Tuesday, November 10, 2009

The Silver Price Remains the Fly in This Rally's Ointment

Gold Price Close Today : 1,101.90
Change: 1.10 or 0.1%

Silver Price Close Today : 17.212
Change: 0.258 or -1.5%

Platinum Price Close Today: 1,355.50
Change: -0.50 or 0.0%

Palladium Price Close Today: 333.15
Change: -1.05 or -0.3%

Gold Silver Ratio Today: 64.02
Change: 1.008 or 1.6%

Dow Industrial: 10,246.97
Change: 20.03 or 0.2%

US Dollar Index: 75.02
Change: -0.04 or -0.1%

The SILVER PRICE remains the fly in this rally's ointment. Why? It has failed so far to make new highs along with gold. Oh, it has made new highs for the move, but not all-time new highs. Today it was strongly attacked and driven back to the bottom of its range ($17.20), after breaching the top of its range ($17.20 - $17.60) during yesterday, but refusing to close above $17.60. I don't like SILVER and GOLD PRICES closing one up and one down the same day. That's a non-confirmation, a family disagreement, a falling out, and somebody may get hurt when that happens. ("Put that fork down!")

Then, too, I can switch on my paranoia meter, and it goes off the chart at such an unnatural result as "gold up/silver down." My Manipulation Meter tells me that I get a bigger bang for my precious metals manipulating buck if I hit the much smaller silver market with selling, rather than the larger gold market. If I can break the silver price, that will drag the gold price down.

Aww, but forget all that conspiracy stuff. Accurate or not, technically divergent closes indicate confusion and hesitation in any market. Stocks today showed the same bafflement, with some indices rising while others fell. Today silver fell 25.8 cents to close on Comex at $17.212. In the aftermarket silver is trading at $17.32.

The GOLD PRICE, on the other hand, kept on climbing that proverbial bull market wall of worry to close up at $1,101.90 (that is Eleven hundred One dollars & 90/100ths). You don't have to be a genius like Nancy Pelosi or Barbara Boxer to recognize gold is fighting hard to push through $1,100 against tough resistance.

The gold price climbed to $1,108 early in the day, then was driven back to $1,097. Bloodied but unbeaten it rose to close $1,101.90 on Comex, up $1.10. Then -- well, by golly! -- it climbed to $1,105.60 in the aftermarket. I have to call that a successful test of support.

Will the gold price pierce $1,110 (One thousand One hundred Ten dollars) this time? It's fighting to. Maybe it will be knocked back to correct before it does, but it won't be much. As I keep on reminding y'all, "A bull market climbs a wall of worry." That means folks on all sides can cite all sorts of apparently good reasons -- meretricious reasons, really -- why the market can't climb any further. Then it does.

Right now that "good reason" is silver's lagging. I don't know whether that foretells an imminent correction, but I do think all the "dollar carry trade" stories prophesying that gold, stocks, and commodities will collapse momentarily as the dollar soars and the carry trade gamblers get caught short dollars are overblown. Sure, it could happen, but the dollar has to rally first, and there hasn't so much as the first swallow of Capistrano flown by yet to harbinge a dollar rally.

Most of these "gold will plunge" doom-and-gloomers miss the real reason gold is rallying anyway: monetary demand. Certainly some speculative demand has been fed by the Fed's huge money supply increases, and by the Dollar carry trade, but monetary demand for gold and silver is PRIMARILY driving this rally. The alternative currencies silver and gold (to put it into crass breakfast flake marketing terms) are stealing market share from lousy fiat currencies like dollars, yen, and Yugos, errr, euros. Gold and silver remain in a long term primary uptrend, a bull market, and that has at least 5 more years to climb.

Today the US Dollar Index fended off attackers at 75, rose to 75.25, sank to 74.95, leapt back to 75.271, then faded from 11:00a.m. the rest of the day. Right now it remains at 75.022, down 4 basis points form yesterday and near the bottom of today's range. Altogether, it was a thoroughly equivocal day, blowing hot and cold out of both sides of its mouth. It says at least, "Dollar didn't break today." When you are the scrofulous US Dollar, that's success, I reckon.

STOCKS are set up now for a crushing and long lasting peak. Stocks were confused today, with the Dow up 20.03 to 10,246.97, the S&P500 down 0.07, and others up and down. The Dow traded in a narrow range, up and down and up, but had a tough time holding on. Maximum I expect to see in the Dow is 10,375. Sauve qui peut! Every man for himself! Get to the lifeboats now!

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.