Thursday, June 10, 2010

Silver and Gold Prices Stand on the Brink of a Spectacular Breakout

Gold Price Close Today : 1220.80
Change: -7.70 or -0.6%

Silver Price Close Today : 18.342
Change 16.2 cents or 0.9%

Platinum Price Close Today: 1533.00
Change: 3.80 or 0.2%

Palladium Price Close Today: 449.50
Change: -0.25 or -0.1%

Gold Silver Ratio Today: 66.56
Change: -1.017 or -1.5%

Dow Industrial: 10,172.53
Change: 272.38 or 2.8%

US Dollar Index: 87.11
Change: -0.79 or -0.9%

Sorry yesterday's comments were so short, but I live waaaay out in the country, and have only satellite internet. When the clouds cover us, it worketh not. Yesterday a mighty thunderstorm blackened the sky.

The GOLD PRICE fell today while the SILVER PRICE rose. Mercy, what a knot! Gold today fell 7.70 to close on Comex down 7.70 to $1,220.80. Gold continues in the correction begun Tuesday, but I have to admit that to me it looks stronger and stronger, never mind that lower close today. It drops, then springs immediately back. The chart says that if the gold price holds $1215 it will not drop further. Today with a $1,217-ish low gold nearly touched its 20 day moving average (now $1,215). Gold often descends to that line, then turns around. Perhaps it will repeat that performance this time as well? Back off from the gold chart and you will at once perceive that the uptrend begun in February from $1,045 (intraday) containus uninterrupted. Nearer in time, the last low at $1,166.50 in May did no more than fall to the uptrend line. Gold could fall to $1,190 tomorrow and remain still within the uptrend. And of course, "A trend in force remains in force until violated." Oh, and once gold breaks out of this consolidation -- oh, my, do not stand in its way, unless you want to be flattened like a pancake. The breakout will not break out, it will explode. And yes, yes, I remember this is time for gold's seasonal lows so it might trade sideways in a tight range until early August, but the strength is there, and before too long it will express itself.

It is very dangerous to make excuses for any market's performance, because that implies you are "talking your position," i.e., lying to yourself and ignoring the facts because of your pre-existing bias. Nonetheless at rare times, it is true, anomalies do occur in markets. For example, that that huge spike in the gold/silver ratio that happened in fall 2008 (which did NOT occur in physicals' prices but only in paper prices) was an anomaly caused by a once in 200 year financial panic. That said, a friend of mine more technically gifted by far than I am, called today to discuss that $17.20 downspike in silver last Monday. Looking at the gold charts and others, that simply appears to be an anomaly, unexplained by what we know and caused by something we don't know. Remember that it gave an upside breakout signal to the gold/silver ratio, but then failed to follow through and thus proved itself a false breakout.

And LO! How did silver recover from that blow? By climbing straight up like a fly on a wall. Now silver's stronger performance that gold today non-confirms gold's weakness. On Comex silver rose 16.2c to $18.342.

I continue to exspect that silver and gold stand on the brink of a spectacular breakout. A silver close below $17.80 and gold below $1,190 would knock all that in the head with a sledge hammer.

The US DOLLAR INDEX is rolling down a hill. Lost another 79 basis points today to 87.107. As long as it remains above 85.00 it will still be riding an uptrend. Remember that all fiat currency values are artificial. The scrofulous US dollar is not one bit more valuable or sounder than the scabby Euro which is not one bit healthier than the pustulous Yen. They are all backed by confidence alone, and therefore subject always to crises. And all are jointly manipulated by their central bankers, who meet monthly in Basel at the Bank for International for supper and to discuss how they will jerk markets around in the coming month.

STOCKS rallied today, up nearly 3%. Dow closed 10,172.53, up 273.28 and the S&P500 rose 31.15 to 1,086.84. This is what seasoned traders call a "Haiti Rally" because it involves voodoo raising a zombie and making it walk. Very impressive: the corpse appears to be alive because it walks, but in fact it remains rat-dead. Those who are suckered by this rally -- how can I say it -- deserve their losses.

I talked to a banker friend today who told me that if all the bank real estate holdings in the country were marked to market they would lose fifty percent of their value. The last shoe has not yet dropped in the banking system debacle.

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.