Gold Price Close Today : 1,388.20
Gold Price Close 11-Feb : 1,359.90
Change : 28.30 or 2.1%
Silver Price Close Today : 3229.8
Silver Price Close 11-Feb : 2999.2
Change : 230.60 or 7.7%
Gold Silver Ratio Today : 42.98
Gold Silver Ratio 11-Feb : 45.34
Change : -2.36 or -5.2%
Silver Gold Ratio : 0.02327
Silver Gold Ratio 11-Feb : 0.02205
Change : 0.00121 or 5.5%
Dow in Gold Dollars : $ 184.52
Dow in Gold Dollars 11-Feb : $ 186.57
Change : $ (2.05) or -1.1%
Dow in Gold Ounces : 8.926
Dow in Gold Ounces 11-Feb : 9.025
Change : -0.10 or -1.1%
Dow in Silver Ounces : 383.65
Dow in Silver Ounces 11-Feb : 409.22
Change : -25.56 or -6.2%
Dow Industrial : 12,391.25
Dow Industrial 11-Feb : 12,273.26
Change : 117.99 or 1.0%
S&P 500 : 1,343.01
S&P 500 11-Feb : 1,329.15
Change : 13.86 or 1.0%
US Dollar Index : 77.642
US Dollar Index 11-Feb : 78.417
Change : -0.78 or -1.0%
Platinum Price Close Today : 1,835.30
Platinum Price Close 11-Feb : 1,805.90
Change : 29.40 or 1.6%
Palladium Price Close Today : 850.50
Palladium Price Close 11-Feb : 811.55
Change : 38.95 or 4.8%
Mercy, what a week! The GOLD PRICE rose 2.1% -- yes -- the SILVER PRICE rose 7.7%, GOLD/SILVER RATIO fell 5.2%. Even stocks joined the party, but the US dollar couldn't be roused from its depression.
Stick a little note up on your mirror to remind yourself that stocks and the SILVER PRICE trend together. When the stock market breaks, silver won't be long behind. (Whoa! No fiery emails, please, silver lovers, I am only talking about silver's performance relative to gold. When investors are risk-hungry, they buy stocks and silver. When they are risk-fearful, they sell stocks and silver and buy gold. I don't make the facts, I just report them.)
This week the GOLD PRICE added a hefty $28.30. Last week, you may remember (and I do, and will remind y'all, because it turned out to be correct -- if it hadn't it would have gone down the memory hole faster than a weasel in a hurry) I said that if gold could pierce the top of its consolidation range, $1,368, it would sprint for $1,380. Yesterday it closed $1,384.70, and today on Comex gained another $3.50 to close at $1,388.20, treading the threshold of the next resistance level.
Gold's lagging against silver, and the established pattern of spike lows for the GOLD/SILVER RATIO, have been keeping me bearish on both silver and gold. I have abandoned that reluctance because gold is now plainly confirming silver's rise, silver has risen to a new all time high above 3 January's high, the ratio has hit new lows, and silver's new high was already yesterday nearly 2% above 3 January, and today 3.9% above. All these argue stubbornly for a breakout and rally to higher prices. Look out! Don't stand in the way of that steam roller!
The utter, final, and ultimate end of all doubt comes when gold, too, reaches a new all-time high above $1,422.60 (3 January's close).
What are we looking at? 3500c and $1,475 at least. Higher? Possible. Silver might reach 3950c and gold $1,600. But let's see how it unfolds.
I have been pondering this, thinking until my hair smoked. What in the world are we seeing? Look at the silver and gold rally from last summer, virtually straight skyward without a jiggle. Recall that markets move up in five waves, one long and very slow one up when only the realizers have caught on and are buying, a very sharp correction (2008) where the bull market tries to shake off as many riders as possible.
After that first wave up and first corrective wave down begins the third wave up. That is never the mildest and sometimes the wildest, stretching and reaching farther even that the most unashamed bulls (like me) could imagine. In the third wave the establishment investors are catching on. Then comes another sharp correction, wave 4 down, shaking out more riders. Last comes wave 5 up, which usually travels straight up in an asymptotic or hyperbolic rise as the public climbs aboard. That's your clue time draweth nigh to climb off the bull.
