Friday, May 07, 2010

Any Higher Gold Price Close Now Will Send The Gold Price Shooting Toward $1,300 Fast

Gold Price Close Today : 1,210.00
Gold Price Close 22nd April: 1,180.10
Change: 29.90 or 2.5%

Silver Price Close Today : 18.429
Silver Price Close 30th of April: 18.611
Change -18.20 cents or -1.0%

Platinum Price Close Today: 1,661.90
Platinum Price Close 30th of April: 1,739.40
Change: -77.50 or -4.5%

Palladium Price Close Today: 512.70
Palladium Price Close 22nd of April: 551.55
Change: -13.95 or -2.5%

Gold Silver Ratio Today: 65.66
Gold Silver Ratio 22nd of April: 63.41
Change: 2.25 or 3.5%

Dow Industrial: 10,380.43
Dow Industrial 22nd of April: 11,008.61
Change: -628.18 or -5.7%

US Dollar Index: 84.542
US Dollar Index 22nd of April: 81.896
Change: 2.65 or 3.2%

This week markets re-taught us the one lesson that everyone must learn to survive: once the bullets start flying it's too late to buy a pistol. No one is clever or fast enough to trade markets like these in an economic climate that ranges from the ludicrous to the surrealistic, when the depression will continue for many more years, with more bank failures & now, it seems likely, widespread sovereign debt defaults (governments not paying their debts). No, you can't trade these markets, you can only identify the primary (15 - 20 year) trends and establish your position when markets are calm, not when the fight breaks out in the bar and people are running for the exits and smashing chairs over each other's heads.

We saw this in the panic of fall 2008, when physical silver and gold price backwardated from paper prices. IF -- if -- you could get delivery of physical silver and gold then, you paid a premium of 15% to 40% over the paper prices. Of course, for a while nobody could get delivery, which was quoted at four to six weeks.

Likewise Obama's and Bernanke's Nice Government Men, with help from the market, rigged up a giant rise off spring 2009's stock market bottom. That gave poor souls holding stocks an unnatural opportunity to sell them at prices above Dow-10,000, even 11,000. Now stock-holders have received the final, ultimate, last-&-never-to-be-repeated warning to sell all stocks & put the proceeds in silver & gold. Are the stocks in an IRA, a 401(k), a pension fund, or just some nostalgic portfolio the investor can't bring himself to treat like an investment? Matters not, get rid of them, while a few days of calm ensue & the NGM are goosing up the stock market again.

Buy gold, buy silver, buy a farm or a revenue-producing, depression-proof business, but y'all had better do something while you still can. When the bullets start flying, it's too late to buy a pistol.

Ponder this from Dr. Robert McHugh of "The Wilshire 5000 Index, which is really about 6,000 stocks, is essentially the entire U.S. listed stock market. This index tells us the U.S. stock market has lost $1.0 trillion of value over the past two weeks. All the gains over the past 2 months have been wiped out in the past two weeks. It took just two weeks to destroy two months of gains." (I strongly recommend Dr. McHugh's letter to all serious investors.)

Today I saw something I have never seen in 30 years of trading silver and gold. From 11:20 to 11:30, silver jumped from 17.60 to 1830. By 12:10, it had leapt again to 18.69. Yes, up 109c in 40 minutes. I reckon I am not the only one who expects silver
to play catch up.

The US DOLLAR INDEX today traced out a double top around 85.20. May take a rest here and lean back and correct for a day or so. The Greek crisis calls two things into question: the Euro's ability to survive, and all sovereign debt. Investors are scurrying to safety, and in a panic that means the US Dollar (up 3.5% this week) and gold (up 2.5%). You can imagine what gold priced in Euros did. I heard late today that the Canadian mint has shipped so many coins to Europe they are down to selling off the shelves.

Will the Euro survive? That is the question. The southern countries and Ireland enjoyed a property boom and now are enjoying a mortgage and banking bust. Euro-crats solution? Drain the taxpayers, bail out the banks, starve the southerners. This isn't a recipe for currency success.

