Friday, March 12, 2010

Reasons Behind the Wild Roller Coaster Ride for the Gold Price in the Last Week

Gold Price Close Today : 1108.00
Change: 0.20 or 0.0%

Silver Price Close Today : 17.136
Change 14.2 cents or 0.8%

Platinum Price Close Today: 1610.80
Change: 22.50 or 1.4%

Palladium Price Close Today: 460.15
Change: -3.60 or -0.8%

Gold Silver Ratio Today: 64.66
Change: -0.529 or -0.8%

Dow Industrial: 10,611.84
Change: 44.10 or 0.4%

US Dollar Index: 80.27
Change: -0.17 or -0.2%

A reader asked me to give the reasons behind the wild roller coaster ride for the GOLD PRICE in the last week. Well, a range from $1,100 to $1,142.70 is only 3.8%, not so terribly wide. Simplest explanation is that gold mounted a massive rise from $681 in November 2008 to $1,226.40 in December 2009, so a correction was bound to follow, frustrating, slow, rangey.

Yet now my friend Bob the Technical Genius points out that an upside down head and shoulders may be forming in gold, a base for the next rally. May be forming.

The simple answer says it just takes time for a market's pendulum to swing from one side to another. If you don't like to sweat, stay off the field.

The GOLD PRICE today fought off an attack that backed it down to $1,100.50, but closed up 20c on the day at $1,108. Splendid, but still range-bound.

The SILVER PRICE remains in an uptrend and keeps gaining on gold. That declining gold/silver ratio says something good is coming for both metals, but what exactly? Silver has also formed a rising wedge since February -- bad juju -- and must close above $18.00 to negate the negatives of that.

Today's $16.832 silver price low was a little higher than yesterday's, and silver gained 14.2c to close on Comex at $17.136. Tomorrow the silver price should go higher but keep in mind that menacing rising wedge and silver's need to conquer $18.00.

Tomorrow promises to be a dark day for the US Dollar Index. Once it falls through the trap door at 80.1, it won't stop till it hits the floor at 79.50. If that floor gives way, then next story is at 78.50. We'll know this my opinion is hogwash if the dollar closes above 81.50, otherwise the dollar will drop a while. Dollar index today fell 17.1 basis points to 80.274.

Stocks rose today 44.1 points to close at 10,611.84 for the Dow and up 4.63 at 1,150.24 for the S&P500. Yes, I have been fighting stocks all the way up and for a reason: the rally is a trap. It may reach the last high at 10,700 or even in a fit climb above 11,000, but the sand is running out of the hourglass. What you are witnessing does not by any means qualify as a new bull market. P/E, yields, time elapsed in this bear market, all argue fatally against a new bull market. No, this is a rally in a bear market, and after the bear has lured the most victims possible into his cave, then he will strike and devour them. Y'all stay out of that bear's cave. Stocks have formed a lethal rising wedge, which usually resolves by crashing.

Many thanks for your expressions of care for Susan and your many suggestions. We consider each of them carefully, and deeply appreciate your prayers.

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.