Thursday, November 12, 2009

The Gold/Silver Ratio is Signalling Lower Silver and Gold Prices, but Not Much Lower

Gold Price Close Today : 1106.00
Change: -8.00 or -0.7%

Silver Price Close Today : 17.255
Change: -27.2 cents or -1.6%

Platinum Price Close Today: 1352.10
Change: -24.00 or -1.7%1

Palladium Price Close Today: 348.45
Change: 2.50 or 0.7%

Gold Silver Ratio Today: 64.10
Change: 0.538 or 0.8%

Dow Industrial: 10,197.47
Change: -93.79 or -0.9%

US Dollar Index: 75.12
Change: 0.10 or 0.1%

Oh, Silver, Silver! How you worry those who love you! The SILVER PRICE may be forming a head and shoulders top, or that could be merely a continuation pattern -- 'tisn't clear yet. 50 DMA lies at $17.01, 200 DMA at $14.50, both ever possible targets for a correction. Best outcome for silver tomorrow is to hold above $17.00.
A fall through $17.00 leads to a re-test of $16.70, or even $16.00. Momentum indicators do NOT look overbought.

The GOLD PRICE closed on Comex down $8.00 at $1,106.00. In the aftermarket it has traded down to $1,103.10.

What are y'all griping about? Did y'all think the Road to Glory for silver and gold prices would be paved smooth so your roller skates wouldn't bump? The Bull always tries to shake off as many riders as possible.

If the gold price is following the same "jump-run-in-place" pattern it's followed since September, it might retreat to the last jumping off point, $1,065. Right now it is trading roughly at the bottom of the range from which it surged to the upside yesterday, so that level might contain it. Momentum indicators show gold overbought, but not outrageously. That occurred several days ago, which throws up another red flag.

One last thought. The gold/silver ratio rose back to 64.10 today. Mmmmm. That might mean that a second and higher top than November second's (645.111) might follow, but not much higher. The ratio has done that before. If so, the ratio is signalling lower silver and gold prices, but not much lower.

Title of today's action might be "Revenge of the Dollar Nerd." Yes, hard as it is to credit, the scrofulous US Dollar Index actually rose today, 49 whole basis points to 75.652. Now it has traced out a potential double bottom at 74.90, but still must get through resistance at 76 -- by no means a foregone conclusion. If 'tis rallying, first target is the 50 day moving average at 76.26. Then more resistance lurks at 77. If it rallies the far target is 78. Oddly, the MACD & RSI momentum indicators don't really point to a rally, since they are hovering near the top of the range.

The dollar's rally (and several days' upmove) wounded Stocks today but not fatally -- at least, that's not proven yet. Some day soon stocks will indeed top, but not yet, I think. Look for one last push up into that 10,375 (50% correction mark).

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.