Tuesday, May 31, 2011

Gold Price Close Below $1,520 Pretty Well Seals the End of this Leg Up, Piercing $1540 Would Lengthen the Rally

Gold Price Close Today : 1535.90
Change : (0.40) or 0.0%

Silver Price Close Today : 38.303
Change : 0.446 or 1.2%

Gold Silver Ratio Today : 40.10
Change : -0.483 or -1.2%

Silver Gold Ratio Today : 0.02494
Change : 0.000297 or 1.2%

Platinum Price Close Today : 1832.90
Change : 34.40 or 1.9%

Palladium Price Close Today : 777.55
Change : 20.05 or 2.6%

S&P 500 : 1,345.30
Change : 14.10 or 1.1%

Dow In GOLD$ : $169.18
Change : $ 1.79 or 1.1%

Dow in GOLD oz : 8.184
Change : 0.086 or 1.1%

Dow in SILVER oz : 328.17
Change : -0.48 or -0.1%

Dow Industrial : 12,569.79
Change : 128.21 or 1.0%

US Dollar Index : 74.61
Change : -0.344 or -0.5%


"Don't talk back!"

Thus ran the repeated refrain of a 1950s' rock 'n roll song, the response of a resentful teenage son to his mother's demands he clean up and do his chores. The "Don't Talk Back" came in a deep bass voice.

Why do I recall this silly song when I look at the currency markets? Why do I feel it's all a silly ping pong game full of "sound and fury, signifying nothing"? Well, because it probably is. Look: Greece teeters on the knife-edge -- and it’s one sharp knife -- of defaulting, the first in a row of dominos-on-edge that will take down Ireland, Portugal, France, Italy, and the French and Italian mega-banks. Now if you had as much sense as a hard crab, you would flee Euros and buy gold or silver or whale oil or anything with value independent of the European financial and banking system.

Yet, LO! What gentle scene breaketh upon our vexed eyes? Why, the US dollar index, sinking out of sight with the sun, down today 0.78% or 60.9 basis points to 74.94. Wait, wait, while I was writing this it sank to 74.547, down another 41.1 basis points or 0.53%.

That's below the uttermost support at 74.90 and turns the dollar down.

But that doesn't really give me double vision. Rather, it's the euro up at closing 0.52% at 1.4396, gapping up above its 50 and 20 day moving averages. I know I'm supposed to look only at technicals, but ignoring fundamentals here is like visiting with somebody who keeps a 55 gallon garbage can open and fermenting in the living room, but never says anything about it. Friends, there is simply no reason the euro ought to rise, but for the actions of the Nice Government Men in the central banks. Yes, the euro is rising and the dollar is falling, but only way to account for it is the euro NGM jacking up the euro in advance of a financial panic nearly equal to the US panic in 2008.

This irks me constantly, like wearing a collar made out of nettles. It's all just a lie, a farce, a sham: paper money -- don't go to hell without it.

STOCKS today seemed to have fun anyway. Dow rose 128.21 (1.03%) to 12,569.79. S&P gained 1.065, 14.1 points, to 1,345.30. This did not much alter stocks' value against gold, but it looks nice for the sheep who must be deceived away from panicking out of the dollar and its instruments.

Technically -- yes, that's not controversial, stick with that, Moneychanger -- stocks rose to their 20 DMA (12,568.62) and closed over it by a gnat's eyelash at 12,569.79. That's hardly a rounding error, yet it is "above" the 20 DMA, first warning tripwire of higher prices. I reckon stocks will rally for a while longer, but they are running out of time like your vacation station wagon with a hole in the gas tank.

Stocks remain the absinthe in the Investment Liquor Store. Go ahead: have another glass of wormwood.
I'm not really having a liverish day, it just makes me bilious always to observe the jobbing manipulations of central banks. Let me move on to that arena in which their tricks so often explode in their faces: silver and gold.

SILVER and GOLD PRICES disagreed today, never a heartening sign. By Comex close the SILVER PRICE had risen 44.6c to 3830.3c while the GOLD PRICE fell 40c to $1,535.90. If you could see that as a curve, for the GOLD PRICE it resembles a cricket ball cast straight up in the air at that point in its apogee that it appears to hover, to pause, to wallow in indecision whether it will rise further or now fall.

BICBW. Maybe the GOLD PRICE is merely gathering its strength and breathing deep to push through $1,535 resistance. Yesterday was flat to lightly higher, stymied at 1,540. Likewise today gold made several attempts to beat down that $1,540 wall, but in the end failed and fell back. Support lies underneath at $1,530 and more strongly at $1,525. A close below $1,520 pretty well seals the end of this leg up. On the other hand, piercing $1,540 would lengthen the rally.

All this implies that lower prices lie in the future.

The silver price had what I might call a "vibratory" day. It bounced between 3874c and 3831c back and forth, yet without progress. In fact, it regressed a tad.

Let me speak plainly. If silver trades down below 3790c, 'twill drop to 3750. If that line holds not, then allies and supporters will vanish and silver will revisit recent lows. Of course, trading up above 3874c would change all that and tells us that silver intends to keep climbing for a while.

Never confuse my comments about what I expect for markets in the short term with the longer term. Silver and gold remain in a bull market (primary uptrend) that will last another 3 - 10 years, depending on government and central bank stupidity. And in the next 30 days, UNLESS a financial panic takes hold in Europe, you will see the lows for this correction, if we have not already seen them.

By the way, anent the Memorial Day Holiday, I don't have to remind y'all that Memorial Day, like music, grits, radio, Nascar, electricity, anesthesia, submarines, good manners, and nuclear power, was a Southern invention, do I?

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.