Thursday, December 09, 2010

The Gold Price Could Drop as Low as $1,230, Must Rise Above $1,430.60 to Confirm Continued Rally

Gold Price Close Today : 1,392.00
Gold Price Close 3-Dec : 1,405.40
Change : -13.40 or -1.0%

Silver Price Close Today : 2878.9
Silver Price Close 3-Dec : 2924.1
Change : -45.20 or -1.5%

Gold Silver Ratio Today : 48.35
Gold Silver Ratio 3-Dec : 48.06
Change : 0.29 or 0.6%

Silver Gold Ratio : 0.02068
Silver Gold Ratio 3-Dec : 0.02081
Change : -0.00012 or -0.6%

Dow in Gold Dollars : $ 168.85
Dow in Gold Dollars 3-Dec : $ 167.42
Change : $ 1.43 or 0.9%

Dow in Gold Ounces : 8.168
Dow in Gold Ounces 3-Dec : 8.099
Change : 0.07 or 0.9%

Dow in Silver Ounces : 394.94
Dow in Silver Ounces 3-Dec : 389.25
Change : 5.69 or 1.5%

Dow Industrial : 11,370.06
Dow Industrial 3-Dec : 11,382.09
Change : -12.03 or -0.1%

S&P 500 : 1,233.00
S&P 500 3-Dec : 1,224.71
Change : 8.29 or 0.7%

US Dollar Index : 80.059
US Dollar Index 3-Dec : 79.147
Change : 0.91 or 1.2%

Platinum Price Close Today : 1,678.50
Platinum Price Close 3-Dec : 1,729.80
Change : -51.30 or -3.0%

Palladium Price Close Today : 737.60
Palladium Price Close 3-Dec : 764.25
Change : -26.65 or -3.5%

The GOLD PRICE spike low to $1,372 yesterday seems to have been confirmed, at least for the time being. In a thoroughly unexcited performance gold moved sideways today, never lower than $1,380.40 and never higher than $1,394. Alternative interpretation is that gold kissed back to the $1,390-ish level before dropping further.

Hark! Today gold did bounce off its 20 day moving average ($1,376.67), a heartening sign, but still hovers not too far from the 50 DMA (1362.60).

Gold has fallen into a tight place, with what might well be a head and shoulders top building on the chart, which would signal a drop as low as $1,230. I'm not saying that will happen, only that until gold rises above $1,430.60 to confirm that its rally is not dead, we have to reckon with all possibilities. When the black shirts at Comex closed down, gold had gained $9.50 to $1,392.00.

While I am here, it occurs to me to make an offer to y'all: if you want ears tickled, go someplace else. I can't help what wild things y'all hear on the internet -- and for all I know some of them may be true -- but I am still going to tell you what the chart says, as God gives me grace. I am still going to hedge about with conditions and maybes, because generally tomorrow isn't very clear. If you want somebody who merely wants to cheerlead for silver and gold, go find 'em, with my well wishes, but I'm not your man.

The SILVER PRICE five day chart looks like a completed A-B-C correction, but that doesn't say we won't get another Al-B-C leg down. Yesterday it spiked down just below 2800c, rose a little today and spent the day riding between 2835c and 2900c. On Comex silver rose a respectable 56.5c, to 2878.9c.

What does that say so far in this correction? Silver has successfully stopped all comers at 2800c, an established support level. It has held above its 20 DMA (now 2757c) which has served as its safety net since last August. These promise good things, but silver has only been falling for three days. It must yet confirm its achievement by gaining back lost ground, and most of all by climbing over that last high at 3067c.

I don't mind admitting that my poor mind is as divided as if somebody had laid an ax down the middle of it. Silver and gold's behaviour since July-August has not been normal but wildly powerful. This is typical of a market in a third leg up, where silver and gold now are. Just as typically, they ride upon mists and fogs and clouds of rumours. But silver and gold have stalled at $1,430 and 3000c. I am inclined to expect to see that $1,600 - $1,675 target fulfilled before a major correction bites, but also see signs of a top, especially those backed up silver refineries.

So in the next few days silver and gold might blast away, or they might sink. Either is possible. In the long term, of course, they are just beginning their mad third leg up, and the bull market will run for years yet. But soon, soon, maybe three days ago or maybe in January, will come a top that will loose a correction lasting 6 - 12 months. I'm never going to live through this unless I learn to modulate my emotions and not swing from ecstasy to despair. Keep calm, because SILVER and GOLD will become more manic still.

What are the last four words you are most likely to hear shortly before you lose vast amounts of money? "It's different this time." Those are the words I am hearing from people who object to swapping silver for gold and believe that by the end of this week silver will reach $600 an ounce.

Sometimes when y'all don't get it, I get it, that is, I get why y'all don't understand -- I didn't state clearly what I meant or misspoke. But this time I don't get why y'all don't get it. I wrote with what I thought was perfect clarity:

"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."

Apparently this was not clear to numerous readers, so I will clarify: US refineries are clogged with a glut of silver. Gluts of silver do not appear at market lows, or at continuation levels; gluts appear at peaks. I do not mean the ULTIMATE peak of the bull market, but certainly an intermediate peak.

But who knows? Maybe "it's different this time."

Anyway, if you are buying silver now this condition has made US 90% silver coin the very cheapest form of silver. Don't buy anything else.

US DOLLAR INDEX's momentum is slowing badly. Today it rose a chintzy 6.2 basis points to 80.059. I've seen racing snails faster than that. Dollar was nailed by resistance today at 80.40, as 'twas also on Wednesday, leaving a double top in place. If the buck cannot hold on to 80 tomorrow, then 'twill sink like your car keys out of your shirt pocket when you lean over the side of the bass boat to look gaze the lake. Don't write it off yet, but it really must hold 80 tomorrow. Yen and euro were flat today, too.

Stocks have made a double top at 11,450. Dow today closed 11,370.06, down 2.42, S&P rose 4.72 to 1,233.

Thanks again for all your prayers and expressions of concern for my wife Susan, now my bionic wife since she has been electronically improved with a pacemaker. Now that her heart has settled down, it appears it has solved her problem. Her energy has returned, a wonderful thing to see. The 16th is our 43rd wedding anniversary, so we are flying to Orlando tomorrow to visit her brother. Tuesday I will return, provided I don't tangle with the TSA. Otherwise, I may be writing y'all by scraps of notes thrown out a jail cell window.

Y'all enjoy your weekend.

Argentum et aurum comparenda sunt -- -- Gold and silver must be bought.

- Franklin Sanders, The Moneychanger
Phone: (888) 218-9226 or (931) 766-6066

© 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.