Friday, May 28, 2010

Once the Gold Price Pierces $1,218, 'Twill Race, for $1,250, the Last High, and Then Proceed to $1,300

Gold Price Close Today : 1,212.10
Gold Price Close May 21st: 1,175.70
Change: 36.40 or 3.1%

Silver Price Close Today : 18.411
Silver Price Close May 21st : 17.633
Change 77.80 cents or 4.4%

Platinum Price Close Today: 1,548.70
Platinum Price Close May 21st: 1,504.90
Change: 43.80 or 2.9%

Palladium Price Close Today: 462.70
Palladium Price Close May 21st: 436.25
Change: 26.45 or 6.1%

Gold Silver Ratio Today: 65.84
Gold Silver Ratio May 21st: 66.68
Change: -0.84 or -1.3%

Dow Industrial: 10,136.63
Dow Industrial May 21st: 10,193.39
Change: -56.76 or -0.6%

US Dollar Index: 86.781
US Dollar Index May 21st: 85.360
Change: 1.42 or 1.7%

"The week don't lie," as they say. In the past week the silver price rose 77.8c (4.4%), gold rose $36.40 (3.1%), the gold/silver ratio fell 0.84 (1.3%), Dow fell 56.76 (0.6%), and the US dollar index rose 1.42 (1.7%). But that doesn't tell the whole tale by any means.

Technically the Dow today fell out of a bearish upward wedge (formed Wednesday and Thursday), leaving 10,250 high and dry and undefeated. The day's performance was wretched. Around 2:00 p.m. "friends" came in to buy and drove the Dow up nearly 125 points. Ahh, but when the bells of 3:30 struck, all the weekend rats left the sinking ship, flopping the Dow down to 10,136.63, down 122.36. S&P500 dropped 1,089.41, down 13.65. Remember what I said yesterday about bear market rallies? "Sudden, sharp, and short-lived." Dow now sands below its 200 day moving average as well as all the others.

I don't get it. How do Wall Streeters hawking stocks live with themselves? How can anyone deny that stocks are locked in a primary down trend (bear market)?

The DOW IN GOLD DOLLARS on 26 May hit a new low at G$169.93 (8.220 oz), rupturing support at G$177 (8.562 oz). Next stop? G$144 (6.966 oz). Ultimate stop? $G$41.344 (2.000 oz) or less, maybe $20.672 (1.000 oz).

And look at the DOW IN SILVER OUNCES. From its present 550.57 ounces the DiSoz stands a mere 65 ounces above its last low at 485.26. Ultimate target? 32 ounces or less to buy the whole Dow.

Crazy, did you say? Crazy? Well, the DiG$ topped at 44.75 oz in gold ounces in August 1999. Since them stocks have lost more than 80% of their value against gold. They will lose another 80% from here. Ditto silver.

US DOLLAR INDEX, preparing for the long weekend, bounced off 85.85 to rise 59.6 basis points to 86.781. Yet remaineth the buck in a short term down trend, and likely will grudge its way down to 82.50. That would be a short term correction of the uptrend
begun in December. Of course, that won't hurt silver & gold a bit.

Again this day the forces of darkness sallied forth from Mordor to pound gold's helmet with their clubs, maces, meat-axes, and selling. Yea, they dove gold to it's knees at $1,202.50 -- their best shot. It availed them nothing. Gold raised itself to its full height, slashing back at is foes and closing up thirty whole cents at $1,212.20 on Comex.

Stalemate continues. Three days now gold has closed about the same price. Double closes, let alone triple, often lead to a trend change, but sometimes for a solid platform for a rally. It's a bull market. In bull markets, riddles are usually answered on the upside.

Gold's price to beat is $1,281. In spite of all attacks gold remains above its 20 day moving average (1,205.88) and of course its 50 and 200 DMAs. Lo, 'tis June, and seasonally that bodes the same for gold sales that 4th of July bodes for fruitcake sales -- nothing good. NEVERTHELESS, once the gold price pierces $1,218, 'twill race, yea, race for $1,250, the last high, and then proceed to $1,300. Seasonally it sounds impossible, but gold has held on and will forge ahead, Mordor notwithstanding.

SILVER'S enemies did everything but borrow the winged monkeys form Oz's Wicked Witch of the East. Yea, they forced silver to retreat as low as 18.22 -- in vain. About 11:30 silver mounted its Silver Charger and fought its way out of that hole all the way to 18.411 at Comex close, losing only 4.6c from yesterday.

Friends, now shift metaphors with me. Silver has found a new floor at 18.20. It has fought off attack after attack and not only held its ground but advanced as well. Folks! We got us an uptrend!

As long as silver remains above 18.00 next week it should be a profitable week. THE GOLD SILVER RATIO has formed a huge even-sided triangle. This pattern may break either way, up or down. The ratio ran to the upper boundary of the triangle (67.635 on 21 May), then collapsed to 64.776 today. Ratio is about to slice through the 50 DMA (64.41) and the 200 (63.94). Bottom triangle boundary lies about 63.245. A slip through that trapdoor and boom! The ratio visits 58, then 52.

Let us talk about aluminum, spelled "aluminium" if you live in Great Britain, where they have a surplus of I's so the government forces them to place them where they're not needed. It is so difficult to extract that in the early 19th century it cost more than gold. Napoleon III fed his best guests on aluminum plates while the trashy guests had to eat off gold. Then the process for extracting it electrically was discovered, dragging down the price if you had access to lots of cheap electricity. After World War II aluminum took the American consumer by storm with aluminum foil, pots and pans, etc., but especially aluminum deodorants.

Then the croakers (to whom I proudly belong) began bringing up questions. Maybe the increased aluminum use might have some causative force in the epidemic of Alzheimer's disease? (No, it doesn't signify anything that both begin with "Al-".) Chief exposure to aluminum for most folks is their daily dose of deodorant, soaking that aluminum through your skin all day. But try, Oh, try, to find a deodorant that works but contains no aluminum. Try to square the circle. Try to find an honest politician.

Here's the answer: zinc oxide ointment. Rub it on the night before generously, then wash it off in the morning. I don't know why it works better this way, but it does. That will be the last time you use it for three to fourteen days, depending on how much sweating you do. And a three ounce tube costs about $1.80, and lasts a year or so

And I don't use aluminum pots and pans, either. By the way, flouridation increases several-fold the amount of aluminum leached into boiling water from the pan.

Y'all 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.