Friday, March 26, 2010

Gold Price Head and Shoulders Formation Gives a Target of $1250

Gold Price Close Today : 1,104.30
Gold Price 19th March: 1,107.40
Change: -3.10 or -0.3%

Silver Price Close Today : 16.892
Silver Price 19th March: 17.017
Change -12.50 cents or -0.7%

Platinum Price Close Today: 1,597.40
Platinum Price 19th March: 1,609.00
Change: -11.60 or -0.7%

Palladium Price Close Today: 455.35
Palladium Price 19th March: 467.00
Change: -11.65 or -2.5%

Gold Silver Ratio Today: 65.37
Gold Silver Ratio 19th March: 65.08
Change: 0.30 or 0.5%

Dow Industrial: 10,850.89
Dow 19th March: 10,741.98
Change: 108.91 or 1.0%

US Dollar Index: 81.623
US Dollar 19th March: 80.772
Change: 0.85 or 1.1%

The story is told that once upon a time a man jumped off the Empire State building. As he fell, the people on every floor could hear him yell, "So far, so good!"

I could say the same about silver and gold today: "So far, so good." Thru the week I have been gazing at the gold chart and the upside down head and shoulders forming there. Question was, would the right shoulder hold at $1,085. So far, so good. Gold stayed below $1,095 for two days, then this morning early smashed through that line. I was talking on the phone and gold stood at $1,091. Ten minutes or 15 minutes later it was $1,101, then $1,105. On Comex later in the day gold closed at $1,104.30, up $11.40. Thus it should have behaved, if that really is an upside down H&S.

A H&S, of course, is a reversal formation, slow forming but quite reliable. To estimate a target, you measure the depth of the head to the neckline, then add that to wherever it breaks out. Just eyeballing it right now it gives a target of $1,250, but bear in mind that a close below $1,085 gainsays my interpretation.

Wednesday and yesterday the silver price stood off every attacker at 16.50 and yielded not a foot to the miscreants. Today it surpassed yesterday's 16.82 high to close on Comex at 16.892, up 16c. Can you imagine how much resistance is clustered up at 17.00, with every smart guy in the world sure that silver will drop further? Yet Monday or Tuesday silver ought to cross that mark. Only resistance to speak of up there is 17.50 - 17.80, then 18.90. As with gold, silver must hold on to its gains so far, and must not close below 16.50. That would negate any upward move.

THE US DOLLAR INDEX lost 49.7 basis points today. If it gets any more schizophrenic, somebody's going to have to put the dollar in one of those custom tailored jackets with sleeves that belt in the back. Day before yesterday it rose 107 basis points, yesterday 34 basis points, still a big move, then today it plunges 50 basis points. Points to lots of nervous longs who don't necessarily trust their gains to last over the weekend and so pull out on Friday to enjoy a peaceful weekend martini out on Lon-gisland. Yes, the scrofulous dollar remains in an uptrend, I suspect it has blown out all its fuel. Like a rattlesnake you think is dead, you still have to be careful cause it might be alive enough to bite you.

Dow today looked pitiful, a sorrier re-play of yesterday's sorry performance. It was up most of the day, then dropped off about 12:30 and could do more than wallow back and forth over unchanged. Closed the day at 10,850.89, up 9.68 while the S&P500 rose a microscopic 0.06 [sic]. Stocks are rolling over. Stay away.

Spring peepers are out and my yard's full of daffodils and forsythia, and new calves are appearing in every pasture. Enough of winter already!

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.