Friday, December 04, 2009

Take This Gold and Silver Price Correction as an Opportunity to Buy More, Cheaper

Gold Price Close Today : 1,168.00
Gold Price Close November 25: 1,187.00
Change: -19.00 or -1.6%

Silver Price Close Today : 18.496
Silver Price Close November 25: 18.768
Change: -27.20 cents or -1.4%

Platinum Price Close Today: 1,442.00
Platinum Price Close November 25: 1,475.30
Change: -33.30 or -2.3%

Palladium Price Close Today: 373.50
Palladium Price Close November 25: 375.20
Change: -1.70 or -0.5%

Gold Silver Ratio Today: 63.15
Gold Silver Ratio November 25: 63.25
Change: -0.10 or -0.2%

Dow Industrial: 10,338.90
Dow Industrial November 25: 10,464.40
Change: -125.50 or -1.2%

US Dollar Index: 75.771
US Dollar Index November 25: 74.346
Change: 1.43 or 1.9%

Whoo--eee, big surprise this week for those who believe that GOLD and SILVER PRICES always rise and the scrofulous US dollar always falls.

Today the US DOLLAR INDEX broke through 74.80 about 8:30 a.m. and left behind two runaway gaps. It climbed all day reaching 75.936 around 3:00 p.m. Right now its trading 75.771, up 114 basis points for the day.

On a weekly chart this looks like nothing, but on a daily chart today's action implies a move to 77.50, provided the dollar can close above 76.50 next week. Odds favour a dollar rally here. No big deal. A corpse will sit up, too, if you hit him with enough electricity. After the jolt, he's still dead.

Now y'all remember I am no prophet, only a poor Tennessee ridge runner and natural born fool turned loose with a forecast, so realize that I am making educated guesses here. If y'all had been carefully watching, you would have noticed that the bottoms in July, mid-August, end-September, and October all happened between 4% & 4.8% down from their preceding peaks. On 2 December gold made an intraday peak at $1,226.40. A 4.8% drop from there takes you to $1,170.23, not far off today's $1,168.80 close (down a painful $48.60).

So where this correction is headed is not so easy to gauge.

If the GOLD PRICE does not catch here or around $1150 - $1160 (the 20 day moving average is now 1156.34), it could drop to $1,088. Another candidate is a 25% correction of the April to December move from $865 - $1,226, namely, $1,136.05. From a raw look at the chart, big support comes in at $1,070. Gold could drop further but it could just as well turn around Monday and slap everybody's jaws. Either way, take this correction as an opportunity to buy more, cheaper. After this correction, gold will take off again and you'll be moaning and complaining to yourself, "Why didn't I buy when it dropped?"

The SILVER PRICE, not as overbought as gold, has not corrected as much as the gold price. No sooner had I let fly the words from my mouth yesterday that it wasn't to be expected that the Gold/Silver Ratio would fall by gold dropping while silver held steady or rose, than the market makes a liar out of me next day. Ratio fell from 63.72 yesterday to 63.19 today.

The silver price could end its correction here, but $18.00 is very strong resistance. If silver falls through $18.00, then pick your target: last low at $16.06, 200 day moving average at $14.92, or $12.50 June low. All are possible, but a bottom is still due in the ratio about year end, and that usually coincides with silver and gold price highs. Also, that $1,300 target for gold is still good. All that argues against a sharp breakdown here.

It appears we may be dealing with trading like Oct-Nov 2007, when metals corrected after a wild 3-month run, then took off again for Gold $1,000 in March 2008. One way or the other, silver and gold prices remain in a bull market, but be careful.

STOCKS are rolling over, readying for a big drop. They are losing fast against silver and gold.

Gold coin and silver bullion remain scarce. With all the marketing genius native to government enterprises, the US Mint has suspended production of gold and silver American Eagles. They probably won't re-appear until the mint has "re-tooled" for 2010, which means February. Stick with silver US 90% coin snd gold Austrian 100 coronas or Mexican 50 pesos. In small coins look for bargains on Swiss or French 20 francs or the Mexican peso series.

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.