Monday, May 17, 2010

Chart Hints That the Gold Price is Correcting From the Friday High

Gold Price Close Today : 1227.70
Change: 0.30 or 0.0%

Silver Price Close Today : 18.835
Change -36.7 cents or -1.9%

Platinum Price Close Today: 1664.90
Change: -49.50 or -2.9%

Palladium Price Close Today: 503.85
Change: -20.95 or -4.0%

Gold Silver Ratio Today: 65.18
Change: 1.261 or 2.0%

Dow Industrial: 10,625.83
Change: 5.67 or 0.1%

US Dollar Index: 86.19
Change: -0.04 or -0.0%

Today lies a fog over everything, and I am searching for some light. Bob the Technical Genius reminded me that all the stock markets in the world appear to be positioned for gargantuan plunges. In that event another panic for liquidity would ensue, prompting terrorized investors to throw everything saleable onto the fire. In that sort of panic where confidence in financial markets is shrinking, the GOLD PRICE fares better than the SILVER PRICE. In the aftermath, silver recovers much faster than gold. In the meantime, silver owners sweat.

But I can't escape the idea that the world of illusion is dissolving. After decades of make-up, manipulation, sleight-of-hand, and old-fashioned unashamed fraud, the public has grown weary and gunshy, so the old illusions no longer deceive. From that I conclude that the only value you own is the one you control. Tangibles, tangibles, I want tangibles, whether a factory or a restaurant or farm that can produce of stream of unfailing revenue, or silver and gold in my hand, I want something real that I control.

In fall of 2008 a financial panic took stocks down 34.4% from 1 September to 20 November. In the same period gold lost 12.5% and silver lost 32.6%. Sounds like Waterloo for silver and gold investors, huh? Sound again. By March 2009 stocks had lost a total 43.2% from their September open while silver and gold were recovering nicely, thanks. Gold was up 15.2% from Sept. '08 and silver up 31.5% from the Nov. 08 low. In March 2009 Silver was down only 1.8% from Sept. '08 and up 48.3% from its Nov. '08 low. By the time they peaked in December 2009, gold had risen from the November 2008 lows 72.7% and silver 119.3%.

More pertinent, though, was the backwardation that Fall 2008 produced. Silver and gold deliveries stretched out 4 - 6 weeks and premiums rose to 20% to 40% over the spot price. There was no gold or silver to be had at the paper market prices; physicals all backwardated.

Since I don't recommend day trading but long term trading that aligns the investor with the long term ("primary") trend, even big drops in the prices of physical silver and gold don't bother me too much. I've been doing this long enough to have experienced several of these comebacks. And I don't want to pick up the phone to order silver or gold only to hear somebody quote a six week delivery. I'd rather get my physical metals and hold them through thick and thin, counting on the primary trend to bring it all right. And of course, I don't want any of my money tied up in paper markets, whether stocks or ETFs.

Call me crazy, but wait until after the last inning.

The GOLD PRICE today mystified. On Comex it closed down a mere 30c. at $1,227.70. Low today was $1,218.90, but now gold is trading at $1,222, down $5 from the close. Five days chart hints that gold is correcting from the Friday high, and today is completing last leg of that correction. I will be satisfied if gold remains above $1,200, even $1,190. Normally I would expect to see gold stiffening up and moving higher tomorrow, but what's normal nowadays? That aftermarket drop today bothers me. Like a fat mosquito buzzing around, you know he's up to no good.

SILVER'S five day chart is awfully choppy. The $18.80 level held, after $19.00 gave way. If silver violates $18.80 then it could fall to $18.40 (20 DMA) or $18.00. Situation is so cloudy it leaves me bewildered. Platinum and palladium were weak, too.

Gold trading tomorrow above $1,230 and silver above $19.00 would put me into a buying mood. Otherwise, I wait and watch.

Today the US DOLLAR INDEX hit a new high for the move at 87.063 (using the high late Sunday our time) but closed lower. Day's low was 86.051 and it's now trading 86.150 down 0.076. Surging to a new high then closing lower is "key reversal" behaviour that often signals a turnaround. If the dollar follows through tomorrow with the second half of this signal (a lower close), then it has turned around and will head lower. One would expect some sort of snap-back rally by the Euro after all it's been kicked around, but the whole world is so unsettled nothing logical works any more, only emotion. Until the dollar confirms with a lower close tomorrow, we have to presume it remains in an uptrend overbought as it is.

Just for reference, the Euro rose 1.01% today (dollar fell 0.09%), and yen rose 0.79%.

It was a typical day in the stock market, down all day then a Secret Buyer (Wink! Wink! Toward the NGM) stepped in 30 minutes before close to bring the Dow in up a colossal 5.67 points at 10,625.83. S&P500 rose 1.26 to 1,136.94. Let us, from intellectual curiosity alone, plumb the depths, however. Dow's low was 10,436.06 and S&P500's 1,114.96. Resistance has now become 10,650. Gravity is strong, buyers puny.

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.