Tuesday, February 23, 2010

I Suspect Gold and Silver Prices Will Proceed to Rise From Here

Gold Price Close Today : 1102.70
Change: -9.90 or -0.9%

Silver Price Close Today : 15.888
Change -33.4 cents or -2.1%

Platinum Price Close Today: 1512.50
Change: -13.00 or -0.9%

Palladium Price Close Today: 431.00
Change: -9.50 or -2.2%

Gold Silver Ratio Today: 69.40
Change: 0.819 or 1.2%

Dow Industrial: 10,282.41
Change: -100.97 or -1.0%

US Dollar Index: 80.40
Change: 0.43 or 0.5%

I feel foolish! I get busy and don't notice that the month is draining away, so I forget that those black-shirts who sell options so often manage to drive down SILVER and GOLD PRICES around option expiry (today) so they don't have to pay off on all those calls they've sold. Turns out they didn't quite make it today, as there was a hunk of $1,100 calls and on Comex the GOLD PRICE closed at $1,102.70, down $9.90. Low was $1,099. There were a bunch of silver $16.00 calls, too, and the SILVER PRICE closed today at $15.888, down 33.4c and leaving those $16.00 calls high, dry, and worthless.

We will know that this explains recent price movements if silver and gold prices proceed to rise from here, which I suspect they will. Frankly, gold's performance in the face of this monthly storm was awfully stout, since it resisted closing below $1,100. Silver's close today, too, was above its previous low. The most any manipulation can effect is a short interruption of the trend.

The US DOLLAR INDEX today rose 42.8 basis points to 80.935, on its way to 81.50, the measured target from its flag formation. Dollar's fundamentals haven't changed a bit, merely the faddish financial crisis of the day. Be patient.

STOCKS keep adding evidence that they have indeed topped. Dow plunged 100.97 today to end at 10,282.41. S&P500 did worse, dropping 13.41 to 1,094.60. Lower prices will come.

Yesterday someone called with a direct mail flyer from some dealer offering to sell gold American Eagles for $1,110. Since that was about $42 lower than wholesale cost, I called a wholesaler friend and we got a good laugh. His comment was, "You and I both know there just cannot be anything legitimate about that."

I've traded gold since 1980, and I can promise y'all that NOBODY ever runs a sale on gold. Imagine a bank running a special selling $20 bills for $18. Won't ever happen. When you see it, you just know that somewhere ahead lies big trouble. Oh, yeah, you might find somebody who will cut his own commission and sell nearer to wholesale, until of course he goes broke, but nobody sells under wholesale.

Here's the king "Gold on Sale" story of all time. Back in the early 1980s a company calling itself "Krugerrand Corporation" used to run full page ads in the Wall St. Journal offering to sell Krugerrands at spot. Since at the time they cost 3% more than spot at wholesale, that offer had us all scratching our heads. Turns out, they didn't actually deliver the Krugerrands, they just sold them to you and took your money. (Shoot, if I never had to deliver the Krugerrands, I might sell 'em for half of spot.

Then things began to unravel, as always. Turns out the photo of the high rise building in Miami with the enormous Krugerrand Corporation sign across the top had been re-touched to add the sign. When the authorities finally went in, they opened the safe and found many bars that looked like silver and gold. Only catch was that they were wood painted silver or gold. Thus vanished the people's money. Over 30 years in business I have seen a lot of gold and silver firms vanish overnight. It has led me to believe the truth of one proverb: "If it sounds too good to be true, it is." Price isn't the only criterion.

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.