Monday, October 04, 2010

As Long as the Gold Price Stays Above $1,295 it Will Keep on Climbing

Gold Price Close Today : 1315.40
Change : 0.70 or 0.1%

Silver Price Close Today : 22.013
Change : (0.024) cents or -0.1%

Gold Silver Ratio Today : 59.76
Change : 0.097 or 0.2%

Silver Gold Ratio Today : 0.01673
Change : -0.000027 or -0.2%

Platinum Price Close Today : 1665.30
Change : -11.00 or -0.7%

Palladium Price Close Today : 560.75
Change : -9.95 or -1.7%

S&P 500 : 1,137.03
Change : -9.21 or -0.8%

Dow In GOLD$ : $168.96
Change : $ (1.31) or -0.8%

Dow in GOLD oz : 8.173
Change : -0.063 or -0.8%

Dow in SILVER oz : 488.92
Change : -3.05 or -0.6%

Dow Industrial : 10,751.27
Change : -78.41 or -0.7%

US Dollar Index : 78.03
Change : -0.686 or -0.9%

Today the US dollar index stood up on its hind legs and bit back, rising an astonishing 34.1 basis points. It was a lot like being savaged by a dead sheep. It's trading now at 78.455, after having hit a Friday low at 78.05. All the buck has accomplished is climbing back to last Thursday's lows (78.40), but considering how much the dollar has lost since August, roughly 500 basis points or about six percent of starting value, that's not too bad. One's mind rebels and says, "Sooner or later it has to rally" but day after day it fails. Remember, too, that from the June high at 88.71 the dollar fell pretty much without relief or rally to its early August low, 870 basis points that time (9.8%).

Recall that on Friday I warned that the Euro had posted what appeared to be an exhaustion gap. Today it fell 0.61% to 1.3676. Although I doubt the Dollar's flight to the center of the earth has stopped, a rally here shouldn't surprise anyone. Long term, of course, you don't want to hold US dollars, as the management is already clearing out space for it in the Mausoleum Of Defunct Currencies.

Stocks may have made their rally peak last week. Dow today fell 78.41 to 10,751.27 and the S&P500 joined for the ride, losing 9.21 to 1,137.03. Stocks are in a primary down trend, so you can start buying them then when that turns, in about 2015, maybe 2020. Till then, stay away.
Silver and Gold today left me a little itchy. What's with the 70 cent closes? 27 Sept gold closed up 70c then the next day added $9.90. On the 30th it closed down 70c and the next day rose $8.30.

Today GOLD closed down 70c to $1,315.40. Silver dropped 2.4c to 2201.3c. Last time they both dropped, 30 September, both leapt up the following day. It's tricky judging what silver and gold will do here because the rise remains so relentless. Here's a guess: silver is resting and reacting after last week's rise, and might retreat as far as 2170c - 2150c in the next couple of days before pushing ahead once more. In the aftermarket this afternoon it dropped as low as 2180, but quickly rose back to 2200c. As long as silver remains above 2150, there's no reason to expect a large correction.

Gold's five day chart resembles silver's, but not as exaggerated. Today gold rested and traded sideways, bumping off $1,312.40 and $1,320. It dropped enough to classify as an exceedingly small correction, so gold might lift off again tomorrow. I suspect that by now the hedge funds are continuing to pile into silver and gold, and that's never a recipe for peace and permanence. Those money jockeys jump from horse to horse without warning. Still, as long as gold stays above $1,295 it will keep on climbing.

People ask me how I can keep on recommending silver to buy silver and gold when the price is rising so fast and markets look ripe for a correction. Three reasons: (1) I can't predict the future, (2) silver and gold are in a bull market (primary uptrend), so (3) the bull market will bail out even your worst timing mistakes. After 30 years of this, I have figured out that the time to buy silver and gold is when it occurs to you to buy it. I have seen too many too-clever folks wait for a reaction before they buy, only to watch silver skyrocket. Either they then pay up and buy at a higher price (rare), or they walk away in disgust and miss the opportunity altogether (common).

Bottom line? It's a bull market. Buy all you can, when you can.

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.