16: 1,341.70
Change: 16.800 or 1.3%

Palladium Price Close Today: 335.55
Palladium Price Close October 16: 330.65
Change: 4.900 or 1.5%

Gold Silver Ratio Today: 60.37
Gold Silver Ratio October 16: 59.60
Change: -0.77 or -1.3%

Dow Industrial: 9,972.18
Dow Industrial October 16: 9,995.91
Change: -23.730 or -0.2%

US Dollar Index: 75.477
US Dollar Index October 16: 75.615
Change: -0.138 or -0.2%

Although SILVER and GOLD PRICES have been trading sideways, both managed to gain a bit this week. Dollar index lost a little but basically closed the week flat. After rising much higher, stocks fell back lower than they ended last week.

The GOLD PRICE continues to hold on stubbornly above$1,050+. Either it is consolidating for another run-up, or topping. It has built an even-sided triangle with a base from $1,070 to $1,035. Even-sided triangles blow out of both sides of their mouths. A downside drop would fall toward $1,020, upside escape (close above $1,065) leads to $1,300 gold. Right, I know it looks crazy. The weekly chart ends all arguments: the gold price has broken out upside over long term resistance. I am expecting a low by 30 October, so if gold means to trade lower, must do so next week. Watch $1,065 resistance and support kicking in around $1,040. If gold closes below $1,018, it proves that I am all wet and gold intends to drop much lower.

The gold price closed on Comex today down 2.20 at $1,055.60.

Silver's weekly chart shows a different face. The SILVER PRICE has broken out above its downtrend line, but not above a long time high like gold (over $1,000). Like gold, silver is somewhat overbought, but that can keep up a long while. Yes, this sideways trading is frustrating, but we simply must wait for the silver price to declare itself: a close below $17.20 takes silver to $16.80, a close above $18.00 much higher.

The silver price closed up today, gold down --- confusion is evident. The silver price closed today at $17.711, up 18.1 cents.

What is the scrofulous US Dollar doing all this time? Dollar Index looks oversold, but not outrageously. Dollar index made a stand this week at 75, and rose today 42.2 basis points to 75.477. Meanwhile the 50 day moving average (81.99) has rolled over downward and will soon drop through the 200 DMA (81.48). Momentum is clearly downward, with only the faintest hint of a turnaround this week. "Failure to drop to the center of the earth" doesn't really qualify as "strength."

Dollar is presently the focus of the smart guys' "dollar carry trade" where speculators borrow dollars (near zero interest and steadily dropping), sell them, and put proceeds into hot markets like stocks, oil, silver or gold. That sets up gold for a double whammy: dollar sellers get caught short if dollar rises, panic and try to cover shorts in a rising market. Faster dollar rises, faster they throw stocks, oil, gold, silver, etc. on the fire.

But that spiral hasn't shown itself yet.

Dow rose this week 96.28 on Monday, dropped 50.51 on Tuesday, dropped 92.12 on Wednesday, rose 131.95 Thursday, and dropped 109.13 today to close the week at 9,972, down 24 points for the week. Tons of buying power has been burnt up without success. Does all that up and down suggest indecision to y'all? Ought to. Stocks are in process of rolling over, but next two weeks could see a rally to 10,375 before it collapses Not much more than two weeks left on this rally. Watch support at 9,900, 9,600, and especially 9,450. As the Dow crashes through those levels, it gets weaker and weaker. S&P500 today dropped 13.31 to 1,079.60. A reader brought to my notice that the S&P500 and gold are trading about the same price. Huh.

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.