Friday, June 18, 2010

The Wild Gold Price Bull Ride Has Begun

Gold Price Close Today : 1,257.20
Gold Price Close June 11: 1,228.90
Change: 28.30 or 2.3%

Silver Price Close Today : 1917.5
Silver Price Close June 11 : 1822.2
Change 95.30 cents or 5.2%

Platinum Price Close Today: 1,590.05
Platinum Price Close June 11: 1,534.30
Change: 55.75 or 3.6%

Palladium Price Close Today: 489.75
Palladium Price Close June 11: 446.45
Change: 43.30 or 9.7%

Gold Silver Ratio Today: 65.56
Gold Silver Ratio June 11: 67.44
Change: -1.88 or -2.8%

Dow Industrial: 10,450.64
Dow Industrial June 11: 10,211.07
Change: 239.57 or 2.3%

US Dollar Index: 85.578
US Dollar Index June 11: 87.277
Change: -1.70 or -1.9%

Questions, anyone, left over from last week's trading? This week answered all mysteries.

The US DOLLAR did not have a good week, losing a colossal 170 basis points. The weekly chart looks awfully double-toppy with the March 2009 peak and the June 2010 peak, but remember that a trend in force remains in force until violated, so the dollar is still trending up, although presently in a downward correction.

Let us ponder dollar possibilities. Presently the buck is below its 20 day moving average (86.83) at 85.578, having dropped another 11 basis points today. Next support lies at 85-85.30, and at the 50 DMA at 84.52. Thereafter only air intervenes until 82.25. If the dollar violates its 50 DMA, then its intermediate trend has changed from up to down. Otherwise, it still has a chance to hit 90 - 92. But first, more downside.

STOCKS are clinging to the cliff of decision: should we jump off to doom, or walk through the air into the sky? They have just this week climbed above their 200 DMA at 10,335. Today the Dow closed at 10,450.64, up 16.47, while the S&P500 rose 1.47 to 1,117.51. Whether stocks stage another eye-popping rally or not, stay away from them. Stocks are in a primary down trend (bear market) that will last another 6 years or more. Want to de-capitalize yourself? Buy stocks!

Oddly, though, the Dow in Gold Dollars has remained about the same frustrating level last two days. Early in May it fell through its uptrend line about $G$191.27 (9.252 oz) and plummeted straight down to a low at G$163.74 (7.92 oz). It has since rallied to G$175.04 (8.468 oz) and fallen back last two days to G$171.78 & G$171.84 (8.313 oz). Double closes often signal a trend change or a market out of gas. Given gold's strength, stocks had better pull over at the next gas station.

SILVER rose 5.2% this week, about twice as much as gold. Need I say more? Well, I'm going to.

From that bogus low on 4 June at 17.29 silver in ten (10) days has risen 188.5c or 11% [sic]. The gold/silver ratio has fallen from 70.382 to 65.565, down an enormous 4.817 or 6.8%. Silver has now proven to my satisfaction that June 4 was an anomaly, an artefact, a manipulation, or a fluke. Today it rose 40.8c to close 1917.5. This is a bodacious breakout.

The Gold/Silver ratio, remember, is the price of gold divided by the price of silver, or how many ounces of silver are needed to buy one ounce of gold. Over the course of a precious metals bull market that ratio falls, meaning silver rises faster than gold over the life of the whole bull market, although not every day or even for long stretches. Today at 65.565 the ratio is about to fall through its 300 day moving average (65.37) and 50 DMA 965.29). It already stands below the 20 day moving average tripwire (66.9). The 200 DMA awaits at 64.03. Once the ratio breaks through that mark it will slide fast, as that roughly coincides with the bottom border of a triangle pattern. First target then will be 60.6784 (last low), and ultimately 47.5 for this rally.

Be advised that at 47.5:1 I recommend swapping silver for gold according to my silver/gold swapping strategy.

What a dirty job I had to do today! Had to reset the scale on all my gold price charts since gold burst through $1250 today to a new $1,257.20, up $9.70. On the GLD ETF chart gold made a double gap last two days and is above its old highs. This is a runaway breakout. The GDX gold stock index also double gapped, as did SLV, the silver ETF. (Thanks, Bob, for pointing these out.) As I said yesterday, there are no triple tops, only two taps and a breakthrough, and that' what gold did today. The bull market that has climbed a wall of worry from 1045 in February has now crashed through the fence and is running wild on a rampage. I can only repeat what I wrote yesterday: always buy the breakouts.

The gold price has now entered that wave of a bull market where the craziest and most unpredictable events happen, and all the surprises occur to the upside. Silver price is a little out of sync with gold, a little behind. First it must beat that last top at $19.81 intraday then march on to conquer the March 2008 peak at $20.67 (close). Target for this move in silver is $29.00. I understand that sounds ridiculous, now, but won't sound ridiculous then.

This is what we have been patiently waiting for: the wild bull ride has begun. If you have not already bought silver and gold, you had better buy quickly or be forever left standing at the station.

On this day in 1812 the US declared war on Great Britain, angered over British imprisonments of US sailors, and, maybe a little bit wanting to conquer Canada. In August, 1814 the British cordially returned the favour by invading Washington and burning down the Capitol and White House. Little Jimmy Madison fled, and Dolly his wife had time only to save the White House drapes and some silverware. Having killed a bunch of folks for no good purpose, the US and Great Britain signed a peace treaty on 24 December 1814. Unfortunately (or fortunately, depending on your outlook) word did not reach either American forces in the West or British forces in the gulf. In January the British invaded near New Orleans and were met by Tennessee volunteers (and a sprinkling of Kentuckians, to be fair) under General Andrew Jackson, who whipped 'em bad on the ninth of January 1815. I feel really bad about the British getting beaten like that. I wonder if we could make it up to them by letting them burn down the Capitol and the White House again. Goodness, I'd even throw in all those government office buildings, too, just for good measure. Oh, and don't forget the IRS building.

On this day in 1178 just after sunset five monks at Canterbury witnessed the moon explode in flames. Gervase of Canterbury reported they were looking at a new crescent moon when the upper part "suddenly split in two. From the midpoint of this division a flaming torch sprang up, spewing out fire, hot coals, and sparks. The body of the moon which was below writhed and throbbed like a wounded snake. Some today doubt the report, others say it was caused by a meteor striking the moon.

Y'all enjoy your weekend.

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.