Wednesday, April 06, 2011

Silver and Gold Prices Have Entered the Second Upleg of a Bull Mark

Gold Price Close Today : 1457.70
Change : 5.90 or 0.4%

Silver Price Close Today : 39.384
Change : 20.9 cents or 0.5%

Gold Silver Ratio Today : 37.01
Change : -0.047 or -0.1%

Silver Gold Ratio Today : 0.02702
Change : 0.000034 or 0.1%

Platinum Price Close Today : 1796.10
Change : 0.10 or 0.0%

Palladium Price Close Today : 785.00
Change : 0.00 or 0.0%

S&P 500 : 1,335.54
Change : 2.91 or 0.2%

Dow In GOLD$ : $176.23
Change : $ (0.23) or -0.1%

Dow in GOLD oz : 8.525
Change : -0.011 or -0.1%

Dow in SILVER oz : 315.53
Change : 0.82 or 0.3%

Dow Industrial : 12,426.75
Change : 32.85 or 0.3%

US Dollar Index : 75.88
Change : -0.035 or 0.0%

Stocks rose today, gainsaying that key reversal they posted the first half of yesterday. What really nags and twists my brain is that stocks and gold are rising at the same rate. This is not right.

I don't mean "not right morally", but that the world simply doesn't work that way. Stocks have been in the G$172 - G$188 (8.32 oz to 9.095 oz) range since January. This has been a long trip above the 200 DMA, in a bear market. That means that it constitutes only an upward correction during a primary downtrend. Stocks will NOT outperform gold during gold and silver's primary uptrend (bull market), because they already HAD their primary uptrend from 1982 thru 2000. Up and down trends alternate 15 - 20 years at a time. All paper assets -- bonds, stocks, dollar denominated assets -- trade opposite to hard assets. Pendulum swung from paper to hard assets in 2000 - 2001. Therefore, stocks present performance against gold is an anomaly, a quirk, a fluke that should end soon.

What is driving the silver and gold bull market? Monetary demand, that is, a flight from the dollar and all fiat currencies. Look at history. Although stocks resemble a hard in that they own bricks, mortar, and machines, they do NOT outperform silver and gold in inflationary or hyper inflationary periods.

And what are silver and gold telling us? Occam's Razor says the most obviovus explanation is probably correct. Most obvious explanation is that silver and gold have entered the second upleg of a bull market and the strength of that leg always steals your breath. But why are stocks rising, too? New dollars from QE2 run first to financial assets, but that will expire with QE2. Thereafter, the dollar's illnesses will remain, still driving silver and gold.

Stocks today added 32.85 to 12,426.75, a new high for the rally that began in March 2009. S&P 500 reached 1,335.54, up 2.91 points.

More than all that, something feels strange. It's all well and good to make chin-boogey about the demise of the dollar, but it's a cruel and terrifying prospect. What would happen if the just-in-time delivery system broke down? Want to answer that? Go into your pantry and add up how many days would lapse before your food supply gave out. Then think about millions in the same situation. Chaos and brutal violence raise their heads.

Y'all need to secure your families in three areas: food and water, protection, and location. Forget buying silver or gold or any other investment until you've covered those bases. Protection means firearms to protect yourself and knowing how to use them. Location means a place to live or run to outside urban turmoil.

Call me crazy, but I intend for my family to survive and prosper on the other side of whatever crisis government corruption brings on our heads. Remember: no crisis last forever. One day it will end and we will get a chance to build a stable, just economy.

Here's one more item: every person in America lives in fear of government. Why does that thrill of terror electrify your gut when the blue lights shine in your rear view mirror? Why do you leap to paw thru your glove box for your papers? Why? Because you know if you stand on your rights you might catch some spiteful, petty tyrant that will take you to jail, and more than anything you are scared of going to jail. Or when the phone rings and it's the IRS calling, you picture yourself and your family, shivering under a bridge in front of a fire in a 55 gallon drum eating moldy soda crackers. You live in fear, because you are realists. You well know that you stand no more chance of getting justice in an American court than deaf bat has of surviving a hurricane.

Now how do you imagine government will treat you in a crisis? Ask the folks who survived Katrina.

Back to today's markets:

The US DOLLAR INDEX lost another 34.5 basis points today, eroding and eroding. If it falls through the last low, 75.25, it will simply sink out of sight, like your wedding ring disappearing into the garbage disposal one nanosecond after you switch it on. It has no momentum one way or the other, so we just have to watch and wait. Against the yen the dollar is doing well. At 85.409Y/$ (117.08c/100Y) today the yen has sunk to its lowest level since April 2010. Euro broke out upside above its November high, closing at 1.4330. Next logical target is 1.5144, the 2009 high. Gold in euros appears to have broken out to the upside.

The GOLD PRICE performed as well as anyone might ask, adding 5.90 on Comex to close at $1,457.70. Yesterday it made a new high, today closed higher. Gold is targeting roughly $1,525.

Buy the breakout!

refuses to stop climbing. Comex today added 20.9c by silver's 3938.4c closing price. Today's high was 3976c, and we can expect that round number 4000c will give silver some difficulty. However, 4200c is a reasonable target. Gold/silver ratio hit 37.012, another new low. Yes, this is outrageous but will get more outrageous still.

On this day in 1862 began the Battle of Shiloh at Pittsburg Landing on the Tennessee River. It was one of Tennessee's finest hours, and her governor, Isham Harris, actually led a charge. Confederate General Albert Sidney Johnston caught Grant by surprise and drove his panicked army back against the river. But Johnston, who everybody accounted the best soldier in either army, took a bullet that severed his popliteal artery. He bled to death, leaving PGT Beauregard, a complete incompetent, in charge. Beauregard frittered away the Southern advantage won by so much blood the first day, failing to follow up. During the night Union General Don Carlos Buell was able to reinforce Grant from the river's east side. Although Forrest discovered this reinforcement and tried to report it to Beauregard, it did no good.

To those with eyes to see, Shiloh proved that the war would be much bloodier than anyone had imagined. In the Union Army of Tennessee 49,000 men met 45,000 in the Confederate Army of Mississippi, with 13,047 Union casualties and 10,699 Southern. Nearly 3,500 were killed.

I know because I grew up hearing about it. My daddy, born in 1910, fifty years after the battle, grew up in Michie, about seven miles from the battlefield.

Argentum et aurum comparenda sunt -- -- Gold and silver 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 $195.66; stocks' primary trend is down, targeting Dow under 2,900 and worth only one ounce of gold; US$ 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.