Friday, February 11, 2011

Silver and Gold Price Have Not Declined Enough After a Gold/Silver Ratio Low, Is the Correction Still to Come?

Gold Price Close Today : 1,359.90
Gold Price Close 4-Feb : 1,348.30
Change : 11.60 or 0.9%

Silver Price Close Today : 2999.2
Silver Price Close 4-Feb : 2906.4
Change : 92.80 or 3.2%

Gold Silver Ratio Today : 45.34
Gold Silver Ratio 4-Feb : 46.39
Change : -1.05 or -2.3%

Silver Gold Ratio : 0.02205
Silver Gold Ratio 4-Feb : 0.02156
Change : 0.00050 or 2.3%

Dow in Gold Dollars : $ 186.57
Dow in Gold Dollars 4-Feb : $ 185.37
Change : $ 1.19 or 0.6%

Dow in Gold Ounces : 9.025
Dow in Gold Ounces 4-Feb : 8.967
Change : 0.06 or 0.6%

Dow in Silver Ounces : 409.22
Dow in Silver Ounces 4-Feb : 416.00
Change : -6.79 or -1.6%

Dow Industrial : 12,273.26
Dow Industrial 4-Feb : 12,090.71
Change : 182.55 or 1.5%

S&P 500 : 1,329.15
S&P 500 4-Feb : 1,310.85
Change : 18.30 or 1.4%

US Dollar Index : 78.417
US Dollar Index 4-Feb : 78.540
Change : -0.12 or -0.2%

Platinum Price Close Today : 1,805.90
Platinum Price Close 4-Feb : 1,842.00
Change : -36.10 or -2.0%

Palladium Price Close Today : 811.55
Palladium Price Close 4-Feb : 812.25
Change : -0.70 or -0.1%

GOLD PRICE today closed Comex down $2.00 at $1,359.90. Low came at $1,354. Technically that doesn't damage the chart, but it does confirm that gold is consolidating between $1,368 and $1,355. If gold crosses that upper threshold, it will sprint to $1,380. If it trips over that bottom threshold, it will fall -- to $1,345, maybe $1,330.

Let the week speak for itself, before I put any words into its mouth. SILVER rose heftily, GOLD reluctantly, stocks admittedly. US dollar index closed lower on the week, but actually is recovering. Platinum and Palladium dropped. I remain out of synch with silver and gold.

A clue to where silver and gold are headed may come from the GOLD/SILVER RATIO, which made a new low this week at 45.08. FOR the present it appears to have made a double bottom, but it hasn't risen much (to 45.36 today) to support that conclusion. Since silver tends to outperform gold when stocks are rising, you must expect stocks to continue to rise if you expect that ratio to keep on falling, i.e., silver to keep on rising.,

To maintain rally-mode the SILVER PRICE must close above 3049c next week. That was this week's intraday high. Today silver dropped along with gold, losing 9.9c to close at 2999.2c, a scootch below 3000c, which makes me grind what's left of my teeth.

I keep on seeing Internet stories about silver's "backwardation," but can't find it in the futures closes. Today, although the contango is pretty slim, silver futures from Feb. 2011 through March 2012 were in contango (distant months were more expensive than near-by months). When you get out to the really long contracts, beginning in March 2012 out to December 2015 there is a slight backwardation, but I'm not sure that says a whole lot. Not what a backwardation of the nearest three months would say, certainly.

Silver's five day chart looks to be rolling over to the downside, although it must fall below 2870c to confirm that. On the upside silver's challenge remains conquering 3050c.

What's the bone sticking in my throat crosswise? Just this: silver and gold have not declined enough in price nor delayed enough in time to fulfill the typical reaction after a gold/silver ratio low. After that very long rise that topped on 3 January 2011 (from November 2008), it seems to me that silver and gold are most likely to take a rest, correct, shake out new, inexperienced investors, and build strength for the next rise. They aren't doing that, they are holding up, even if gold is not particularly enthusiastic.

But I may just be sour because the market is not meeting my little expectations. Of course, if my suspicions prove correct I look like the prince of wise men. Y'all see why it's so hard to win in this game?

All this musing has to do only with the immediate future for silver and gold, not the long term. For that, silver and gold remain in a primary uptrend with three to ten years to run.

Maybe I just don't trust the quiet.

US DOLLAR INDEX recovered its drug-induced enthusiasm this week. On Wednesday it spiked down to 77.50, then rebounded smartly to end today at 78.417, up .21%. That wasn't quite its 78.697 high, but it made good yesterday's gains. On a five-month chart (, "$usd") the dollar index has traced out an upside-down head and shoulders since mid-January. Other indicators point upwards, and today the dollar index left behind its 20 day moving average (78.09). Barring a close below 77.50 the dollar should ease its way upward.

Stocks edged higher this week, but without impressing me. They've made another bearish upward wedge, or extended the existing one. This will end badly. My friend Michael Peroutka talks about the Mojo, that is, the spell that keeps folks from noticing that the emperor is stark, staring naked. From nowhere does The Mojo ooze out more powerfully than Wall Street and financial topics. Might as well hit yourself in the head with a ball peen hammer as to try to explain to an "expert" financial planner or stock broker why his product will inevitably drop because it is trapped in a primary downtrend. The Mojo creates such a dark, fiery cloud that folks can't even hear you. Some of 'em can't even see your lips moving.

When somebody asked Flannery O'Connor why she wrote such bizarre stories, she replied, "When people are deaf, you have to shout to make them hear." She might have been talking about investing today.

Stocks remain the pneumonic plague in the Cosmic Encyclopedia of Investment Diseases. Expose yourself at your own risk.

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.