Monday, January 03, 2011

Gold Price Gained Only $1.50, Was it a Good Idea to Prefer Silver to Gold Over the Last Year?

Gold Price Close Today : 1422.60
Change : 1.50 or 0.1%

Silver Price Close Today : 31.096
Change : 0.186 cents or 0.6%

Gold Silver Ratio Today : 45.75
Change : -0.227 or -0.5%

Silver Gold Ratio Today : 0.02186
Change : 0.000108 or 0.5%

Platinum Price Close Today : 1767.10
Change : -1.50 or -0.1%

Palladium Price Close Today : 795.00
Change : -7.00 or -0.9%

S&P 500 : 1,271.87
Change : 14.23 or 1.1%

Dow In GOLD$ : $169.59
Change : $ 1.19 or 0.7%

Dow in GOLD oz : 8.204
Change : 0.058 or 0.7%

Dow in SILVER oz : 375.31
Change : 2.98 or 0.8%

Dow Industrial : 11,670.75
Change : 93.24 or 0.8%

US Dollar Index : 79.19
Change : 0.008 or 0.0%


I consider it very bad manners and even worse taste ever to say "I told you so." Therefore I will offer y'all the following statistics without comment, as res ipsa loquitur. These are the percentage changes from 31 December 2009 to 31 December 2010.

Dow in gold Dollars, -14.5%

Dow in silver Ounces, -45.9%

Gold, + 29.8%

Silver, +83.7%

Gold/Silver Ratio, -29.4%

Dow Jones Industrial Avg., +11.0%

S&P500, +12.8%

Nasdaq Comp, +12.8%

Platinum, +20.5%

Palladium, +95.6%.

But one leetle question does pop up! Was it a good idea to prefer silver to gold over the last year?

The SILVER PRICE managed to close above 3100c for the first time in this bull market. Added 18.6c to close 3109.6c on Comex. The GOLD PRICE stalled at Friday's ending prices, gaining only $1.50 to $1,422.60. I liken this to wading through the deep mud in the lake as you walk up the shore out of the water. Once gold breaches $1425 'twill pick up speed. Silver's meeting resistance at 3100c, but hasn't given up yet. The five day chart shows a clear 5-wave up move from last Thursday and a three wave correction from today's high in the forenoon. Ditto Gold, but not as clear. I expect tomorrow to see higher prices, maybe even JUMPING higher.

The GOLD/SILVER RATIO today hit 45.6. We are still swapping silver for gold, and now the ratio has dropped a bit more and we've found someone to buy large amounts of US 90% silver coin so that we can do the swaps a little closer to the spot ratio than the earlier ones. I have been pouring over past price action on earlier swaps, and that leads me to believe all the more strongly that a price peak, which coincides with a ratio low, does not lie far in the future.

Remember one of the characteristics of the ratio is that once it hits its low, it VERY rapidly rises. That reflects silver's volatility and the speed of its collapse after a peak. That collapse occurs over a fairly uniform time, then hits a low, which coincides with the ratio high. That's when we swap gold back into silver.

From here the ratio might hit -- possibly -- 43.3. Might go lower. But 45.5 really was my lowest target, and I am happy as a mouse in a pie factory to get these trades off where we have, and thankful for whatever other ones we might do. Remember the market proverb when you are tempted to wait for "just a little more movement in your favour." "Bears get rich, and bulls get rich, but pigs get slaughtered."

The US DOLLAR INDEX today lost 8/10 of a basis point to close at 79.193. This no more than confirms the dollar intends to move lower, at least to 78.50. At 78.50 it will have to decide whether it will bounce and rally, or fade away.

STOCKS today benefitted from something. Dow rose 93.24 to close at a scandalous 11,670.75. Here's an assignment for you number-crunchers. The 2000 Dow high was 11,722.45. Find yourself an inflation calculator on the Internet and throw in that 11,722.45 number to see where the Dow would have to be today just to equal January 2000.

S&P 500 rose 14.23 points to 1,271.87. Y'all buy stocks with your money, and let me know next year how that works out for you. My guess is that the economy will hit a brick wall again this year -- banks forced to do something about all those rotten mortgages on their balance sheets, municipal bond defaults, or, if not that, then stray dogs -- and that will trim stocks' sails considerably. But what do I know? I'm just a natural born fool from Tennessee, not one of them Wall Street smart boys that's been to Haahvaahd.

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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.