Tuesday, May 04, 2010

Do I Hear the Death Knell Tolling for Silver and Gold Prices?

Gold Price Close Today : 1168.60
Change: -14.10 or -1.2%

Silver Price Close Today : 17.818
Change 99.5 cents or -5.3%

Platinum Price Close Today: 1678.60
Change: -46.80 or -2.7%

Palladium Price Close Today: 546.70
Change: 0 or 0.0%

Gold Silver Ratio Today: 65.59
Change: 2.719 or 4.3%

Dow Industrial: 10,927.77
Change: -225.06 or -2.0%

US Dollar Index: 83.30
Change: 1.03 or 1.2%

I neglected to tell y'all yesterday that some sections of Nashville received 16 inches of rain in 36 hours, one-third of a year's rain in one and a half days.

TODAY the US DOLLAR INDEX exploded upward 102.7 basis points to 82.399, smashing 82.60 resistance. First target is 86.87.

Do I hear the death knell tolling for silver and gold? Hardly, but that's what all the blow-hard gurus and media experts will be blathering. When they do, remember they're the same ones who have been telling you to buy stocks, which fell 2.2% today versus gold's 1.2% drop.

What drove the dollar up? Maybe the specter of centrifugal force shattering the Euro precipitated a run into dollars. It crossed above 82.6 and climbed evenly the rest of the day, pausing only at 83.20. Doesn't look like a panic move.

The DOW fell 225.6 to 10,926.77, losing 2.2%. S&P500 lost 2.4%, down 28.66 to 1,173.60. Low was an ominous 10,869.25. Dow cut clean through its 20 day moving average (11,065.15) & kept on falling. Shaky support trembles at 10,800, more manly support awaits at 10,730, then real support at 10,500.

This is a "broadening top" (megaphone), so even from this low stocks might suddenly oscillate back to the top of the range. Today's low at 10,9869 lay about the bottom of the megaphone's mouth, so a close lower than that tomorrow would bind the fate of stocks to gravity for some time.

As I have said before, and will continue to say as long as the chart sings such a plain song, get out of stocks. They are in a primary down trend (bear market) that will last at least another 5 years. Coming soon, to this location, Lower prices!

I reckon the silver and gold debacle today annihilates my Three Criteria For Ease of Mind -- or does it? Predictably always-more-volatile silver took the brunt of the higher dollar blow, losing a gargantuan 99.5c to close on Comex at 17.818. That didn't stick, as silver is now trading at 17.89.

How much damage was done? Silver closed below its uptrend line stretching back to February and below its 20 DMA (18.12). However, a little peek for slumming below the uptrend line is standard behavior for silver, so maybe it means nothing and will not follow through. Solidest support stands around 17.50. Overhead silver must climb above 18.10 to re-enter the uptrend channel.

'Twas arresting, how much deeper wound silver took. Gold's was a mere scratch. On Comex gold closed at $1,168.60, down $14.10 and cosmetically below $1,170. Odd, all day I never saw it trade below $1,170. Now gold is trading at $1,172. Today did no damage at all to the uptrend, nor did it near the 20 DMA ($1,155.17 today). No, gold remains in its uptrend, and y'all have been given the opportunity to buy silver on sale. Odd -- all of gold's fall occurred between 9:00 and 11:00. Hmmmm.

One casualty of Gold's drop has been the low premium on Krugerrands. Somebody big has thrown an order on the market for the usually-low-premium Krugerrands, and it must be a sizable because the premium has jumped over 1% (about $12) and some wholesalers are refusing to sell Krugerrands, anticipating a short squeeze.

Today's bottom line: Dollar index broke out upside and should carry to 86 or higher, troublesome but not nearly fatal to silver and gold; stocks likely broke the back of a year long uptrend and began a long fall; gold remains in an uptrend & silver will have to lick her wounds a few days but most probably remains in an uptrend, too.

On this day in 1626 Peter Minuit, a Dutch colonist, arrived at Manhattan Island with 4 boats of settlers and 300 cattle. From the Indians for 60 guilders worth of cloth, beads, and brass buttons he bought the island. Generally this is thought to be a classic example of an totally bone-headed trade, but think about it. A gulden or florin was a ducat, 0.1106 troy ounce of gold, so 60 gulden was 6.636 ounces of gold. It was probably a pretty big pile of cloth & beads. More than that, the Indians must have thought, "These Dutch have no real estate savvy at all! They're willing to pay all this stuff for this little island and the hunting here isn't even worth canoeing over from the mainland. Let's take these suckers before they change their minds."

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.