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Tuesday, April 12, 2011

Gold Price Must Close Higher Tomorrow and Step Out Smartly to a New High to Contradict that Key Reversal

Editors Note: Please note we posted incorrect gold and silver prices in Franklin Sanders Commentary yesterday, due to no fault of Franklin Sanders. The correct prices are now posted. Our apologies for any confusion caused. If only gold was 1242 and silver 18.59, I think we can safely say you will never see those prices for gold and silver again on goldprice.org!

Gold Price Close Today : 1467.40
Change : (6.00) or -0.4%

Silver Price Close Today : 40.604
Change : 0.004 cents or 0.0%

Gold Silver Ratio Today : 36.14
Change : -0.151 or -0.4%

Silver Gold Ratio Today : 0.02767
Change : 0.000115 or 0.4%

Platinum Price Close Today : 1781.50
Change : -29.40 or -1.6%

Palladium Price Close Today : 773.75
Change : -22.50 or -2.8%

S&P 500 : 1,324.46
Change : -3.71 or -0.3%

Dow In GOLD$ : $174.42
Change : $ 0.74 or 0.4%

Dow in GOLD oz : 8.437
Change : 0.036 or 0.4%

Dow in SILVER oz : 304.92
Change : 0.03 or 0.0%

Dow Industrial : 12,381.11
Change : 1.06 or 0.0%

US Dollar Index : 75.056
Change : 0.187 or 0.2%



Today is Miss Susan's birthday, so I'll have to make this quick. She wanted to cook her own birthday supper for the whole family, but a daughter and daughter-in-law vetoed that. Coincidentally, on this day 150 years ago began the First War for Southern Independence.

'Twas an odd day, and you'll wear out your fingers and your patience scrabbling around for invisible reasons behind baffling contradictions.

The DOLLAR INDEX remains in its wallow, but is clearly studying wallowing lower. After an overnight high at 75.20, the dollar wallowed deeper and deeper into the mud. Today's 74.704 low was lower still than Friday's. Both the failure to breach 75.20 and the edgey lower low forecast more wallowing to come, and a lot lower dollar.

Meanwhile wrap -- nay, TRY to wrap -- your understanding around this little paradox. Bond values vary inversely with bond yields. A $1,000 bond due in a year that pays 10% interest is worth less than the same bond that pays 5% interest. Yet today the dollar sinks, reflecting a shrinking value and, one might conclude, a shrinking BOND value, since the 30 year US treasury bond is denominated in US dollars. Conclude again: today the 30 yr bond rose 0.71%, gapping up, while the yield fell. That also implies the market is expecting interest rates to fall and the US dollar to rise.

Gives me a headache merely to look upon these charts.

Meanwhile the euro, scrofulous jury-rigged currency of the cobbled-up European Union whose members boast 3 bankrupt countries and another 3 or four bankruptcy candidates, ROSE today to a new high for the move, 1.4474. And the yen jumped to 83.561Y/$ (119.67c/100Y).

Some say that central banking is the best practical argument for the necessity of hell. I remain neutral on that point.

STOCKS took a bad whipping with a big stick. Dow lost nearly 1% or 117.53 points to 12,263.58 and the S&P500 followed right along, losing 10.3 points to close at 1,314.16.

Now I'm just a natural born fool from Tennessee, and not slick and smart like them Wall Street fellows with the shiny, pointy shoes (New York Fence Climbers, we call 'em), but if I were painting a chart that had made a double top and rolled over, it would strongly resemble the Dow chart. Today's plunge fractured support above 12,300, and dropped toward the 20 day moving average (12,198), first warning of a trend change. 50 DMA lieth not far removed, a close 12,170. Another drunken day like today sends the Dow slicing through both of them and leaves Wall Street investing geniuses with a tolerable lot of explaining to do.

Stocks remain the Lucretia Borgia 2008 merlot at the Great Wine Bar of Investing.

The GOLD PRICE followed through on the downside today, losing 14.50 to end at $1,452.90 on Comex.

Behold, this is good, and this is bad! Good, in that it fell not through $1,445 but made a low at only $1,446.30 and closed above $1,450. Bad, in that it could not close through $1,455 resistance.

Break the rules only at the risk of breaking your own neck. The four words an investor is most likely to hear shortly before he loses copious sums are, "It's different this time." It rarely is, hence why although gold "feels" much stronger, I confess that today's close contributes the second and final nail of a key reversal. Yesterday the break into new high territory with a lower close for the day, followed by a lower close today. Unless gainsaid by higher, much higher, closes, gold will trade earthward for a time.

Yet recall that the upward trading channel will contain gold all the way down to $1,430, so without a close below that level 'twill not seriously cheapen gold.

Up above the gold price would have to close higher tomorrow and step out smartly to a new high to contradict that key reversal.

Friends, looks like the market's handing y'all a wonderful buying opportunity.

SILVER, like gold, attempted a rally to 4085c but failed. Today's low came about where yesterday's appeared, 3966c, and Comex closed above 4000c at 4005.8c, but that still meant losing 54.6c.

Here's one possibility: silver made its first corrective wave yesterday, rallied in the B-wave today, and tomorrow will complete the last down wave. However, it cannot fall below 3900c. If it does, then more downside lies in its future.

Notice that the gold/silver ratio barely rose today, to 36.270.

I am neither bold enough nor foolhardy enough to call Monday the high for this move in silver and gold. If that is true, few witnesses have yet come forward. Difficulty is that silver is working in what appears to be a wild third wave up, in territory not traversed since 1981. Tricky to discern whether silver will yet reach for 4400c or 4600c, or a stout correction has begun.

It goes without saying that if silver rises above 4200c then we can back-burner the correction worries for a while.

On this day in 1861 Abraham "Genocide" Lincoln maneuvered the Confederate States into firing on Fort Sumter so that he would have an excuse to invade the South. Confederate peace commissioners had already been to Washington to negotiate the transfer of forts and magazines on their territory peacefully. Lincoln dallied, delayed, mumbled out of both sides of his mouth, but refused to come to terms. After promising he would not re-supply Sumter, he sent a naval expedition to do so. Let's see: he sends a foreign navy to invade a sovereign nation's soil, after he promised not to and his own cabinet opposed the move. Clever move, though, since the misunderstood APPEARANCE of the CSA firing "first" shots at Sumter would give him an excuse to invade the South.

And that's how it was done.

On this day in 1864 Confederate Genl. N. Bedford Forrest captured Fort Pillow, Tennessee. Yankee war propaganda ran lurid reports that Forrest had "slaughtered" the black troops there. This lie is still repeated today, but is easily refuted. In 1871 or 1872, shortly after the war ended and when one can surmise Forrest found few friends in the US congress, he was summoned to testify before a congressional committee about Fort Pillow. After that testimony congress dropped the issue. Is it likely that Forrest's virulent enemies would have dropped the issue if there were even a mouse-burp of truth to the charges that he shot troops -- black or white -- seeking to surrender?

AMERICAN CULTURAL MILESTONES: On this day in 1954 Joe Turner released "Shake, Rattle, and Roll." Argentums et aurum comparanda sunt --

-- Silver and gold must be bought.

- Franklin Sanders, The Moneychanger © 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 or 18 ounces of silver. or 18 ounces of silver. US $ and US$-denominated assets, primary trend down; real estate bubble has burst, primary trend down.

Argentum et aurum comparenda sunt -- -- Gold and silver must be bought.

- Franklin Sanders, The Moneychanger
The-MoneyChanger.com

© 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.