Monday, April 19, 2010

Today Marked the Completion of Gold's Correction Begun Last Monday

Gold Price Close Today : 1135.20
Change: -1.10 or -0.1%

Silver Price Close Today : 17.725
Change 5.6 cents or 0.3%

Platinum Price Close Today: 1696.00
Change: -31.50 or -1.8%

Palladium Price Close Today: 534.70
Change: -13.30 or -2.4%

Gold Silver Ratio Today: 64.05
Change: -0.265 or -0.4%

Dow Industrial: 11,095.05
Change: 73.39 or 0.7%

US Dollar Index: 80.95
Change: 0.03 or 0.0%

Overnight the GOLD PRICE traded lower to $1,123.60, but bounded smartly off that level up to $1,135 resistance. On Comex it closed at $1,135.20, down $1.10 from Friday. Now $1,137 has become the price to beat, and $1,124 the price that gold must defend against all adversaries.

While viewed as catastrophic in some quarters, gold's fall has only returned to the neckline of the upside down head and shoulders formed January - April. That would be typical behaviour for markets, touching back to the breakout point for one last kiss good-bye before blasting off into a rally. This does not signal weakness, but proves support and confirms the rally. If gold closes below $1,124, that outlook would be proven dead wrong.

The lynch mob cornered the SILVER PRICE at $17.465, but silver faced them off and ran 'me away. Nothing terribly amiss here, only silver must not close below $17.50. Silver closed at $17.725, up 5.6c from Friday.

Yes, I would buy both silver and gold right here. Y'all were waiting for a correction, don't go all weak- kneed and sweaty on me now.

Right, wrong, or crazy-as-a-betsy-bug, here's my outlook. Today marked the completion of gold's correction begun last Monday after the $1,161.50 high close. Now gold is entering its next rally after the December $1,226 high. If it performs as usual, silver can be expected to outperform gold in this leg up, pulling the gold/silver ratio below 50:1.

Okay, I confess, this is a risky interpretation, but what I believe is most likely. Based on past seasonal performance, silver & gold could rally into early June. If I am wrong, you'll have to wait until next fall for significantly higher prices, and endure a long hot summer of meaningless back & forth trading.

STOCKS plainly found help after 14:30 today from A Friend With Deep Pockets. Dow ended the day up an improbable 73.39 at 11,092.05. S&P500 rose 5.9 to close at 11,97.52, while the Nasdaq fell slightly along with other indices. This was not a strong showing.

Stocks are topping, but just as an elephant takes a long time to sit down, so stocks are a colossal market and ponderously slow to change course & direction. Cultivate longsuffering, withstand seduction, stay out of stocks.

The US DOLLAR INDEX barely reached its 20 day moving average (81.07) with today's 81.28 high, but settled below 81 and now is trading at 80.945, up only 2.8 basis points -- Hey! Louise! Hand me my magnifying glass! Looks like the Goldman-Sachs supercharge hath spent itself. Dollar remains below its short term downtrend line that has reigned and ruled for the last month. No change.

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.