Monday, January 11, 2010

Silver and Gold Prices Responded to the Dollar's Fall by Strong Up Moves

Gold Price Close Today : 1150.70
Change: 12.50 or 1.1%

Silver Price Close Today : 18.683
Change: 22.5 cents or 1.2%

Platinum Price Close Today: 1591.80
Change: 15.30 or 1.0%

Palladium Price Close Today: 433.55
Change: 4.90 or 1.1%

Gold Silver Ratio Today: 61.59
Change: -0.074 or -0.1%

Dow Industrial: 10,663.99
Change: 45.80 or 0.4%

US Dollar Index: 78.30
Change: 0.29 or 0.4%

SILVER and GOLD PRICES responded to the dollar's fall by strong up moves. On Comex the SILVER PRICE rose 22.5 cents to $18.683 while the GOLD PRICE added $12.50 to $1,150.70. Yes, that sends gold above that $1,140-ish resistance, and within striking distance of $1,200. From $18.68 the silver price could easily reach its last high close at $19.29. But as I have warned before, this may only mark that exuberant B-wave of an A-down/B-up/C-down correction. Here's an example. From the February high to the May 2009 low, silver made an A-B-C correction, but from the June high to the July low, it dropped straight down, hit the bottom, and commenced a rally that never stopped until December. So I just can't say in advance which path this correction will follow. It will clue us by closing 3% above the last highs, or falling back. We wait for the market to speak.

Several readers wrote asking what I meant by "Get out of all assets that promise to pay dollars in the future." After all, don't we use dollars, so won't we be paid dollars in the future? Stocks are valued in dollars, but are not a promise to pay future dollars. Silver and gold are valued in dollars, but are not a promise to pay future dollars. All the following promise to pay you back dollars tomorrow for dollars deposited with them today: bank deposits, certificates of deposit, all federal, state, local, and corporate bonds, loans of all kinds, annuities, whole life insurance policies, and whatever else promises to pay you dollars in the future.

Also, my Friday remarks about the unprofitability of those hugely overpriced 1/10 American Eagles at $249 each did not mean that the gold price would never rise to $2,490, since it most likely will. Rather, I meant that those coins, like almost all other modern "rarities", will not hold that premium against gold as it rises, and so will only be a waste of the premium you pay.

Momentous news of the day was the dollar's unexpected collapse of 36 basis points after a like fall of 45 bps last Friday. I say "collapse" because the Dollar Index fell below its 20 day moving average. Even if the dollar is fated to rally more this year, this could extend the present correction. I remind those who fear the Big Bad Dollar & its rally this year that in 1st quarter 2008 the dollar was rallying sharply while silver & gold did the same. Shake out of your head the notion that the US Dollar's weakness is the only force driving investors into silver and gold. It is a powerful force, but not alone by any means. US $ Index is not around 77.104, down 36 basis points from Friday.

Day after day stocks keep edging to slightly new highs. Dow today closed 10,663.99, up 45.80 & S&P rose 2 to 1,146.98. However, other indices were mixed, so up, some down. Shows confusion. Stocks are vulnerable to a correction here.

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.