Friday, March 04, 2011

The Gold Price Gains a Mere 1.4% This Week, I'll Feel Comfortable When It Clears $1,451

Gold Price Close Today : 1,428.20
Gold Price Close 25-Feb : 1,408.70
Change : 19.50 or 1.4%

Silver Price Close Today : 3531.7
Silver Price Close 25-Feb : 3289.8
Change : 241.90 or 7.4%

Gold Silver Ratio Today : 40.44
Gold Silver Ratio 25-Feb : 42.82
Change : -2.38 or -5.6%

Silver Gold Ratio : 0.02473
Silver Gold Ratio 25-Feb : 0.02335
Change : 0.00137 or 5.9%

Dow in Gold Dollars : $ 176.10
Dow in Gold Dollars 25-Feb : $ 178.01
Change : $ (1.91) or -1.1%

Dow in Gold Ounces : 8.519
Dow in Gold Ounces 25-Feb : 8.611
Change : -0.09 or -1.1%

Dow in Silver Ounces : 344.49
Dow in Silver Ounces 25-Feb : 368.73
Change : -24.24 or -6.6%

Dow Industrial : 12,166.40
Dow Industrial 25-Feb : 12,130.45
Change : 35.95 or 0.3%

S&P 500 : 1,320.95
S&P 500 25-Feb : 1,319.88
Change : 1.07 or 0.1%

US Dollar Index : 77.234
US Dollar Index 25-Feb : 77.234
Change : 0.00 or 0.0%

Platinum Price Close Today : 1,835.10
Platinum Price Close 25-Feb : 1,803.30
Change : 31.80 or 1.8%

Palladium Price Close Today : 809.65
Palladium Price Close 25-Feb : 790.55
Change : 19.10 or 2.4%

The GOLD PRICE seems positively somnolent with a mere $19.50 gain this week (1.4%), yet it, too, claimed a new high at $1,437.20 on 2 March. I will feel much more comfortable when gold clears $1,451 (2% above the 3 January high), but still have to call it a breakout. Gold is flashing early, tiny signs of weakness, but I am putting my hand discreetly over my mouth, as I have been fighting this rally since 26 January and by now look pretty foolish even for a natural born fool from Tennessee.

THUNDERATION! As my grandfather used to say. What can I say about the SILVER PRICE when in one week it rises 7.4 percent or 241.9 cents? Drink up! I love the party and everybody's having a high old time, but the cops will show up sooner or later. Parabolic rises are paroxysms, and eventually correct.

Still, now that the SILVER PRICE has made another new high and smashed down the wall at 3500c, where will it stop? 3700c? 3950c? Those levels are the only little jiggles of resistance on the chart, and that from 31 years ago. Comex silver rose 100.4c to 3531.7c, a new high.

At some point a big break will land on silver and gold, but for now the party is raging.

The GOLD/SILVER RATIO, naturally, made another new low this week, today in fact, at 40.439. I would have y'all ponder this: since 17 October 2008 at its 84.329 reaction high, the ratio has lost 25.7% of its peak value. Pondering that you will understand why I have recommended -- against complaints about the bulk -- buying more silver than gold since 2001. And why on the home page of my website stands the article, "Why Silver Will Outperform Gold 400%." And why I tell folks that heavy old silver won't weigh near as much when it fetches $50 or $75 an ounce.

More numbers for thought: from 1960 to 1980 the GOLD PRICE swelled from $35 to $850, 24.3 times. Silver augmented from $1.2929 to $50, 38-2/3 times. At today's closes, gold has climbed to 5.56 times its 2001 low, and silver 8.77 times.

Past performance guaranteeth no future performance, but 'tis our sole guide. If silver and gold merely perform to their last bull markets, then so far they have climbed only 1/5 of their ultimate ascent. Stated another way, silver and gold could increase about five more times from here.

I warn you to read that against the background of short term volatility. A sharp correction will hit here soon, but you ought merely use it to increase your position. This bull market has much longer to run both in time and price.

I am slap-out astonished, yea, even I who all these years has been waiting for silver to explode. Now my face is all black and my hair blown straight back and frizzed from the explosion, and all I can do is gawk in amazement.

The US DOLLAR index, fossilized relic of socialism, totalitarianism, cronyism, and parasitism, backslid again today. Not much, 8.9 basis points, but it still drooped ending at 76.394.

On the weekly chart the dollar stands plumb astraddle the uptrend line from the 70.70 low in May 2008. One slip and Humpty Dollar plunges off the wall with only one obvious target: 70.70.

However, 'tis more likely that the buck will turn around and rally for a while. Yes, yes, I know I have been musing over that possibility for a while and it has never emerged, but the dollar's fall really has lost momentum. Assuming it doesn't violate today's 76.30 low -- assuming -- then my phantom rally might materialize.

Standing in the ghost's way is a rallying euro. The euro's strength ranks as yet more phantasmal and fantastical than the scrofulous dollar's. With about a third of its members teetering on bankruptcy and only the strong will of the ECB to bail out the French and German banks who've loaned these deadbeat governments money, the euro ain't exactly the Charles Atlas of currencies itself. Why it is rallying while North Africa disintegrates is a deep mystery. Technically, though, it broke out past its last high (1.3841), it stands above its 20, 50, and 200 day moving averages in that order, and if I tear the top off the chart and ignore all the rotten fundamentals, I have to say it will rally further.

When I say rotten, I mean it. You could grow mushrooms on the euro or the dollar. BIG mushrooms on the yen.

Mmmmmmm. STOCKS are falling on rising volume? What meaneth this sign? That the blade of the guillotine is speeding up. Stocks have now failed twice at their 50% correction of the 12,400 - 12,000 fall. This ain't baseball.

Worse yet, today the Dow closed BELOW its tripwire 20 day moving average (12,201), first warning of a downturn. Not far below lies the 50 DMA at 11,944.13, then support at 11,803 and 11,450. Right, 300 and 700 points below today's close at 12,166.40. Dow gave back 91.8 points today, down 0.75%. S&P showed itself a little worse, down 0.94% (10.02 points) at 1,320.95.

A remote chance remains that the Dow might rise once more to 12,400 for a double top, but that changes nothing. It will merely collapse from a higher level.

Stocks remain the burnt-orange leisure suit in the Investment Fashion Parade -- not cool.

Defeated yet again, the Dow in Gold Dollars (DiG$) has left off rallying and returned to its 200 day moving average, ready to roll off the curb and into the gutter. DiG$ is flashing clearly that stocks are about to lose big value against gold. The Dow in Silver ounces kept on making new post-2003 lows again this week, down to 344.5 oz from its 2003 high at 2,556.7 oz. A neat, clean 86.6% loss.

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

© 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.