Thursday, May 27, 2010

Today's Action Hints the Gold Price Will Break Upwards

Gold Price Close Today : 1211.90
Change: -1.50 or -0.1%

Silver Price Close Today : 18.457
Change 16.2 cents or 0.9%

Platinum Price Close Today: 1559.10
Change: 37.80 or 2.5%

Palladium Price Close Today: 464.80
Change: 27.55 or 6.3%

Gold Silver Ratio Today: 65.66
Change: -0.663 or -1.0%

Dow Industrial: 10,259.06
Change: 284.61 or 2.9%

US Dollar Index: 86.24
Change: 0.57 or 0.7%

'Twas a vexatious day, with the gold price down a tadge and the silver price up stoutly. How do you cook that mess?

Overnight the GOLD PRICE remained range-bound by $1,210 and $1,216. Slap on the open sellers attacked, driving gold to $1,205.50, the day's low, boom! Straight down. Gold never became disoriented, traded sideways an hour, then mounted on mighty wings to its $1,218.30 high. Balance of day until now was spent range trading between $1,210 and $1,214. The stalemate has not ended, and the tension is still there. Sellers' weakness was exposed when they couldn't even drive gold to $1,200, but resistance at $1,215 - 1,218 is still blocking gold. A big break is coming, one way or the other, and today's action hints gold will break upwards.

The SILVER PRICE remains out of step with the gold price, trying to pull ahead. Silver sure enough reached that $18.50 ceiling today ($18.56 high), but couldn't leap that hurdle. However, it held on to close on Comex up 16.2c at $18.457, top of the day's range. More than that, it closed above its 20 day moving average ($18.44), first confirmation/sign of a turn upwards. Hard not to conclude that the silver price will jump tomorrow, break through $18.50 and run to $19.00.

Beneath the market watch $1,195 and $18.00. Falls through those prices would turn silver and gold sour, though that remains the least likely outcome

Right on time, the US dollar index crashed through 86.40 today, pointing to a trek toward 82.50 before it turns around. Dollar dropped 87.7 basis points today -- a large 87.7 -- and is now trading at 86.244. today's fall makes the double tops on Tuesday and Wednesday appear to be exactly that, tops. Dollar has completed a long upmove and so it's time for a rest.

No doubt the rising dollar made the Nice Government Men awfully nervous, too. They don't want it rising too fast, and they work with their buddies in the European Central Bank to manipulate exchange rates. How could a buddy stand back when a buddy's fiat currency is seeking the center of the earth? Can't, and stay buddies.

A friend made the most insightful, and probably correct, statement I've heard about the Euro crisis. Purpose of the crisis (my friend believes that things don't just happen, but somebody causes them to happen) is to force further integration of European Union, that is, strip the constituent states of existing powers and increase centralization. After the dust clears, only the Eurocrats and ECB will be left standing. Deutschland, auf Wiedersehn! France, au revoir! Espana, adios! Italia, arrivederci! Tchuess, Freiheit!

Right on cue, also, the Dow rallied 284.61 to close at 10,259.06. S&P500 rose 35.16 to 1,103.11. Now there is a bare chance this might be natural market action and not painting the tape, as stocks yesterday were right oversold. Today they jumped 175 points straight up on the open, then range-traded 10,150 to 10,200, unable to break out until 2:00 p.m. EDT. Thereafter the Dow edged up then at the very last moments before the close jumped about 50 points. This perfectly examples a bear market rally: sudden, sharp, and short lived. Stocks will resume their fall. Woe awaits the unwary!

An Ozzie friend today sent me an email with statistics from 1909. Average US worker's yearly wage was $200 to $400 a year. 90% of all doctors had no college education, but attended medical schools. Heroin and morphine were available over the counter at drugstores, no prescription.

Progress? Think about it.

There's a lesson here about gold and silver's undervaluation. In 1909, both were universally money. $200 - $400 a year = 9.675 troy oz. gold to 158.68 troy ounce. $200 - $400 a year = 158.68 to 309.36 oz. silver per year. Right, and they could live on that. Equivalent of $25,000 - $45,000 per year, that implies a gold price of $2,325.58/oz and silver price of $145.46/oz

Think more. No FDA. No regulations or controls on drugs or food or hardly anything. Everyone was free to compete with the corporations. Doctors weren't miseducated by pharmaceutical companies.


Progress is an illusion.

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.