Thursday, May 06, 2010

This Gold Price Rally is Not Near its End, and in Fact I am Targetting $1,375

Gold Price Close Today : 1196.90
Change: 22.30 or 1.9%

Silver Price Close Today : 17.493
Change -1.8 cents or -0.1%

Platinum Price Close Today: 1648.90
Change: 1.10 or 1.10

Palladium Price Close Today: 502.45
Change: -1.50 or -0.3%

Gold Silver Ratio Today: 68.42
Change: 1.344 or 2.0%

Dow Industrial: 10,520.32
Change: -347.50 or -3.2%

US Dollar Index: 84.80
Change: 0.72 or 0.9%

Peace be with you all!

You've heard of Black Friday and Silver Tuesday? Well, welcome to Souvlaki Thursday! The day I pick to take my wife shopping in Florence just happens to be the day the Dow drops 1,000 [sic] points, the US dollar index rises 72 basis points, and gold jumps $35.

About 4:30 I returned to my office and on the Internet my son had pulled up Money Central at One side headline whined, "Trading error reportedly blamed." I fell off my chair and rolled on the dusty plastic mat laughing. What brilliant propagandist in DC thought that honker up?

At 2:00 p.m. the Dow was cruising along down about 170 points when an Unseen Thumb and Forefinger pulled the plug. Next anybody knew the Dow had plummeted 1,000 points to 9,869.62. It was down 998.5 points or 9.2%, at which juncture the Nice Government Men swung into action and manipulated the market up 650.7 points in less than an hour. Great work, fellows! The Dow closed down only 347.8 points at 10,520.32. S&P Low came at 1065.79, down 100 points or 8.5%. It closed at 1128.15, down 37.72 or 3.4%.

Ahh, friends, that don't happen in nature.

Let me dose you with a little perspective. On 19 October 1987 the Dow fell 508 points or 22.6%. 28 October 1929, fell 6.3%. Next trading day, 28 October 1929, fell 12.7%. On 29 October the Dow fell another 11.7%. On 4 Nov 1929 it dropped 5.8%, then another 9.9% next trading day. So today's low down 998.5 points was a 9.2% drop, ranking right up there with the really big ones.

For all intents and purposes today's low hit the February low, and fell far below the 200 DMA, now at 10,184.89. That's it, the breakdown from the broadening top. Gurus and paid pimps will tell you 'tis only the backwash of the passing Greek crisis. Greek, Schmeek -- that may have served as the catalyst but the weakness was already festering and 'twas the weakness that broke down, not Greece.

Now the sirens of Wall Street will do their best to sing a lovely song to drown out today's cacophony, but stop your ears! Stay out of stocks.

If I were the Nice Government Men and "tasked" (as they like to say in Governmentspeak) with keeping the leaky stock market afloat, I would be working overtime tonight calling hedge fund and pension fund and mutual fund managers and company presidents and ordering them to buy stocks like mad tomorrow or face SEC and EPA problems the rest of their natural lives. Ergo, be ye not surprised if stocks recover sharply tomorrow. 'Twill make now a whit of difference: the silver thread has been cut, the crystal bowl shattered, the milk spilt, the barbecue sauce poured down the drain. What comes next, despite all the camouflage, persiflage, and decoupage from Wall Street & its kept media, will be lower stock prices. It may sound obvious, but stating the obvious is my only poor gift but a valuable one in an Age of The Numb: stock market rallies do not begin with thousand point drops.

As I was thus musing, I happened to read an e-mail from a subscriber who wrote about today's stock market results: "Chauncey Gardner would now say, `The roots are now severed.'" Again, I hooted and hollered. He alludes to the movie, Being There. Video clip at

Laugh yourself sick.

Dow in Gold Dollars today dropped from G$191.27 (9.252 oz) to G$181.70 (8.790 oz), and fell through the bottom of the trading range.

I reckon the interpretation that gold had broken out over $1,160 resistance and dropped back yesterday to confirm that breakout with a "final kiss good-bye" proved correct. Comex gold leapt up $22.30 at $1,196.90, slicing through resistance like Rommel slicing through North Africa. Gold kept right on rising in the aftermarket and the prices you see below are based on a current $1,208.20.

This gold rally is not near its end, and in fact I am targetting $1,375, yet expect a vicious and fierce counterattack from the NGM tomorrow. Might give you a buying opportunity.

Speaking of NGM, we come to the conundrum of silver's lagging. The Gold/Silver ratio shot up to 68.42:1 today. Lo, we might well ascribe this to natural causes, namely, worldwide financial anxiety (not to say panic) driving investors more into gold than silver for safety. Okay, I can buy that, but remember: I am the kind of paranoid who always asks questions when he witnesses an anvil spontaneously shoot up into the air.
Then my mind harkens back to the 1990s and that unutterably lengthy period when silver flatlined along with gold, even in a decade where the silver supply shortfall amounted to 1.5 billion (with a "B") ounces.

And I scratch my paranoid scalp, and think, "If I were trying to suppress gold's price, I'd first sell lots and lots of paper silver to drive silver down because experienced traders watch that ratio and expect the two to move together. Couldn't have gold flat with silver rising. Besides, I get much more bang for my manipulating buck by selling in the much smaller silver market.

But then, I am well known as a paranoid who doesn't even believe in the Tonkin Gulf Incident or lone assassins or tooth fairies or government's fundamental beneficence or Ben Bernanke's genius.

There I am in Office Depot today and I needed to use the restroom. I walked into the hall where the restroom doors were, and I noticed on one side a "Lounge" sign with Braille letters underneath. Then there was the Women's restroom with Braille, and the Men's restroom with Braille. Then there was the Janitor's Closet with a Braille sign under the word "Janitor", and I began to wonder, "How many blind janitors work at Office Depot?" I've never heard of a blind janitor before. Do they have a nationwide Union of Blind Janitors? At last it dawned on me: this is your government in action! I don't know the law or regulation, but nobody but the government would require that. Nobody.

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.