Monday, August 02, 2010

The Silver Price is Clearly Today's Big Story

Gold Price Close Today : 1183.40
Change : 1.70 or 0.1%

Silver Price Close Today : 18.403
Change : 41.6 cents or 2.3%

Platinum Price Close Today : 1601.40
Change : 27.70 or 1.8%

Palladium Price Close Today : 517.10
Change : 19.60 or 3.9%

Gold Silver Ratio Today : 64.30
Change : -1.393 or -2.1%

Dow Industrial : 10,674.38
Change : 208.44 or 2.0%

US Dollar Index : 80.89
Change : -0.65 or -0.8%

Today my son and I drove away at 5:05 a.m. for a trip to furthest Alabama to pick up some cypress siding for his house. Thus I was out of the office all day, in an un- air conditioned truck, soaking up the heat off the pavement. Got back at 17:30 to discover that today's big story was clearly silver.

The SILVER PRICE hopped its 20 day moving average (1796), brushed past $18.00 resistance, and blew through its 50 DMA (1819), rising 41.6c and coming to rest at Comex close at $18.403. I heard rumours about JP Morgan being forced to cover their widely-suspected silver shorts, and maybe that is driving silver. That might also explain why in this latest correction silver has performed more strongly against gold than usual in a fall.

Today's close brings the silver price slap up against July's high, but with this difference. In July the silver price was falling off a June peak (1946c) but now is rising off a bottom.

Today's boost strengthens my surmise that we witnessed SILVER and GOLD PRICES bottom last week. More frustrating sidewise movement may take place into mid-August, but the lows have been seen.

Watch the silver price for its next move after this rise. Will it flake and flop tomorrow? Or bull its way through $18.50? That is the highest hurdle.
Buy any silver breakout tomorrow over $18.50. Silver must hold $18.20.

A friend emailed me that the GOLD PRICE today broke out on a point and figure chart, but I haven't checked that out. Before Comex opened this morning the gold price fought off attackers at $1,175, climbed to $1,190.80 by 9:30, then slid off to trade between $1,180 - $1,185 the rest of the day. On Comex the gold price closed $1,183.40, up $1.70.

Clearly something is happening in silver that is not happening in gold. Gold's limp and languid performance today just doesn't jive with silver's. From Friday's 65.697, the gold/silver ratio fell to 64.305 today, an unusually massive 1.392 points or 2.1%. If this is a silver fluke, 'tis a persuasive one. Gold should begin playing catch up, challenging $1,200 resistance.

The US DOLLAR INDEX fell through the 81.40 floor all the way to 80.892, down 65.1 bps and headed, I reckon, to 80.57, the 200 DMA. If 80.57 can't catch it, then maybe 79.50 will. It looks like the dollar's move from 88.71 is nearly completed, and it is now resting on the bottom of its down trend channel. Dollar is bound to turn up some time soon.

Y'all know I'm standing back from the present stock rally because it is a classic trap for bulls. Now that the Dow has beaten its June high (10,594 intraday), it might reach for 10,750 or even 10,920. Today it closed up 208.44 at 10,674.38. S&P rose 24.26 to 1,125.86. These gains will not live long, like gnats in summer. Remember that markets usually look strongest precisely when they are topping.

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.