Friday, August 06, 2010

Stop Waiting to Buy Gold - The Lows Have Been Posted

Gold Price Close Today : 1,203.30
Gold Price Close 30-Jul : 1,181.70
Change : 21.60 or 1.8%

Silver Price Close Today : 1845.9
Silver Price Close 30-Jul : 1798.7
Change : 47.20 or 2.6%

Platinum Price Close Today : 1,570.90
Platinum Price Close 30-Jul : 1,573.70
Change : -2.80 or -0.2%

Palladium Price Close Today : 489.75
Palladium Price Close 30-Jul : 497.50
Change : -7.75 or -1.6%

Gold Silver Ratio Today : 65.19
Gold Silver Ratio 30-Jul : 65.70
Change : -0.51 or -0.8%

Dow Industrial : 10,653.56
Dow Industrial 30-Jul : 10,465.94
Change : 187.62 or 1.8%

US Dollar Index : 80.351
US Dollar Index 30-Jul : 81.537
Change : -1.19 or -1.5%

Die Woche luegt nicht. The week doesn't lie. This week silver and gold prices rose strongly, the white metals lost minutely, stocks rose, and the US dollar index broke down again.

The US DOLLAR INDEX resolved our quandary by dropping below its last support at 80.45 and proving once again that the US Dollar is a weak reed that will pierce the hand of anyone who leans on it. Today the dollar fell as low as 80.085 and now is trading down 47.4 basis points to 80.351. Dollar is overdue for some sort of rally, after the long fall from early June's 88.71 high. Is it washing out today, or will it drop further, to 79.51, the last intraday low (March)? The 200 DMA, a frequent target for corrections, stands at 80.65, so the dollar has already sunk past that point. The 200 week moving average stands at 80.16, and on the weekly chart the next bottom appears at 74.25. In addition, the 50 week MA lurks at 80.04, and that may catch the dollar as it falls.

STOCKS have sketched out a rising wedge and today's fall brought them to the lower boundary of that wedge. Remember that a rising wedge is bearish, that is, most often it ends with a downside breakout. Today the Dow closed at 10,653.56, down 21.42. S&P 500 closed at 1,121.64, down 4.17. These numbers appear measly but in fact portend much greater drops. All week long stocks traded out onto a limb bounded by 10600 and 10700. Today, the bough broke. Stocks spent most of the day trying to keep their mouth above water, with a low at 10,515.37, but LO! How Amazing. Friends came in toward the day's end to bid stocks up. They ought to buy a new sprayer for the Nice Government Men, they have to spend so much time painting the tape. Stocks may yet make one spike up, but a large drop will happen soon, maybe beginning next week.

Speaking of painting the tape, look at the GOLD PRICE today. It opened a little above yesterday's close, at $1,195.50, then somebody hit the open stop orders and the panic broke out. Within minutes the gold price had jumped to $1,210.50! Clearly the market was thin. Now maybe it was just the black shirts on the floor running the stops so they could write more trades, but this past week's strong upmoves argue against that. Nobody wanted to be short gold above $1,200, and they got their wish, but at a high price. SOMEbody managed to push gold back to $1,203.30 at the Comex close, up only $6.10, but they were only locking the barn door after the thoroughbreds had escaped. Gold is above $1,200, that's what counts. Now it must deal with resistance at $1,210 and $1,218. Watch for the rest of August to display gold prices edging higher and higher. Traders got their heads handed to them today. They will remain chary the rest of the month.

Stop waiting to buy gold. The lows have been posted.

The SILVER PRICE gained 47.2c or 2.6% this week. Comex closed at 1845.9c, up 15.1c today. Silver burst through that 1840c resistance and made a high at 18.57. This week's trading, all above 1800c, marked silver's first successful battle on that beachhead. Next challenge is 1860c, which silver should conquer next week. Yes, yes, August is fraught with sideways trading, but it is not unheard of for silver to begin a rally in August. Lows were seen last week, buy silver without fretting.

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.