Wednesday, February 10, 2010

Silver and Gold Prices are on the Edge of a Cliff

Gold Price Close Today : 1075.80
Change: -0.90 or -0.1%

Silver Price Close Today : 15.302
Change: -12.9 cents or -0.8%

Platinum Price Close Today: 1510.80
Change: 7.70 or 0.5%

Palladium Price Close Today: 414.95
Change: -4.55 or -1.1%

Gold Silver Ratio Today: 70.30
Change: 0.529 or 0.8%

Dow Industrial: 10,038.38
Change: -20.26 or -0.2%

US Dollar Index: 80.06
Change: 0.19 or 0.2%

Several times every day I answer the same question about premiums on SILVER and GOLD PRICES, so let me share that with y'all: over time, premium always disappears. That means that you will NOT re-capture at the peak of the market when you sell those premium dollars you spend today. It means that you should always buy the lowest cost per ounce silver or gold, consistent with liquidity (never buy anything so unusual that you can't re-sell it, like Iranian Pahlavi's or gold shot.)

Does that mean we do not recommend US silver Eagles? Right, because buying US 90% silver coin nets you 13% more silver today. Does that mean we don't recommend American gold Eagles? Right, because they cost from $15 to $40 an ounce more than other coins. Remember, you will NOT recapture those premium dollars when you sell a the peak, I don't care what all the boiler-room salesmen tell you about numismatic coins and proof Eagles and all the rest. The principle remains, well attested by history: over time, premium always disappears.

In the end, an ounce of gold or silver is an ounce. That's the only thing that counts in the long run. All else is marketing, "moichendizing" as Mel Brooks/Yogurt would say.

The US DOLLAR INDEX rose today 19.4 basis points to 80.057, but silver and gold prices held their own. The gold price dropped 90c to $1,075.80 at Comex close, silver dropped 12.9c to 15.302. In the aftermarket metals dropped a bit more, but not significantly. Today was a "pause," and a pause can mean a pause in a move, or it can mark a change of direction.

Silver and gold prices are on the edge of a cliff. They might fall over the cliff, or a powerful updraft might catch their parasails and carry them into the sky. Nothing has happened yet to tell us which way they will break. We are waiting for the gold price to break below its last low ($1,062) or above its last failed high ($1,120).

Dow Jones Industrials today closed down 20.26 at 10,038.38, close enough to the deadly 10,000 mark to chew away most of the fingernails on the Nice Government Men. S&P dropped 2.39 to 1,068.13. Today, tomorrow, or next week stocks will break big. They will break.

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.