Friday, January 28, 2011

Today the Gold Price Rallied, Does This Mark the End of the Correction?

Gold Price Close Today : 1,340.70
Gold Price Close 21-Jan : 1,341.00
Change : -0.30 or 0.0%

Silver Price Close Today : 2793.4
Silver Price Close 21-Jan : 2741.6
Change : 51.80 or 1.9%

Gold Silver Ratio Today : 48.00
Gold Silver Ratio 21-Jan : 48.91
Change : -0.92 or -1.9%

Silver Gold Ratio : 0.02084
Silver Gold Ratio 21-Jan : 0.02044
Change : 0.00039 or 1.9%

Dow in Gold Dollars : $ 182.31
Dow in Gold Dollars 21-Jan : $ 183.01
Change : $ (0.70) or -0.4%

Dow in Gold Ounces : 8.819
Dow in Gold Ounces 21-Jan : 8.853
Change : -0.03 or -0.4%

Dow in Silver Ounces : 423.27
Dow in Silver Ounces 21-Jan : 433.03
Change : -9.75 or -2.3%

Dow Industrial : 11,823.70
Dow Industrial 21-Jan : 11,871.84
Change : -48.14 or -0.4%

S&P 500 : 1,276.34
S&P 500 21-Jan : 1,283.35
Change : -7.01 or -0.5%

US Dollar Index : 78.135
US Dollar Index 21-Jan : 78.130
Change : 0.01 or 0.0%

Platinum Price Close Today : 1,792.40
Platinum Price Close 21-Jan : 1,826.50
Change : -34.10 or -1.9%

Palladium Price Close Today : 812.50
Palladium Price Close 21-Jan : 818.05
Change : -5.55 or -0.7%

The GOLD PRICE and SILVER PRICE place the most twisted riddle before us today. Did today's rally mark the end of the reaction, or merely a sharp reaction against the trend?

GOLD jumped a healthy $22.30 on Comex to close at $1,340.70. That was strong, that was tough, that was admirable, but that was not a close through $1,345 resistance. Therefore, today's close answereth not our riddle. The Williams %R indicator shows an extreme low, but that, too, speaketh with forked tongue. It might indicate a little rally, then a resumption of the downtrend. No answer there, either.

What about the low so far? $1,318.40, yesterday's close, nearly fits one of my targets, that $1,308 support. That's a clear "maybe."

I am trying to learn not to draw to inside straits, but to stick to the main chance. Gold must clear $1,345 and then $1,355 and $1,365 in short order to state clearly that it has finished dropping.

SILVER outshone gold today. The rise to 2800c (high at 2804c) cleared the last high at 2780. Still, the close came at 2793.4c, up a hefty 89.8c but still not ABOVE 2800c. I will leave the many metaphors to your imagination, but "not there" in the end means "not there." It either is or it ain't, and so far, it ain't.

Besides, this silver reaction doesn't meet my expectation either in time or price. Time should drag out another month or more, price drop further than what we have already seen, less than 15% from the peak. Just doesn't seem a sufficient tergiversation for volatile silver.

But lo! I am teachable, and chary of ever wedding myself to my own preconceptions. Still, it cleaveth to my mind the main chance is a silver jump not higher than 2860c (the 20 DMA), then a drop to lower lows.

Now arguing against lower lows are the RSI and MACD, which are hinting that the SILVER PRICE and the GOLD PRICE are ready to move up.

So in the end, I can't answer the riddle and can only wave one hand in the air and then the other. Next week will tell us.

Be not confused, neither be dismayed: the primary uptrend in silver and gold remains as robustly healthy as ever. You are witnessing a temporary correction after a long move up. The bull market is not even near a beginning of an end, much less the end.

Strange unto weird. Look at that board: gold within 70c of last week's close, US dollar index within half a basis point, and all else but silver and platinum are nearly unchanged.

DOLLAR INDEX gave today the first sign of breaking out of that falling wedge it has spent so long drawing. Dollar closed today up 40.8 basis points to 78.135, comfortably above 78 at least. Is it a breakout? If so, Monday it must rise again, and in fact ought also to rise for three days or more. Since the Yen fell today 0.68% and the Euro fell 0.69%, it looks like a short covering rally at least.

Behold: the rising dollar coincided with falling stocks and rising silver and gold. I do not interpret, I only observe. Maybe the riots in Islam land boosted gold today? But then, how do you explain silver rising further than gold today?

Dollar topped today at 78.28, so 78.30 and 78.40 are the marks to beat next week. A drop below 77.60 launches dollar into free-fall.

STOCKS took a hard beating with a white oak stick. They began the day looking poorly, then some lemming-like impulse sent investors running over the cliff. By noon the Dow had fallen to 11,805. Dow closed at 11,823.70, down 166.13 (1.4%) and the S&P500 lost 23.20 (1.8%) to close at 1,276.34.

Look at the chart. This was a waterfall, a severe break breathing panic and fear. As I have been repeating, and repeatedly been rebuked for repeating, the Dow has formed a fatal (read: deadly, tending to croak) rising wedge, which points AWAY from the direction it will break-out, a prolix way of saying that a rising wedge breaks out downward.

Stocks will continue to offer a wild, dangerous, and downward roller coaster ride in the Great Amusement Park of Investing. Keep off!

DOW IN GOLD DOLLARS hit a high this week at its last low, and it stands above the 200 day moving average. I think that was the top of the move, and 'twill descend from here.

On Friday, 4 February 2011 I will be speaking in Severn, Maryland for the Institute on the Constitution: "The Only Cure For The Economic Depression, and It Ain't From Washington, DC." For details, go to If you make it, come up and introduce yourself. Admission is free but limited seating requires you register in advance.

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.