Friday, January 14, 2011

Correction for Silver and Gold Price. Will Gold Reach $1,300 or Lower? and Silver $26.50?

Gold Price Close Today : 1,360.40
Gold Price Close 7-Jan : 1,368.50
Change : -8.10 or -0.6%

Silver Price Close Today : 2830.9
Silver Price Close 7-Jan : 2866.1
Change : -35.20 or -1.2%

Gold Silver Ratio Today : 48.06
Gold Silver Ratio 7-Jan : 47.75
Change : 0.31 or 0.6%

Silver Gold Ratio : 0.02081
Silver Gold Ratio 7-Jan : 0.02094
Change : -0.00013 or -0.6%

Dow in Gold Dollars : $ 179.11
Dow in Gold Dollars 7-Jan : $ 176.35
Change : $ 2.76 or 1.6%

Dow in Gold Ounces : 8.665
Dow in Gold Ounces 7-Jan : 8.531
Change : 0.13 or 1.6%

Dow in Silver Ounces : 416.38
Dow in Silver Ounces 7-Jan : 407.34
Change : 9.04 or 2.2%

Dow Industrial : 11,787.38
Dow Industrial 7-Jan : 11,674.76
Change : 112.62 or 1.0%

S&P 500 : 1,293.24
S&P 500 7-Jan : 1,271.50
Change : 21.74 or 1.7%

US Dollar Index : 79.066
US Dollar Index 7-Jan : 81.141
Change : -2.08 or -2.6%

Platinum Price Close Today : 1,811.40
Platinum Price Close 7-Jan : 1,735.80
Change : 75.60 or 4.4%

Palladium Price Close Today : 793.00
Palladium Price Close 7-Jan : 751.90
Change : 41.10 or 5.5%

Th GOLD PRICE rallied to $1,377.80, about 1:00 a.m. New York time. From there gold ground down the entire day, excepting for a larger fall-off-the-cliff down to $1,355.42. After that gold moved in a sideways chastened pattern, oscillating around $1,360.

Comex GOLD lost 26.50 to $1,360.40, after failing to break through $1,386 resistance yesterday. Now call to mind that earlier this week gold broke that old $1,362 low and touched $1,353. Yesterday it rallied, but today returned to close beneath the old low. This strongly suggests that gold will move lower, say, to $1,330 or $1,300.00.

The SILVER PRICE took a whuppin' twice as bad as gold's this week -- no surprise that, since smaller market silver is always more volatile than gold. Overnight silver traded to 2895c, but ground down toward the New York open. A little bump carried it up from 9 to 11, and then silver gave up again and sank to 2811c. Comex closed down a massy 94.3c at 2830.9c.

Behold, the chart! Silver has established a down trend with lower highs. One more lower low confirms that downtrend. Today's tumble carried silver below its 50 Day Moving Average (28.44), so momentum is, for the nonce, down.

Aww, put up your handkerchiefs! Markets never move in straight lines, and every party leaves a hangover. Silver and gold remain in a primary uptrend (bull market), and will be for several more years. Y'all got right by buying silver and gold back when everybody else through you were crazy. Now, sit tight.

By the way the GOLD/SILVER RATIO behavior also argues that on 3 January we saw tops in silver and gold. The ratio has definitely turned up, which signals a correction for silver and gold. No doubt gold will reach $1,300, maybe lower, and silver $26.50. Be patient, lift up your eyes to the hills. That's where the horizon is, and where you get your bearings.

In spite of a dead-cat bounce (rally) this week, silver and gold continue downward. Ditto the US dollar index. Appears that stocks will, for the nonce, gain a bit against silver and gold. After the magnitude of the plunges, it's about time.

Picture in thy mind a rectilinear box. Now place it on the US DOLLAR INDEX chart. Since 1 December the Dollar Index has traded within that box, bounded on the top by 81.30 and on the bottom by 78.80. The dollar index today once again reached the bottom of that box.

Boxes or consolidation patterns will break out eventually, but don't give much clue which way. This week the dollar has been driven -- down -- by a successful sale of sorry, scrofulous Portuguese bonds. Although this only pushed off the inevitable day of reckoning, speculators took it as a sign that the European sovereign debt crises (plural number) are fixed. This is the selfsame optimism that a six year old boy shows when he straps on a pair of cardboard wings and jumps off the barn. All the same, this groundless enthusiasm has driven the Euro up and the buck down. Whether it will push the dollar out of that box on the chart and back down to the November low at 75.63, or whether the dollar next week will rebound and clean the silly Euro-ites' clock, remains to be seen.

Not that I am any fan of the scabby US dollar and the crooks who manage it, but in truth it is not subject to the same centrifugal stresses as the Euro, where nations whose spending cannot be controlled are yet bound by a common currency. Since those nations have spent, oh, say, 100 years financing government by inflation and stealing from gullible bondholders, they don't easily change their habits. Thus the euro stands a somewhat better chance of blowing up before the dollar.

Maybe my natural born fool's brain has come unsynchronized from the market, but I still expect the dollar to rally further, although my expectation has grown weak as a radio broadcast from Pluto. US dollar today lost 12.5 basis points to stop at 79.066.

STOCKS rose today, proving that both P.T. Barnum and H.L. Mencken were right. One guesses that the euro-enthusiasm has infected stock-buying optimists with visions of economic recovery dancing in their heads. Veritas filia temporis.

Noteworthy today was the Dow in Gold Dollars, which measures stocks' performance in gold, broke through its 200 DMA. Recall that the DiG$ topped 25 August 1999 at G$925 (44.75 oz) and has been falling ever since, to G$179.11 (8.665 oz), by 79%. In down- trending market a
rally to the 200 DMA occurs from time to time, just before the market begins falling again.

Same thing is occurring in the Dow In Silver Ounces, now 415.56 oz. Could rally to 515, or could collapse next week. Stocks remain the brown lettuce in the crisper of the great refrigerator of investments.

'Tis worth noting and pondering that stocks have diverged from their sometime movement in the same direction with silver and gold. I'm not sure what that means, but it seems like something to wonder about.

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.