Tuesday, October 12, 2010

Silver and Gold Prices are NOT in a Bubble

Gold Price Close Today : 1345.70
Change : (7.60) or -0.6%

Silver Price Close Today : 23.147
Change : (0.200) cents or -0.9%

Gold Silver Ratio Today : 58.14
Change : 0.173 or 0.3%

Silver Gold Ratio Today : 0.01720
Change : -0.000051 or -0.3%

Platinum Price Close Today : 1680.00
Change : -2.00 or -0.1%

Palladium Price Close Today : 588.00
Change : 0.00 or 0.0%

S&P 500 : 1,169.77
Change : 4.45 or 0.4%

Dow In GOLD$ : $169.29
Change : $ 1.12 or 0.7%

Dow in GOLD oz : 8.189
Change : 0.054 or 0.7%

Dow in SILVER oz : 472.78
Change : -2.85 or -0.6%

Dow Industrial : 11,020.40
Change : 10.06 or 0.1%

US Dollar Index : 77.29
Change : -0.148 or -0.2%

Yesterday was a yankee government holiday with the post office closed, but the markets were open. We took the opportunity for a day off.

Frankly, market are out so far off the edge of the curve that it's very difficult to make any intelligent statement about them. No matter what everybody may think, a falling dollar is not the universal penicillin for economic disease.

As always, Wall Street is getting it wrong. They are honking about silver and gold being in a bubble and at a top. Now why should we believe that the same dullards who missed calling the Stock Market Bubble, the Dot Com bubble, the Real Estate Bubble, and even the soap bubble can accurately spot one in silver and gold? Alas, their over-sized Harvard-trained crania have overlooked the most fundamental principle of investing: always identify the primary trend and align your investment with, not against it. But then, they have stocks to sell, stocks that are locked in a bear market (primary down trend), so maybe they cannot afford to meditate on primary trend, let alone mention it.

The MBAs in the skyscrapers are confusing a runaway bull market (primary uptrend) in a third wave up with a bubble. Not only are silver and gold NOT in a bubble, but they will grow wilder, furrier, and more unpredictable, all in one direction: up. Now beware, and overlook not the metals' short-term oversold condition, which could fall off in a sharp, sudden, but shallow correction any time. I don't mean that silver and gold will perpetually rise. The last 60 days or so have been very unusual, fuelled by more than bull fever alone, and that same force is pushing stocks up, too.

Stocks, on the other hand, are locked in a primary down trend (bear market). Remember, primary trends run 15 to 20 years, so this stock bear market won't end before 2015, maybe 2020.

Oh, wow. Did I neglect to mention that the US dollar is also imprisoned in a hopeless primary downtrend, and beyond the technical picture is doomed by the institutional and political framework of central banking and government spending? Well, it is, so Wall Street's other investment offering, bonds, are also a Killer Investment -- that is, they will kill any purchasing power you still retain.

Okay -- anybody confused about where I stand? Good, then let's look at today's market.

Before I say anything about the US DOLLAR INDEX, I want y'all to ponder and keep in mind that under our central banking system, all currency exchange rates are government- manipulated. All means all. Thus if the dollar is falling, it falleth because somebody -- Treasury or Fed Reserve or more likely both -- has decided to let it fall. Ditto if it rises. Not true only if the currency escapes their nasty, damp clutches, and usually that means heads into a collapse.

Thus the buck continues to fall, but here just below 77, from 76.90 to 77.50, the dollar seems to be trying to begin -- maybe -- a little rally. Technically an eentsy-teensy bit of support lieth in the past around 76.60, but 't'ain't huge. Keep your eyes peeled for a dollar rally. It will wreck the party fearsomely, especially in stocks.

STOCKS have climbed above 11,000. Today the Dow augmented by 10.06 to 11,020.40 and the SYP500 embraced another 4.45 points to rest at 1,169.77. Great, great, great, it's broken above the previous high and headed into a new rally! Not quite. It is completing the right shoulder of a gigantic head and shoulders top that measures out a target around 8,000. I am nothing more than a natural born fool, an ignorant ridge runner from Tennessee, but heed my warning and stay away from stocks.

GOLD and SILVER pulled another trick today. Both dropped, silver by 20c to 2314.7c and gold by $7.60 to $1,345.70. So what? Yesterday silver gained 26c and gold $9.10, so for the two days both have netted a rise. I have been observing for the last 2 months or so that instead of indicating weakness, silver and gold often jump -- and high -- the day after a little fall. Maybe they will repeat that performance again tomorrow.

I feel like I have ants crawling in my bones when I say this, but I would keep on buying silver and gold. This well-muscled and determined rally has set its eyes on $1,600 and 3400c.

After the Comex closed silver rose again, higher than yesterday's close. Right now it's trading at 23.31. Silver has thrice bumped against 2045c, looking like a helium balloon searching for a way out. It will pierce the ceiling.

Gold has risen back to $1,352. Both silver and gold appear to have made some sort of high and correction last Thursday. Now they are making good the fall, recovered to rise again. Gold needs to clear $1,355 resistance.

Gold and silver are safe down to $1,325 and 2230c. If they break those levels then a correction has begun. Otherwise, they are headed for the sky. That bunching up on the 6 month gold and silver charts leaves me a bit uneasy, but other than that the fury will continue until it ends.

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.