Friday, August 20, 2010

The Gold Price Did Nothing Worse Than Undergo An Expected Correction Today

Gold Price Close Today : 1,227.70
Gold Price Close 13-Aug : 1,213.50
Change : 14.20 or 1.2%

Silver Price Close Today : 1812
Silver Price Close 13-Aug : 1810
Change : 2.00 or 0.1%

Platinum Price Close Today : 1,514.00
Platinum Price Close 13-Aug : 1,522.00
Change : -8.00 or -0.5%

Palladium Price Close Today : 478.00
Palladium Price Close 13-Aug : 475.00
Change : 3.00 or 0.6%

Gold Silver Ratio Today : 67.75
Gold Silver Ratio 13-Aug : 67.04
Change : 0.71 or 1.1%

Dow Industrial : 10,213.47
Dow Industrial 13-Aug : 10,303.15
Change : -89.68 or -0.9%

US Dollar Index : 83.049
US Dollar Index 13-Aug : 82.927
Change : 0.12 or 0.1%

Well, look at that! After all the travail and trouble silver and gold prices underwent this week, yet they close the week in positive territory -- not much positive, but positive still. Lo, the dollar turned up also, but stocks barely held on. White metals were bewildered, platinum up and palladium down.

The US DOLLAR INDEX certified its mood today with a 56.3 basis point (0.72%) jump to trade now at 83.049. That certainly establishes the floor at 81.90 - 82, and argues clamourously that the dollar intends to move higher. Above, 83.5 offers weak resistance, but at only 85 an real argument will start. If, as this seems, it is a new rallying phase, then the dollar will pass above the last high (88.5) to 90 or higher. That outlook does not carry the gloom for silver and gold prices that it might have five years ago. A strong dollar may slow gold some, but not much.

STOCKS experienced a down week. Five day chart shows a double top Tuesday and Wednesday, followed by a 144 point slide on Thursday, another smaller slide today, and lethargy. Bigger and more dramatic drops lurk in the near future.

The DOW IN GOLD DOLLARS fell through G$175 (8.466 oz) support this week and closed today at G$171.97 (8.319 oz). The DiG$ has now positioned itself for a fall off a cliff. Once it passes that last low at G$162.22 (7.847 oz) gravity will hug the DiG$ to her breast ever more tightly. Stocks are about to become a lot cheaper relative to gold.

I was verging on giving up on silver this week, but as painful as today proved, it proved hopeful as well. Silver was beaten down to 1781c -- whew! Yet it was a spike bottom. Fall from 1825 to 1780c is 45c, but silver clawed back all but 19.8c of that, closing Comex at 1812 (August futures). October futures, the more active month, closed 1798c, down 36.4c. This is one of those occasions I look at those stats and shake my head, suspecting a roach must have fallen into somebody's keyboard. All right, let's deal with it as the worst case, as silver below 1800c. It fell to well-established resistance and bounced off. Silver's worst face here is the long rounding curve of lower highs and higher lows since the February 1468c low. What does that long triangle mean? I can see it as a big, flat-topped rising triangle with the top boundary from 1945 (Dec. 09) to 1981c (May 2010) and the bottom rising from 1468c (Feb 2010) to today. Wow, that's shakey, but then, this is August, which often is the month I spend worrying whether metals will ever recover or not. If it is a flat-topped rising triangle, then higher prices will come.

Silver remains in the same dilemma: it must clear 1860c to rally, then burst through the old high at 2068.5c to catch up to gold. As long as silver clings above 1750c here, it will stay in the game. A drop through 1700c [sic] will take a good while to heal.

I keep reading folks on the internet who scream "Manipulation!" at every silver price fall. Maybe, but maybe not. Even if the Nice Government Men and their yellow cur, egg-sucking running dogs in the bullion banks are manipulating silver, the rising bull trend ought to express itself and defeat them. Still, the logic of the denouncers is impeccable. If you want to wound gold, strike silver because it's a smaller market and your bullets go further. To mix a metaphor or two.

The GOLD PRICE did nothing worse than undergo an expected correction today, dropping to a low of $1,222.15 but closing above $1,225 support on Comex. Settlement was $1,227.70, down 6.10. After six up days, who can carp about one down day? On a five-day chart that $1,225 looks significant, so next week gold must stay above that. A close below that lets loose all sorts of harpies, but gold and silver aren't quite in synch here. Remember that gold has done something silver has not done sofar in this upmove. It has closed above its last two (2) highs and made steady progress. Looking at gold, standing above its 200, 50, and 20 day moving averages, on an unbroken uptrend, I have to call for higher prices next week. Silver may have more gump work to do.

Back off, now, and look at the horizon. Long term silver and gold remain in a primary uptrend or bull market that should last at least another five years. Wait patiently for silver to makes itself plainer, then buy either on a fall or on a breakout above 1860c. Buy gold on any retracement.

On this day in 1741 Alaska was found by Danish navigator Vitus Jonus Bering. No one has ever successfully explained how Alaska got lost in the first place.

On this day in 1930 Philo Farnsworth (I'm dead serious) patented a television system. On this day also in 1930 the first demonstration telecast of home TV in the US was received in New York City. Boy, there's one invention you wish had died a-borning.

On this day in 1964 President Lyndon "Landslide" Johnson signed a nearly $1 billion bill declaring War on Poverty. A few years later, Poverty won. Not generally known is that Pres. Johnson was one of our few presidents who could resurrect the dead. Every election graveyards all over Texas were emptied out as the residents ran to the polls to vote for Lyndon.

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.