Thursday, October 07, 2010

The Gold Price Could Drop to its 50 Day Moving Average 1250.87

Gold Price Close Today : 1,333.90
Gold Price Close 1-Oct : 1,316.10
Change : 17.80 or 1.4%

Silver Price Close Today : 2256.5
Silver Price Close 1-Oct : 2203.7
Change : 52.80 or 2.4%

Gold Silver Ratio Today : 59.11
Gold Silver Ratio 1-Oct : 59.72
Change : -0.61 or -1.0%

Silver Gold Ratio : 0.01692
Silver Gold Ratio 1-Oct : 0.01674
Change : 0.00017 or 1.0%

Dow in Gold Dollars : $ 169.67
Dow in Gold Dollars 1-Oct : $ 170.10
Change : $ (0.43) or -0.3%

Dow in Gold Ounces : 8.208
Dow in Gold Ounces 1-Oct : 8.229
Change : -0.02 or -0.3%

Dow in Silver Ounces : 485.20
Dow in Silver Ounces 1-Oct : 491.43
Change : -6.23 or -1.3%

Dow Industrial : 10,948.58
Dow Industrial 1-Oct : 10,829.68
Change : 118.90 or 1.1%

S&P 500 : 1,158.06
S&P 500 1-Oct : 1,146.24
Change : 11.82 or 1.0%

US Dollar Index : 77.393
US Dollar Index 1-Oct : 78.034
Change : -0.64 or -0.8%

Platinum Price Close Today : 1,696.10
Platinum Price Close 1-Oct : 1,676.30
Change : 19.80 or 1.2%

Palladium Price Close Today : 584.80
Palladium Price Close 1-Oct : 570.70
Change : 14.10 or 2.5%

Tomorrow I will be travelling, so I am sending out this weekly summary a day early.

Silver and gold keep on advancing (along with stocks) making new highs every day. The dollar continues it relentless and easy descensus Averni. One wonders whether it will ever return. So far the dollar giveth no hint of a rally, but as far as it fallen, surely it must turn around soon, if only to prove it yet liveth. Stay on guard.

Today silver and gold broke right after the open, but what does it mean? Is it only a hiccup, or a break toward a real correction? This much we know: twas not the dollar's fault. The US dollar today gained a too-tiny-to-notice 0.7 basis point to trade at 77.393. Yet silver dropped 45.5c to 2256.5c (Comex close) and gold lost $12.50 but caught at $1,333.90. Since silver had gained 101.7c in the past two days, today's loss wasn't exactly fatal. Likewise Gold on Tuesday and Wednesday had added $31. Truth is, I am glad to see a fall today. Recent action has simply been unrealistic and unsustainable. This drop will shake out some weak hands.

What did today's drop do? Primarily point out to us where support lies, at $1,325 and $1,330 for gold and 2245c for silver. Watch 2220c and $1,320 also. Gold reached $1,365 and silver 2350c before they began dropping. Probably zillions of sell stops lurk in the shade just beneath present prices, so any decline is liable to be jerky. On the longer correction side, gold could drop to its 50 day moving average (1,250.87). Silver's 50 DMA stands at 1974c.

Often when a correction does occur, it makes two peaks before it drops in earnest. If this is the case, you'll see gold and silver trade back to the highs tomorrow or Monday, then fall off. New highs are necessary to confirm that the rally is continuing.

Don't let today shake you too much. Markets go up, markets go down, progress is made by zigs and zags. It's normal.

Stocks today were mixed. The smaller indices rose a few points, but the Dow lost 19.07 and the S&P500 lost 1.91. Stocks, silver, and gold falling together without any catalyzing stimulus from the dollar suggests all are way overbought. Remember that stocks are in a countertrend rally in a bear market, moving against the primary trend, while silver and gold are moving with the primary trend. Therefore the end of this rally for stocks should be ugly, but shouldn't smart too much for silver and gold.

Hold on to your silver and gold. If they drop to targets noted above, buy more. If they fall further, give them a few days to see where they will settle and then buy more.

On this day in 1571 an alliance of Spanish and Italians smashed the Turkish fleet at the Battle of Lepanto, first naval win in 120 years for the Christians. That cleared the Eastern Mediterranean of Turkish control for some time. The Battle of Lepanto was the last clash of oar-driven ships.

On this day in 1896 Dow Jones first began reporting an average of the prices of 12 industrial stocks in the Wall Street Journal. By keeping my index, the Dow in Gold Dollars, I have one unchanging measure of stocks from 1869 to the present.

On this day in 1913 Ford Motor Co. began operating its first assembly line. It could turn out one car every three hours.

On this day in 1949 was established the infamous and notoriously un-democratic German Democratic Republic. The GDR found a way to make a Marxist economy work: Hire half the people to spy on the other half. When I was attending the Free University of Berlin in 1971 and 1972 the clever East German communists realized that they could not rely on the Vopos (Volkspolitizten) or Volksarmeeists to shoot at every refugee fleeing across the wall and its no-man's-land. Lest one should make good his escape from the Workers' Paradise, they installed machine guns operated by electric eyes. It might get more hateful and cruel than that, but I don't know how.

Y'all enjoy your weekend. Argentums et aurum comparanda sunt --

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.