Will governments default on the bonds? Most likely the weaker ones will, but "weaker" is a relative term when all of them have a balance sheet that looks like it's been dating vampires.

Had I been the Nice Government Men today, I would have backed off and let markets settle before manipulating further. Weight against them is simply too mighty. Looks like they cut stocks loose for today, provided they didn't fall another thousand ticks.

Dow today closed down 139.89 at 10,380.43 while the S&P fell 17.27 to 1,110.88. Support at 10,300 held today, but below that lies merely the psychologically important 10,000 mark, then atmosphere, which holdeth up not much of anything. Don't get cute and short the stock indices, because they are like a wounded rattlesnake. You thought you ran over it and killed it, but when you bend over to pick it up it sinks its teeth into your hand. Sudden rallies possible without warning.

Nor did beating up on GOLD avail them aught. Today's low came about 11:30, then gold just breasted the waves and shot ahead to a $1,212.60 high. On Comex gold closed at $1,210.00, up $13.10. Still trading around that mark. December intraday high was $1,127 and high close was $1,217.40. Any higher close now will send gold shooting toward $1,300 fast. That you will probably see next week, unless the panic sufficiently evaporates to take pressure off gold. That would also let the US dollar down.

From here gold needs to remain above $1,196 or risk losing the ground it has gained.
SILVER astounded me today. I knew it was due to leapfrog a little, but a dollar in one day? Silver now stands about where it stood when this interruption began. First hurdle is 18.80, then the old high at 19.45. At the rate silver is going it might get there by Tuesday. But remember that moves like today are "spongy," and can vanish as fast as they materialized.

The GOLD/SILVER RATIO dropped today to 65.7 from 68.4 earlier this week, but will not clearly be trending down until it falls through 62:1.

The DOW IN GOLD DOLLARS smashed through support this week and closed today at G$177.34 (8.579 oz). It lost G$15.50 (0.75 oz) this week, and should fall rapidly below G$150 (7.256 oz).

The old market proverb says, "Get right and sit tight!" More fulsomely, identify the primary (long term) trend, invest in it, and watch it rise. If you have rid yourself of stocks, bonds, and dollar-denominated assets and with the proceeds bought silver and gold, you can now "Sit tight." Stay at it.

Bottom Line: Silver and gold rally was interrupted by a financial panic last week,then helped by it. Rally has now resumed with vigor. Buy silver and gold.

My comments yesterday about the silliness of government regulations requiring Braille on a sign for the janitor's closet in Office Depot brought a number of reader comments. Best was the question, Why put Braille under the buttons on Automatic Teller Machines? How can a blind person read the screen? Maybe the government will mandate a Braille screen? I don't know how to do it, just do it!

Best of all, as another reader wrote, is Braille on drive through ATMs. How would a blind person drive, let alone read the screen?

Speaking of governments, I have been thinking about Greece. 'Tis an object lesson in how modern government/banking combines wreck economies and frustrate national character. If you have ever known any Greeks, you know that you could pick just about any one of them up off the street in Athens or Nafplion, transport him to Chicago, drop him penniless and shirtless on the street, and come back a year later to find him running his own restaurant with a 40 page menu. Or, if you set him down on a desert
island, within two years he'd have tourists flying in to eat there. Now how can a people so universally successful & hardworking outside of Greece suffer under a failing economy in their own country? Simple: banks & government. Get the government and the banks out of the way, and in two years the Greek economy would be humming like a hive of happy bees. Alas, but no! Rather, Euroland will bail out the banks and wreck the taxpayers and economies in the rest of the union. Look thru the lies: it's not the Greeks who are being bailed out, but the banks.

Enjoy your weekend!

Argentum et aurum comparenda sunt -- -- Gold and silver must be bought.

- Franklin Sanders, The Moneychanger

© 2010, 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.