Monday, November 16, 2009

The Silver Price Should Outperform the Gold Price Like a Show-Off - Buy the Break Out

Gold Price Close Today : 1,138.60
Gold Price Close 13 Nov: 1,095.10
Change: 43.50 or 4.0%

Silver Price Close Today : 18.39
Silver Price Close 13 Nov: 17.365
Change: 10.250 cents or 5.9%

Platinum Price Close Today: 1,454.40
Platinum Price Close 13 Nov: 1,344.30
Change: 110.100 or 8.2%

Palladium Price Close Today: 376.25
Palladium Price Close 13 Nov: 330.25
Change: 46.00 or 13.9%

Gold Silver Ratio Today: 61.91
Gold Silver Ratio 13 Nov: 63.06
Change: -1.15 or -1.8%

Dow Industrial: 10,406.96
Dow Industrial 13 Nov: 10,023.42
Change: 383.540 or 3.8%

US Dollar Index: 74.911
US Dollar Index 13 Nov: 75.761
Change: -0.850 or -1.1%

Look at the changes for the week. Clearly, gold, silver, and stocks (?) are still rallying. Whatever damage to those rallies a dollar rally might do remain immaterial because the dollar refuses to rally yet.

Today was a big break out day for stocks and metals, and self-defense makes us ask whether they are joined at the hip. If they rise together will they fall together? For stocks I am sure of the answer (as sure as I ever get about such things), but not for silver and gold.

The US DOLLAR INDEX closed today dead on top of its lower support, at 74.911, down 37.5 basis points from Friday. Resistance runs from 74.777 to 74.900. If the dollar breaks that line, it will fall clean to 74, then further. Maybe even revisit the old low at 71. Tomorrow will seal the dollar's fate, one way or t'other.

STOCKS at long last have reached the 50% correction of the Spring 2009 to Now rally, 10,375. In fact, the Dow closed above that mark at 10,406.96, up 136.49. From here you have to reckon the Dow as a dead man walking. It could spike as far as 11,000, but this is as good as it gets for stocks. S&P500 closed at 1,109.30, up 15.82 Mark well, my friends, that although stocks are making new rally highs in dollar terms, in gold and silver terms the bloom long ago left the rose. The Dow in Gold Dollars topped on 27 August at G$209.47 (10.133 oz), fell through support G$195-194, and today stands just above free-fall territory. Although the Dow rose to a new high today, the DiG$ closed G$188.94 (9.14 oz), down and nearly a new low. Point is, these two, stocks and gold, are NOT moving together but against each other.

My friend Bob The Technical Genius called today and recommended that I call up charts of the ETFs, SLV & GLD, for a clear view of what silver and gold prices are doing.

Very clearly you will see the breakaway gap on both charts today. Assuming that this is a breakaway gap rather than an exhaustion gap, which is hardly likely here, then gold and silver prices are signaling a fast, large run up. That offers another argument against metals stopping here.

The SILVER PRICE today finally crossed $18.00, and spectacularly. It rose $1.02 to close at $18.39 on Comex. That's a 5.9% rise in one day! Since silver has hung back back more than gold, from here (as it is later in the rally) silver should outperform gold like a show-off. Buy the break out.

The GOLD PRICE last week argued that it was very strong when it dropped to $1,106 then closed higher Friday at $1,116.10. That set gold up for today's surge of $22.50 to a Comex close at $1,138.60. I still expect this rally to reach $1,300 before it stops. However, my friend Bob, who is a world-class worrier when it comes to markets, is sweating bullets over the $1,140 point. Okay, recall nowr H.L. Hunt's wise words, "Never get really elated in victory; when times are tough, never get down." Any time now silver and gold could undergo sharp corrections as they tread their path to gold at $1,300. However, I don't believe that will happen tomorrow, or until both metals put meaty gains under their belts.

How will you know I am wrong? A silver close below $18.00 or a gold close below $1,106 would sound alarm claxons. Be clear, though, about stocks. They can completed their 50% correction, and can collapse any day now. They are extremely overbought (gold and silver are not).

If you still have stocks, better call your broker in the morning and sell 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.