Wednesday, May 05, 2010

The Dollar's Ascent Has Not Been Able to Break the Back of Gold's Rally

Gold Price Close Today : 1174.60
Change: 6.00 or 0.5%

Silver Price Close Today : 17.511
Change -30.7 cents or -1.7%

Platinum Price Close Today: 1647.80
Change: -30.80 or -1.8%

Palladium Price Close Today: 503.95
Change: -17.80 or -3.4%

Gold Silver Ratio Today: 67.08
Change: 1.492 or 2.3%

Dow Industrial: 10,868.12
Change: -58.65 or -0.5%

US Dollar Index: 84.17
Change: 0.87 or 1.0%

US DOLLAR INDEX rose 87.1 basis points to 84.17 right now, near the high of 84.307. The dollar rose quickly on the open, then fell slowly to 83.75, and rose steadily the rest of the day. While the intraday trading doesn't look like a panic, what do you call a market that rises 180.4 basis points in three days when it normally trades 20 to 30 bps per day? A slow stampede? Clearly sorting out the Greek crisis has shaken a lot of other skeletons out of the Eurocloset, and not only the debt-ridden PIGS. No, there is the matter of European unity and the missing leadership which threaten the Euro's very being. Dollar has further to rise.

But notice that the dollar's ascent has not been able to break the back of gold's rally. One suspects that some of that panicky money fleeth into gold rather than dollars. Expected is that the second day of a rout would be as bad as the first, but no, today's trading only forced the GOLD PRICE back to a low of $1,157.50, that is, below the critical $1,160 breakout point. That was a very fast, sharp V-move that immediately jumped back to $1,176.40 (the high) and closed on Comex up $6 at $1,174.60, only $8 below Monday's high.

The SILVER PRICE lost another 30.7c to close at $17.511, a cosmetically please close above $17.50 support. Today's low today fell at $17.04, so viewed from the standpoint of its recovery from that attack -- up 47c -- silver fared not so ill.

For now I must assume that we are seeing the gold price slapped by a financial crisis favouring the dollar but not broken, the silver price suffering as usual more than gold but also not broken, and stocks broken.

STOCKS kept on falling today. Dow lost another 58.65 points to close at 10,868.12, right at the bottom of the megaphone and near the 50 day moving average (now 10,832.88). S&P lost even more, down 7.73 to 1,165.87. Be warned that stocks are rattlesnake crazy here. They may continue cascading, or suddenly rally for a final "good-bye kiss" to higher prices. Either way, the trend now has turned down, the top is in, and lower prices will soon come.

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.