Friday, January 21, 2011

The Gold Price Followed Through Today Falling Another 5.50 to Stop at $1,341

Gold Price Close Today : 1,341.00
Gold Price Close 14-Jan : 1,360.40
Change : -19.40 or -1.4%

Silver Price Close Today : 2741.6
Silver Price Close 14-Jan : 2830.9
Change : -89.30 or -3.2%

Gold Silver Ratio Today : 48.91
Gold Silver Ratio 14-Jan : 48.06
Change : 0.86 or 1.8%

Silver Gold Ratio : 0.02044
Silver Gold Ratio 14-Jan : 0.02081
Change : -0.00036 or -1.8%

Dow in Gold Dollars : $ 183.01
Dow in Gold Dollars 14-Jan : $ 179.11
Change : $ 3.89 or 2.2%

Dow in Gold Ounces : 8.853
Dow in Gold Ounces 14-Jan : 8.665
Change : 0.19 or 2.2%

Dow in Silver Ounces : 433.03
Dow in Silver Ounces 14-Jan : 416.38
Change : 16.64 or 4.0%

Dow Industrial : 11,871.84
Dow Industrial 14-Jan : 11,787.38
Change : 84.46 or 0.7%

S&P 500 : 1,283.35
S&P 500 14-Jan : 1,293.24
Change : -9.89 or -0.8%

US Dollar Index : 78.130
US Dollar Index 14-Jan : 79.066
Change : -0.94 or -1.2%

Platinum Price Close Today : 1,826.50
Platinum Price Close 14-Jan : 1,811.40
Change : 15.10 or 0.8%

Palladium Price Close Today : 818.05
Palladium Price Close 14-Jan : 793.00
Change : 25.05 or 3.2%

The GOLD PRICE followed through today on yesterday's fall through $1,350, losing another 5.50 to stop at $1,341, not far from our first target at $1,330. On the weekly chart gold fell below its 20 WMA (1,353.14), offering another weight to gravity.

The SILVER PRICE dropped another 4.3c today after tumbling 133.3c yesterday. Comex closed at 2741.6c.

Silver has fallen through its 20 DMA (2929c) and 50 DMA (2854c) and below here the next backstop appears at 2645c -- coincidentally my highest price target for this correction. Silver's fall is liable to turn vicious next week, so brace yourself.

Reflect a moment upon the GOLD/SILVER RATIO. From my viewpoint, that ratio is technically controlling the market right now. It troughed on 3 January 2011 at 45.749. That also coincided with the high closes for silver and gold.

Looking at past ratio lows, the ratio will spend about 3 months rising to a reaction peak. Unfortunately, that doesn't always coincide with the silver and gold price lows, but 'twill fall in the neighborhood. As silver showed greater volatility upwards in the rally's last phase, so also it will show greater volatility downwards in the reaction. Silver could fall to 2640c to 2115c. Gold, on the other hand, probably won't fall lower than $1,280.

What would gainsay these forecasts? The GOLD PRICE above $1,425 hand in hand with the SILVER PRICE above 3109c or the ratio below 45.749.

While causes remain, effects continue. Rising silver and gold are the effect of inflating the money supply in every fiat currency. Has the cause been removed? No. Well, then neither will the effect disappear. Ignore all the dire and supercilious warnings of the "end of the gold bubble" and "death of silver." This is a primary uptrend, a raging bull market that has 3 to 10 more years to run and prices you and I cannot now even envision.

Silver and gold dropped stoutly, the dollar joined, while stocks diverged from metals and rose. Meanwhile, platinum and palladium said, "No, we ain't a-goin'" and rose instead. Ratio rose since metals fell.

Although the US DOLLAR INDEX rose yesterday after touching 78.50 support, it slammed down today 69.3 basis points to 78.13, smashing all hope that 78.50 might hold it.

Where do we stand now?

The short term chart shows the 20 DMA (79.68) just crossed below the 50 DMA (79.81) which confirms the dollar is headed lower. Significantly lower. Most likely target is 76.70, maybe the last low at 75.63. Only thing putting the brakes on against that conclusion is the euro chart, where the euro gapped up today after a long nine-day series of upmoves. Might be an exhaustion gap.

Weekly dollar chart looks even worse. 20 WMA (79.07) has fallen below the 200 WMA (79.58). Hard to imagine what might stop this plunge short of 75.63. Clearly, my expectation that the dollar would rise in the first half of this year was wrong.

STOCKS rose again today to a new high for the move. Dow reached 11,871.84, up 49.04. S&P wasn't quite as enthusiastic, rising 3.09 to 1,283.35.

Stocks are progressing from overbought to over-overbought to preposterously overbought. Relative Strength Indicator stands at 74.15, when 70 is extremely overbought. MACD is also overbought, but today's rise came on higher volume. Deadly rising wedge has formed to points surely to a sharp breakdown.

Stocks remain the moldy deviled eggs in the investment picnic basket.

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.