Friday, January 15, 2010

If the Gold Price is Tracing Out an A-B-C Correction, then B Peaked This Week and Gold Will Fall Next Week

Gold Price Close Today : 1,130.10
Gold Price Close 8th Jan: 1,138.20
Change: -8.10 or -0.7%

Silver Price Close Today : 18.411
Silver Price Close 8th Jan: 18.458
Change: -4.70 cents or -0.3%

Platinum Price Close Today: 1,601.50
Platinum Price Close 8th Jan: 1,576.50
Change: 25.00 or 1.6%

Palladium Price Close Today: 453.50
Palladium Price Close 8th Jan: 428.65
Change: 24.85 or 5.8%

Gold Silver Ratio Today: 61.38
Gold Silver Ratio Close 8th Jan: 61.66
Change: -0.28 or -0.5%

Dow Industrial: 10,609.55
Dow Close 8th Jan: 10,617.29
Change: -7.74 or -0.1%

US Dollar Index: 77.171
US Dollar Index Close 8th Jan: 77.461
Change: -0.29 or -0.4%

Everything went down this week? Yep, everything but platinum and palladium, but it's hard to trade anything as quirky as those two.

Not surprising anyone, the scrofulous US dollar index burst through 77 and raced ahead today to a high of 77,30. Right now it is trading at 77.171, up 43.9 basis points.

Certes, a rising dollar greases the rungs on any ladder silver and gold prices are climbing, but 'tis not an unbreachable difficulty. Last year silver and gold rocketed ahead from mid-January lows to mid-February highs while the dollar raged and raced upwards. No, it seems metals are steadily decoupling from the dollar as their most powerful price determiner. Not wholly, not yet, but steadily. You'll know that transition is complete when gold is no longer quoted in dollars, but dollars in gold.

The GOLD PRICE traded down today $12.50 to close on Comex at $1,130.10. That lands it back in support at $1125 - 1,130. This week saw a spike bottom to $1,118, so that now becomes the "must hold price." If the gold price falls through that trap door, then 'twill be doomed to revisit $1,100, maybe $1,085.

However, golds uptrend from the $1,075 intraday low on 21 December remains unbroken. A close below $1,125 would wreck that.

The jury is still out on the nature of gold's correction begun on 3 December, and the ultimate low. If gold is tracing out an A-B-C correction, then B peaked this week and gold will fall next week. But will it fall lower than $1,075. Or have we already seen the bottom. Watch the market next week to find out. I only remind y'all, at the risk of being scorned as a permabull, that gold remains in a primary uptrend that has another 5 - 10 years to run. Therefore we have to assume every question will resolve to the upside. They won't always, but that's generally safe. And if you're wrong, then the bull market will bail you out.

Folks often assume silver and gold walk in lock step, but that's not at all true. They work together like waves chasing each other with a little lag or lead, and sometimes even mover opposite each other (Fall 2008).

Since New Years silver has shown itself stronger than gold. Silver must hold 17.00 cents to maintain its lower trend line, and should hold 17.66 to remain above its 20 day moving average, the first warning of a downturn. Really, if silver closes below 18.00, it will be a mess for a while.

On the upside gold must climb above $1,160 and silver above 18.90 even to begin to claim another rally has been loosed.

On the weekly chart silver's uptrend line hits today about 16.70, nested with lateral support, and that argues against any fall to a new low.

I am tempted to read today's stock behavior as the decisive breakdown out of the long bearish upward wedge that both the Dow and the S&P500 have long been forming. that means this week's new Dow high above the wedge's upper boundary was the spike that proves the top. And today stocks dropped noticeably. Dow fell 100.90 to 10,609.55 and the S&P500 fell 12.43 to 1136.03. Whether tomorrow or next month, a big break loometh in stocks.

Monday all the banks and markets are closed so I won't publish a commentary.

Y'all enjoy your weekend!

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. Whenever I write "Stay out of stocks" readers inevitably ask, "Do you mean precious metals mining stocks, too?" No, I don't.