That third wave up cranked up in Fall 2008, and last summer began to stretch its legs. Trying to be wise these last weeks, trying to discipline myself to the historical stats, I became foolish and refused to believe my eyes. Clearly, silver and gold are not ready for any significant breather, nor has the gold/silver ratio made its low. It's all right, we just swapped gold for silver a little early. That correction will come, eventually, and we will swap back. But the lesson to learn here is this is a bull market, and you never, ever, fight the trend. Silver and gold's performance will run yet amoker, if "amok" is capable of comparison.
Yet in the midst of life there is death, and when the bullets are whizzing around your head, you better keep it down. Ever present possibility remains that silver and gold will top suddenly and correct sharply. That, too, belongs to an enthusiastic market.
From internal indicators the GOLD PRICE has more room to rise than silver. Weekly momentum indicators have just now turned up. They also have plenty of room to riot on the daily chart.
The SILVER PRICE, on the other hand, has nearly reached escape velocity. Relative Strength Indicator is at the top of the range, but as we say in the fall, can become a lot more overbought before it drops. Weekly indicators are high, but what does silver care about that?
Folks, you must buy the breakouts, as you must buy the corrections. Sometimes you get slapped, but a bull market is a rising tide, and she will eventually raise even the boats carrying your mistakes. Buy silver and gold.
Driving all this is the Fed's generosity, pouring out money on all and sundry alike, like some perverse mockery of Cornucopia. Look at the little drop in the Dow in Gold Dollars, down to G$184.52 (8.926 oz). For weeks the DiG$ has hovered there, unable to make any progress. Sooner or later one of Reality's RPGs will bring it down, but the point to observe here is that the DiG$ remains flat because gold and stocks are rising at about the same rate. Clearly, stocks are acting as a "hard asset play", which, as bricks and mortar, they are. Unhappily, that's where the comparison dies, because they are also economic beings, not monetary, and they dwell within the economy. No amount of money printing will revive a sinking economy, Keynes, Bernanke, and Bernard O'Bama notwithstanding.
Mark also that the new money driveth not all things with the same goad. Silver and palladium, for example, are running faster than the others, no doubt because they are such small markets. New money has a proportionately larger impact when it hits them.
Ponder the Dow in Silver ounces. It fell a massive 25.5 oz this week, 6.2%, but reached no new low. The latest low struck on 3 January, when silver made its last price high, at about 375 oz. Miss not, however, that silver has been pounding the stuffing out of stocks, far more ardently than gold has. Still, the oddity always catches our eye: WHY? Odd, odd that the Gold/Silver ratio reached new lows without silver at a new high. Odd again that the Dow in Silver is higher today, with silver 120c higher than on 3 January, that it was then. I think the mystery is revealed in the Fed's pumping, because that new money runs first to Wall Street. Why not speculate? It's free money.
Woe, woe, woe, down de dollar go, and not so very slow! US dollar index lost 35.3 basis points (0.45%) to end at 77.642, a new low for the move. Low came at 77.50. Now the dollar must either throw its grenade or fall on it. Since mid-January the dollar has traced out an upside down head and shoulders sort of pattern. A close below 77.50 violates that pattern and puts skids underneath the dollar. Yesterday's close took it below the 20 day moving average, first tripwire of a trend change.
What will happen I don't know, but it will happen because the Fed wants it to, you can rest assured. Dollar weakness plainly is driving stocks right now, and stocks are the Fed's Potemkin indicator for the economy. "If stocks are rising, the economy must be recovering!" Right, and if you set a corpse upright in a coffin, he must need an armchair.
STOCKS made new highs this week, indeed, today, too, but some indices rose while some fell. The Dow peaked its head above 12,380, rising 73.11 to 12,391.25. S&P rose far less, by 2.58 to 1,343.01.
Argentum et aurum comparenda sunt -- -- Gold and silver must be bought.
- Franklin Sanders, The Moneychanger
Phone: (888) 218-9226 or (931) 766-6066
© 2011, 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.