Tuesday, May 11, 2010

"Realizers" are Racing into Silver and Gold and out of the Central Bank Fiat Currencies

Gold Price Close Today : 1230.70
Change: 19.50 or 1.6%

Silver Price Close Today : 19.272
Change 74.2 cents or 4.0%

Platinum Price Close Today: 1704.20
Change: 7.8 or 0.0%

Palladium Price Close Today: 534.66
Change: -0.06 or 0.0%

Gold Silver Ratio Today: 63.86
Change: -1.505 or -2.3%

Dow Industrial: 10,748.26
Change: -36.88 or -0.3%

US Dollar Index: 84.47
Change: 0.31 or 0.4%

Today smashed to splinters (once again) those theories that "stocks and silver and gold prices move opposite to the US Dollar." In fact today the US $ index tucked a hefty 31.1 basis points under its belt, while the Dow fell 37 points and the GOLD PRICE leapt, mounted, surged, sprang $19.50 at Comex Close and another $10 afterwards. The SILVER PRICE rose 74.2c [sic].

Y'all are now watching what I have long suspected would appear in this bull market namely, the uncoupling of SILVER and GOLD PRICES from all fiat currencies as truly alternative monies. Think about that. Thus the Euro and Yen fall, dollar rises briskly, but instead of seeking shelter in the dollar "realizers" around the globe are racing into silver and gold and out of the central bank fiat currencies. Much more economic and monetary pain, alas, will follow, but at the last the turmoil will mount so high that all the fiat currencies will be onto the landfill and silver and gold will be the only monies left standing.

Here's something passing odd. Because I am writing this from home I opened an old version of this file from 22 March 2010. I wrote then about stocks, "Stay away. Yet 45 days and mourning will haunt stock markets." Weird: 6 May 2010 was exactly 45 days later, when stocks dropped 1,000 points. Be advised here and now that was a coincidence. Don't expect a repeat.

The US DOLLAR INDEX is staring at one or two more down days before resuming its rally. Rally will reach toward 86.50. The euphoria over the trillion dollar Greece bailout thinned remarkably today as sobriety bit in. Appears that mobs crowded into the US dollar today and gold.

Historical perspective is needed to evaluate silver's rise properly. At spring 2008 peak on 5 March 2008 the silver price hit $20.684. In the secondary peak on 14 July 2008 silver touched $19.175. On 2 December 2009 silver topped at $19.295.

Today silver gobbled up a massive 74.2c to close on Comex at $19.272, right at last December's high, and above July 2008. Right now (7:15 p.m. CDT) the silver price is fetching $17.33. Now combine silver with gold's $30 burst, and the picture clarifies sharply into a breakout. Yes, surely, surely metals must keep these gains tomorrow and improve them, but there is simply too much impetuosity to these moves, coming atop of great jumps last week, to expect this to be a top. I leave the matter for the market to settle, but I expect much greater gains.

The gold price today closed Comex up $19.50 at $1,219.90, then added another $10 afterward. Now it is trading at $1,231.70. Today's close surpassed 2 December 2009's high close at $1,217.40, and surpassed the 2 Dec. intraday high, $1,226.40. Gold only needs to prove this is a breakout into a new rally by closing higher tomorrow or the next day.

Sound strategy is to buy the breakout. The gold price is building a rally that will put a new floor under it at $1,200. New floor for silver will be $18.80.

Closes below $1,185 for the gold price and $18.50 for the silver price would gainsay all of my outlook above.

Confirming the bullish picture for metals, the Gold/Silver Ratio has plunged in the past four days from 68.4 to 63.3 today. Low today knocked on the door of 62:1, the most critical level. Once the ratio falls through 62, it will topple quickly toward 50.

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.