Tuesday, February 08, 2011

Gold Price is Without Question Rallying and Will Go Higher, Watch Closely How it Behaves at $1,380

Gold Price Close Today : 1363.40
Change : 15.80 or 1.2%

Silver Price Close Today : 30.271
Change : 0.923 cents or 3.1%

Gold Silver Ratio Today : 45.04
Change : -0.878 or -1.9%

Silver Gold Ratio Today : 0.02220
Change : 0.000425 or 1.9%

Platinum Price Close Today : 1857.90
Change : 18.10 or 1.0%

Palladium Price Close Today : 837.40
Change : 19.75 or 2.4%

S&P 500 : 1,324.46
Change : 5.41 or 0.4%

Dow In GOLD$ : $185.48
Change : $ (1.05) or -0.6%

Dow in GOLD oz : 8.973
Change : -0.051 or -0.6%

Dow in SILVER oz : 404.13
Change : 2.25 or 0.6%

Dow Industrial : 12,233.53
Change : 71.90 or 0.6%

US Dollar Index : 77.95
Change : -0.081 or -0.1%

Today's GOLD PRICE crashed through that $1,353 barrier and thru next resistance at $1,362. It rose $15.80 to close on Comex at $1,363.40. Silver rose faster, by 92.3c, to close Comex at 3027.1c. Stabbed by my own words, I cast down the sweaty, bearish towel and pick up the bullish banner. Yesterday I said that gold needed to rise above 1,355 then $1,362. With gold above that level and silver over 3000c, and the ratio making a new low today, my mouth is shut.

The SILVER PRICE gained a whopping 92.3c today to close Comex at 3027.1c. Remember that the 3 January high was 3109c. By the way, silver today is strongly UN-backwardated or, in easier English, in normal contango: Feb 11 3009.5c, Mar 11 3029.5c; April 11 3030.5c; July 11 3034.5c; Dec 11 3032.5c. However, the 2012 contracts are all over the place, as are the 2013d, 2014s, and 2015s. May be those just didn't see any trading today.

More importantly, the GOLD/SILVER RATIO made a new low today at 45.04 oz. of silver per ounce of gold. If you meant to swap silver for gold earlier, then the market has given you another chance. SWAP NOW, SILVER FOR GOLD!

I remain curious why silver and gold are so reluctantly confirming each other. That ratio low might stop here, or might continue to 43.6, or even 41. Odd is that gold is 4.1% below its high, while silver is only 2.7% below its high.

That begs a question: Does this constitute only a lower low (a kind of double bottom) in the ratio that will not reach the previous highs and thus end in lower silver and gold prices? Or will silver and gold proceed to make new highs? We just have to wait for that answer.

For now, SILVER and GOLD are without question rallying and will go higher. Watch closely how they behave at $1,380 and 3100c. It is an anomaly for me to recommend buying more gold than silver, but because of the low ratio, that's what I would do right now.

I am often, yes, often, baffled by the media's interpretation of markets. Today (taking advantage of a holiday as government's usually do making such announcements) China announced it would raise interest rates to cool inflation. MarketWatch interpreted that as the event raising gold's price. Hmmmm. China cooling inflation means MORE demand for gold? How's that, since inflation is the primary driver for monetary demand? How's that, since rising interest rates make it more costly to hold gold? Well, supposedly that Chinese government move "validated" a Chinese inflation problem. Wow. Deep, very deep, but who, down to the lowest goat in the herd, didn't already know China has an inflation problem?

DOW IN GOLD DOLLARS is faltering, whispering that stocks are about to turn down against gold.

STOCKS rose again today in nominal terms. Dow added 71.9 to 12,233.53 and S&P500 rose 5.41 to 1,324.46. The Dow in Gold Dollars points to a drop in stocks coming soon, but let us take the longer view.

First, stocks are in a Primary Down Trend (Bear Market). A primary trend lasts 15 to 20 years once it begins, and stocks began this bear market in January 2000 (in August 1999 against gold). That means that stocks will be trending downward, never mind the zigs and zags inbetween, until 2015 or so. Down, not up.

Second, an answer for those who argue that stocks will benefit from inflation as a hard asset refuge (they represent bricks and mortar). Constantino Bresciani-Turroni conducted the classic study of the German hyperinflation 1920 - 1923. He reports that although stocks showed HUGE nominal gains, in real terms they in fact lost value.

Third, stocks are in a Primary Down Trend (Bear Market) against both silver and gold. Stocks have already lost 80% of peak value, and will lose another 80% before this bear market ends. Knowing that, why would I own stocks rather than silver or gold?

Questions, anyone?

Trapped in a hotel room last weekend, I was forced to turn the TV to Fox news and CNN. Noticed the long, expensive, celebrity-endorsed articles for four big gold sellers. Because this advertising costs so much, it ought to tell you something about the advertisers. Now I sell silver and gold, so anything I say sounds like invidious comparison, but LO! I will say it anyway. These folks BURY customers, charging 40 to 50% more than most dealers. How do I know? Because I have dealt with so many of their corpses when the customers come asking us to dig them out of their rotten investment. Folks, celebrities do NOT endorse gold dealers because they believe in them, but because they get paid large money to pander for them. Bear that in mind, and buy carefully.

This plethora of advertising also tells us that huge demand is flowing into silver and gold. Sometimes that's good news, sometimes bad. Generally the public is most excited, the advertising most intense, the headlines loudest, at tops, not bottoms.

Will the gentleman who wrote me about selling the Chilean gold doubloons please write again? I have a quotation but erred by deleting your email.

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.