Wednesday, January 05, 2011

The Gold Price Dropped to $1,373.40, Where Does That Leave Gold Against It's Moving Averages?

Gold Price Close Today : 1378.50
Change : (44.10) or -3.1%

Silver Price Close Today : 29.492
Change : (1.604) cents or -5.2%

Gold Silver Ratio Today : 46.74
Change : 0.993 or 2.2%

Silver Gold Ratio Today : 0.02139
Change : -0.000464 or -2.1%

Platinum Price Close Today : 1730.50
Change : -25.70 or -1.5%

Palladium Price Close Today : 774.40
Change : -1.60 or -0.2%

S&P 500 : 1,270.20
Change : 6.36 or 0.5%

Dow In GOLD$ : $175.80
Change : $ 5.93 or 3.5%

Dow in GOLD oz : 8.504
Change : 0.287 or 3.5%

Dow in SILVER oz : 397.49
Change : 1.29 or 0.3%

Dow Industrial : 11,722.89
Change : 31.71 or 0.3%

US Dollar Index : 80.26
Change : 0.814 or 1.0%

The GOLD PRICE moved sideways, testing support with its foot at $1,364 a little before midday, leaving a V-bottom behind, and trading range bound between 1372 and 1380 afterwards. No doubt y'all will recall -- since y'all are not IRS agents testifying on the stand to something that might help the defendant, which questions mightily debilitate their memories -- that in December Gold posted its low at $1,362.30 (intraday). Gold dropped $5.10 and came to rest on Comex at $1,373.40.

Where does that leave gold against its moving averages? Below the 20 ($1,390.06) and below the 50 ($1,379.73). Decidedly negative. But give it a day or two and it ought to work up at least a dead-cat bounce. I'm simply not sure that gold has finished this move, despite all the evidence.

The SILVER PRICE had lost 31.9c when Comex closed at 2917.3c Yesterday it lost 5.2%, so today looked right calm. Patter mirrored gold's, mostly sideways with a V-spike before noon. If silver doesn't fall below 2930 tomorrow, that will begin to look like a temporary bottom. Today's low was 2859c.

Before y'all start running for the hills, remember H.L. Hunt's wisdom: "Never get really elated in victory; when times are tough, never get down." Silver and gold have had a magnificent 26 month run, from 880c to 3109.6c (up 3.53 times) and from $705 to $1,422.60 (up 2.02 times). A reasonable person expects markets to zig and zag. You got the zig, now you have to live with the zag a while. Bull market remains alive, well, robust, and vigorous, and will run three to ten more years. Relax, be thankful for the gains so far, and look forward to more in good time.

Let's stroll down Mem'ry Lane a while and see what we can find under the leaves.

What ho! When the GOLD/SILVER RATIO bottomed on 19 April 2006, it wasn't the silver price high. That came on 11 May 2006, but only 2.3% higher. In the first two days after the high, silver lost 10.8%. In the first five trading days, 16.2%. At the ultimate correction low silver had lost 35.4% of its peak value.

And today stirred yet another mem'ry beneath my balding but still slightly attractive (to my wife) pate. The Dow Jones Industrial Average today closed at 11,722.89. Coincidentally, at the bull market high on 14 January 2000, it closed at 11,722.98. It didn't reach that level again until nearly 7 years later, on 30 October 2006.

And my curiosity nagged, wondering what the inflation-adjusted value of 2000's 11,722.98 was. Tom's Inflation Calculator says the Dow would have to be at 15,446.90 today to equal 2000's value. John Williams Shadow Stats, which throws out all the government's inflation-hiding "adjustments," says that to equal the 2000 value the Dow would have to be at 30,425.10.

But what do I know? I'm just a natural-born fool, too stupid to believe what his government tells him.

Y'all already know that the Dow closed 11,722.89 today, up 31.71. S&P500 rose 6.36 to 1,276.56. My opinion hath not wavered: in the delicatessen of investing, stocks are the superannuated liverwurst with four-day old sliced onions.

THE US DOLLAR INDEX leapt 81.4 points or 1.05%, clearing 79.50 resistance AND 80 resistance. That takes the dollar back to 80.40 resistance, and aims for 80.80 and higher. Today's leap carried the buck up through its 20 DMA (80.02). Now it has bounced off its 50 DMA (79.21) and cleared its 20 DMA. Dollar will go higher. Soon.

Today is "Twelfth Night," the 12th night of Christmas and eve of the Epiphany, celebrating the appearance of Christ to the Gentiles represented by the three kings.

During the Twelve Days of Christmas (Christmas thru Epiphany, 6 Jan) our office will be working only four hours a day. Please be patient, leave a voice mail or send us an email at [email protected]

Thanks for your understanding.

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

- Franklin Sanders, The Moneychanger
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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.