Friday, March 05, 2010

Assuming that Silver and Gold Prices Are About to Extend Their Rally, This Late-Stage Leg Up Will See Silver Sharply Outperform Gold

Gold Price Close Today : 1,134.80
Gold Price Close 26-Feb : 1,118.30
Change: 16.50 or 1.5%

Silver Price Close Today : 17.362
Silver Price Close 26-Feb : 16.499
Change 86.30 cents or 5.2%

Platinum Price Close Today: 1,578.00
Platinum Price Close 26-Feb: 1,543.50
Change: 34.50 or 2.2%

Palladium Price Close Today: 479.15
Palladium Price Close 26-Feb: 431.75
Change: 47.40 or 11.0%

Gold Silver Ratio Today: 65.36
Gold Silver Ratio 26-Feb: 67.78
Change: -2.42 or -3.6%

Dow Industrial: 10,566.20
Dow Industrial 26-Feb: 10,325.26
Change: 240.94 or 2.3%

US Dollar Index: 80.430
US Dollar Index 26-Feb: 80.352
Change: 0.08 or 0.1%

Res ipsa loquitur. The thing speaks for itself. This week's big winner was Palladium the Obscure, up 11%, on strength of a J.P. Morgan report that the PALLADIUM PRICE would b'ime/by touch $700/oz, stampeding the sheep into palladium. Moving right along, the SILVER PRICE won the next prize with a 5.2% gain, 3.5 times gold's gain, so the Gold/Silver Ratio dropped 3.7%. Dow rose 2.3%, S&P500 3%, and dollar index flatlined.

'Twas a strong week for the GOLD PRICE, stronger than the mere numbers (up 1.5%) intimate. No, that's not blather. Gold successfully tested $1,090 support last week and battered its way through resistance at $1,100, $1,118, $1,125, and $1,132, not to mention that in February $1,120 had turned gold back. Yesterday gold discretely corrected, bounced off $1,125 and today closed over $1,132 at $1,134.80 ($2.20 higher).

All these things set the gold price up to challenge the January high at $1,161.80 intraday ($1,150 closing). That will be the final witness that gold has entered a new rally, ready to test its mettle once more against the $1,226.40 all time intraday high. Technically from Dec. 3 to end-February gold formed a falling wedge, which (as they usually do) has broken out upside. Another harbinger of higher prices.

The silver price hath the bit between its teeth and runneth. It now stands above its 20 day moving average and its 50 DMA and the 20 is about to cross above the 200. All hopeful pointers. There is little resistance between here and the last intraday peak at $19.45, chiefly $17.75 and $18.80. Forget ye not that the silver price failed to make a new all-time high in December to match gold's, which shame silver has yet to wipe clean. Assuming that my earlier interpretation was correct and that silver and gold prices are about to extend their rally, this late-stage leg up will see silver sharply outperform gold. Too early to tell if that's true because the gold price must push through $1,226 to confirm. Otherwise we are condemned to five more months of up and down trading in a range.

Silver today gained 20.6c to close on Comex at $17.362. Look what the gold/silver ratio has done, falling to 65.36 from above 70 not long ago. Next stop resistance at 60:1

Longer term, all these messengers bring good news for SILVER and GOLD PRICES, just a leetle uncertainty about the near future.

'Pears to me the US DOLLAR INDEX has rolled over and left its rally behind. It double topped at 81.20+ this week. To resume its uptrend the $ Index would have to climb over 81.30. Fall will accelerate once it pierces 79.80, then question will become, Can it hold above 78.50? Still dangerous as a rattlesnake in a liverish mood, because dollar could bend, correct, and shoot to 89. I don't think that's going to happen, nor do I think that Michael Anthony will drop by my house tonight with a million dollar check from John Beresford Tipton, but I recognize the possibility. Dollar Index fell 13.1 basis points to 80.43 in late trading.

STOCKS managed to rise today and clear the 10,400 hurdle. And? So what? This move may reach the last high around 10,700, but that will only emphasize with a double top the single material fact: stocks will fall much, much further, even further than the last 6450 low for the Dow. Today' scorecard? Dow + 122.06 at 10,566.20 & S&P500 at 1,137.78, up 14.81.

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.