Wednesday, December 08, 2010

Does it Remain Possible that the Gold Price will Reach $1600 Soon?

Gold Price Close Today : 1381.70
Change : (25.80) or -1.8%

Silver Price Close Today : 28.224
Change : (1.524) cents or -5.1%

Gold Silver Ratio Today : 48.95
Change : 1.641 or 3.5%

Silver Gold Ratio Today : 0.02043
Change : -0.000708 or -3.4%

Platinum Price Close Today : 1684.00
Change : -19.70 or -1.2%

Palladium Price Close Today : 725.95
Change : -16.30 or -2.2%

S&P 500 : 1,228.28
Change : 4.53 or 0.4%

Dow In GOLD$ : $170.05
Change : $ 3.33 or 2.0%

Dow in GOLD oz : 8.226
Change : 0.161 or 2.0%

Dow in SILVER oz : 402.94
Change : 0.69 or 0.2%

Dow Industrial : 11,372.48
Change : 13.32 or 0.1%

US Dollar Index : 79.98
Change : 0.120 or 0.2%

GOLD PRICE 5 day chart looks like a corrective move off the Tuesday peak, not the beginning of a new impulsive move down. Today $1,400 capped the market and all the fighting was done between there and $1,372.20 Gold opened at $1,393 tried to rise but slipped to $1,372.20 between 10:00 and 11:00. After that it moved sideways in a tight range just above $1,380. Comex closed at $1,382.50, trimmed by $25.80.

Gold's 20 day moving average at $1,377.55 was hit today. The 50 DMA lies beneath at $1,361. If gold closes below $1,361 then we have to reckon with the worst correction since last August. If gold doesn't turn up by Monday, it will begin to look queasy. Above it must best $1,430.60 to prove a continuing uptrend.

SILVER PRICE, I remind y'all, is more volatile not only to the upside but also to the downside. Therefore it should surprise no one that today it lost about twice as much as gold, 1.77% versus 0.8%.

Silver's 5 day chart speaks more clearly than gold's, and it appears to have exhausted its downside momentum today. Low struck at 2793c. Comex lost 152.4c to close at 2822.4c.

The daily chart looks more like gold's. From 11:00 forward silver traded in a tightening range from 2800 to 2850 -- a long narrow triangle. That signifies an equilibrium, but an equilibrium may result from no force on either side to thousands of foot-pounds on either side. Either way the forces are balanced, and when the pressure up or down increases just a little, a big move will result. Comex lost 152.4c to 2822.4c.

Think about this: silver hasn't even touched its 20 DMA, now at 2751c. 2800c holds out very strong support for silver, as does 2650c.

Folks keep on questioning me about the present glut of silver on the market. They cite JP Morgan's silver short, etc., etc. Whether that JP Morgan story is true or not, I only know that when refineries are backed up from now to February, and when large wholesalers completely pull their bids on 90% coins, that does NOT signal a silver shortage. Rather, the opposite. And remember that the pipeline is very narrow, and easily clogged, and very shallowly financed.

Tomorrow may not tell us much. After two harrowing days, silver may simply take a rest, and resume work on Friday.

Does it remain possible that gold will reach $1,600 soon? Sure, but watch that tell-tale support at $1,350. Break that and it won't.

GOLD/SILVER RATIO jumped up to 48.95 today. And it is feasible that the ratio is stalled trying to break through 47.50 and will yet during this move break through that barrier and fall further. If gold continues rising toward $1,600, that is likely.

But who knows? That's why you set targets, and don't deviate from them when they are hit.

Balance of the arguments slightly favour that silver and gold have topped for this move.

The US DOLLAR INDEX today failed to clear 80 and fell back, barely below 80. Oh, it tried to leap through 80.40, but failed and spent the rest of the day doing penance, bowing lower and lower. Over yesterday it actually gained 12 basis points to 79.977.

Not clear yet whether dollar is merely bouncing off its 20 DMA preparatory to crashing through it, or decided to advance again. Stay tuned.

STOCKS vacillated and oscillated today. Dow managed to scratch out 13.32 points at the close, 11,372.48. S&P500 won 4.53 points to close $1,228.28. Stocks are the Gila Monster of investments.

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.