Wednesday, November 10, 2010

The Gold Price Must Beat Its Way Through $1,410 and Silver Through 2815c to Confirm an Upturn, Tomorrow All Will Be Clear

Gold Price Close Today : 1399.10
Change : (10.70) or -0.8%

Silver Price Close Today : 26.861
Change : (2.041) cents or -7.1%

Gold Silver Ratio Today : 52.09
Change : 3.308 or 6.8%

Silver Gold Ratio Today : 0.01920
Change : -0.001302 or -6.4%

Platinum Price Close Today : 1743.80
Change : -44.00 or -2.5%

Palladium Price Close Today : 700.45
Change : -18.65 or -2.6%

S&P 500 : 1,218.71
Change : 5.31 or 0.4%

Dow In GOLD$ : $167.80
Change : $ 1.44 or 0.9%

Dow in GOLD oz : 8.117
Change : 0.070 or 0.9%

Dow in SILVER oz : 422.81
Change : 0.70 or 0.2%

Dow Industrial : 11,357.04
Change : 10.29 or 0.1%

US Dollar Index : 77.66
Change : 0.214 or 0.3%

For both the GOLD PRICE and the SILVER PRICE, here's what argues against a key reversal: the lows yesterday and today are nearly identical, 2650c and $1,385. That leaves a pattern that might be a completed ABC correction and a double-bottom -- or more indecision.

Remember that a "key reversal" requires two elements. First, the market rises into new high territory, but ends the day lower than the previous day. Next, it must follow through the subsequent day with another lower close. What does that say, applied to gold and silver?

Taking the entire day's trading and not the Comex closes alone, both metals completed a key reversal yesterday and today, I think. On Comex silver closed down 204.1c to 2686.1c, but that loss is exaggerated. Remember that silver's fall yesterday occurred mostly after the Comex close. Silver now costs 2724c versus 2694c yesterday. Now you might think that gainsays that "lower close" requirement, but I'm not sure how to call it.

Tomorrow will make all things clear. If silver and gold drop below those marks, then it was a key reversal and lower prices are coming. Looking the other way, gold must beat its way through $1,410 and silver through 2815c to confirm an upturn.

It seems I have the rare ability to write many words without ever making myself fully understood. Case in point is my remarks yesterday about the GOLD/SILVER RATIO target for our silver to gold swaps. Yes, like the rest of the world a wave of indecision and greed occasionally washeth over me, and it did yesterday because that ratio was dropping so fast. Looked likely to crash clean through our target and sink to the center of the earth before it reversed.

I spent more time last night than I care to remember staring at charts and exposing my old eyeballs to the radiation of a cathode ray tube. I came away with the provisional (there's that indecision again, popping up it sickly head) conclusion that we are about to experience a correction in silver and gold that may carry the ratio up to 56 or 57.5 (52.7 is a shallower possibility).

Right, do the math. When the ratio rises, the prices of silver and gold usually fall.

What I believe has happened -- all still in the midst of an ongoing rally to $1,600 and 3400c - 3950c -- is that the ratio hit a fan or downtrend line from 2003, and the uptrend line from 2006 and 2008, and bounced. Oh, the ratio will surely penetrate that line, but as overextended as it was, any excuse for a correction would answer.

"All wrong" would be writ all over this outlook if gold closes over $1,424 and silver over 2890c.

Because I have obfuscated again and sprayed the conclusion abundantly with words, here's the ratio target: still 47.5, for the nonce.

Now glance over at the dollar. Today the US DOLLAR INDEX stuffed another 21.4 basis points under its shirt to 77.657, up 0.28%.

Dollar continued to drift upwards, and now is elbowing resistance at 78. The Euro shows a double top, the yen shows a twisted island reversal, and nobody in Europe or Japan wants a currency appreciating against the buck. Ergo, expect a higher dollar for a space.

STOCKS stumbled higher today. Dow eked out 10.29 to perch at 11,357.04, while the S&P 500 gained about 5 times as much, rising 5.31 to 1,218.71 Yet the Dow in Gold Dollars has broken down and is hinting, although hasn't yet laid the money down, that stocks are about to plunge against gold. Leave this bear market to maul others, y'all stay out.

Don't get shaken: the bull market in SILVER and GOLD has a long, fruitful life in front of it. Go home tonight and kiss your wife or husband, enjoy your dinner and your kids, and know that if you've bought silver and gold, you've done your best to protect your family from the wicked Vandals in Washington.

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.