Wednesday, May 19, 2010

Silver and Gold Prices are Perched Precariously Because of Their Recent Huge Gains

Gold Price Close Today : 1214.30
Change: -13.40 or -1.1%

Silver Price Close Today : 18.855
Change 2.0 cents or 0.1%

Platinum Price Close Today: 1674.20
Change: 9.30 or 0.6%

Palladium Price Close Today: 497.75
Change: -6.10 or -1.2%

Gold Silver Ratio Today: 64.40
Change: -0.780 or -1.2%

Dow Industrial: 10,510.95
Change: -114.88 or -1.1%

US Dollar Index: 87.28
Change: 1.08 or 1.3%

More confusion and panicky behaviour today. The Euro chart looks like a waterfall, down 1.33% to $1.217. Yen fell 0.42%. Europeans are being beaten now with the same stick that beat America in Fall 2008. Will it get worse yet, and spread to the US? Jerk to pieces stock markets around the world? Man, don't ask me! I'm just trying to keep my own car out of the ditch until the day ends.

The GOLD PRICE was as contradictory and hard to read today as I've ever seen it. Yesterday and Friday the bottom was $1,218. That was breached in early trading before the US opened, then after the open the gold price began climbing and reached $1,220. Whoops, it fell again to $1,211, then closed Comex down $13,40 at $1,214.30 -- sloppy, ill-omened, below that $1,218 support. Then out of nowhere about 14:00 Eastern time in 30 minutes gold reached $1,229! Since it has eased off and now is trading around $1,226. Closing below $1,218 support leads one logically to expect gold to follow through with lower prices. Instead, it turns around and heads to the support where it has closed the last three days ($1,228.8, $1,227.4, $1,227.7). That says that tomorrow the gold price ought to climb higher. If it trades over $1,230 it might panic the shorts. Downside we have to reckon with a possible fall to $1,196.

The SILVER PRICE traded as choppily as the gold price today. Yesterday it made a $17.70 low, today traded down to $18.62. However, that drop today looks like a V-bottom, because most trading yesterday and today was supported at $18.80. After closing up 2c at $18.855, silver climbed over $19.00 in the aftermarket. Today's trading clearly display's an uptrend that will hold as long as the silver price abides above $18.90.

Markets are so spooky that they might break either way. SILVER and GOLD PRICES are perched precariously because of their recent huge gains. All we can do is watch the range boundaries of support and resistance and wait. Gold above $1,230 brings higher prices, gold below $1,214 brings lower.

The US DOLLAR INDEX ended our quandary today by rising a massive 107.8 basis points. It is now trading at 87.283 on its way to 89.5. Rally has resumed. Believe me, 'tis not dollar strength driving this, but fear and Euro weakness. As a reader recently wrote me, The dollar is only the best looking horse in the glue factory. Yet in the land of the walking dead, the three-legged horse is king. Or something like that. I may have mixed too many metaphors & proverbs there.

STOCKS succumbed again today to gravity, whose path of least resistance is down. The Dow made an early stab at crossing 10,650, peaked at 10,718.86 quickly, then fainted the rest of the day. At closing it had lost 114.88 points to end at 10,510.95. S&P500 lost a bigger 16.14 and closed 1,120.80. Y'all might conceive that I enjoy reporting this, but I don't. Millions of people are watching their investments evaporate, and remain trapped in a hopelessly obsolete worldview. About 10,440 fear will again strike investors with the urge to sell, setting the Dow up to lose another 250 points.

This will be the last commentary I send this week. My mother, who was one month shy of 93, passed away last night. I have to finish my monthly newsletter for paid subscribers tomorrow then travel to Arkansas for the funeral. God willing, I will write y'all again on Monday. The psalm says, "Precious in the eyes of the Lord is the death of his saints."

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.