Tuesday, May 24, 2011

Gold Price Must Clear $1,525 Tomorrow or Lose all Momentum and Fall to Earth

Gold Price Close Today : 1495.60
Change : 15.80 or 1.1%

Silver Price Close Today : 35.094
Change : 1.606 cents or 4.8%

Gold Silver Ratio Today : 42.62
Change : -1.572 or -3.6%

Silver Gold Ratio Today : 0.02346
Change : 0.000835 or 3.7%

Platinum Price Close Today : 1767.50
Change : 2.70 or 0.2%

Palladium Price Close Today : 736.00
Change : 15.55 or 2.2%

S&P 500 : 1,340.68
Change : 11.70 or 0.9%

Dow In GOLD$ : $173.60
Change : $ (0.71) or -0.4%

Dow in GOLD oz : 8.398
Change : -0.034 or -0.4%

Dow in SILVER oz : 357.90
Change : -14.76 or -4.0%

Dow Industrial : 12,560.18
Change : 80.60 or 0.6%

US Dollar Index : 75.43
Change : 0.026 or 0.0%

The GOLD PRICE has now bumped its head against the top of its resistance range. It reached $1,527.50 today, but retreated only to $1,520, having now ratcheted over $1,515 resistance. At Comex close gold had risen $7.90 to $1,523.20. In euros Gold has hit new highs the last two days.

Time to fish or cut bait. GOLD PRICE must clear $1,525 tomorrow or lose all momentum and fall to earth. It has plenty going for it, as yesterday it climbed over the 20 DMA fence ($1,512). Above $1,525 lies almost no resistance until the last high at $1,575.10.

Expect to witness GOLD higher tomorrow.

The SILVER PRICE blew past 3550c like the Trans-Siberian Express and hardly slowed all day. Comex close at 3612.1, even though 122c higher than yesterday hardly tells the tale I am looking at on the chart. In the aftermarket the SILVER PRICE rose another 60c! Now at 3673c.

When a market pierces what has been stubborn resistance -- in this case, 3550c, and blasts higher, that is a "breakout," and only rarely do they fizzle in the first days. Oh, silver may back and fill a little tomorrow, but as long as it remains above 3600c, twill climb toward the sky's vault.

I have trouble getting through on this point, so I'll say it again, LOUDER: NEVER BUY PREMIUM. Over time, premium always disappears. You will not get back those premium dollars at market peak, so always buy whatever silver or gold is cheapest at the moment. Case in point: At wholesale (not retail) US 90% silver coin costs 61c an ounce LESS than spot silver, while silver American Eagles cost 450c OVER spot today. Why would anybody buy silver American Eagles? Cause they don't know no better, I reckon, but it makes no sense to me at all. I've been watching for 31 years, and over time premium always disappears. Today's premiums will, too.

My minimum target for this rally -- assuming the SILVER PRICE closes higher again tomorrow -- is the 50 dma at 3900c.

Yesterday the US Dollar Index proved its upward course by rising over 76 as high as 76.30. Today it backed off, and is trading now at 75.907, down 19.7 basis points (1/4 of 1%), but that's to be expected after yesterday. Notice how the Dollar Index is ratcheting up: it slowly reaches a level, is blocked there a day or so, then breaches that level and jumps higher. When it backs off, the former resistance -- or higher -- acts as support. Dollar will reach at least its 200 DMA (78.10) before this rally ends.

The euro gapped down yesterday, then filled the gap today. Tomorrow will likely move down again. Closed today at 1.4100, up 0.3%, but has sunk below its 20 and 50 day moving average. More than that, y'all can hardly picture in your minds what a mess will result if Greece defaults. Think 40 miles of dominos. Clearly the European Nice Government Men are doing a yeoman's job manipulating that euro, otherwise it would be 3 or 4 to the dollar. If Greece defaults, who will bail out the German and French banks? After all, every country in the world exists only to serve the banks, nicht wahr? I admire the way the banks' propaganda machine has filled the Germans with a self-righteous assurance that it's all the fault of those free-spending southerners, when in fact they are being bled exactly as the southerners are, only from a different vein.

Japanese yen did nothing much today. Trading now at Y81.93/$ (122.06c/Y100).

STOCKS are wallowing in deep mire. Today the Dow and S&P500 both hammered through their 50 day moving averages (12,397 and 1,326). Dow lost 25.05 points to end at 12,356.21 and S&P500 dropped 1.09 to 1,316.28. Either stocks reverse tomorrow or they have a long fall in front of them. Momentum points firmly down still.

More interesting by far the Dow in Gold Dollars (DiG$) that measures stocks against gold, broke down today through the uptrend line stretching back 11 months. The DiG$ closed at G$167.69 (8.112 oz). Last remotely possible barrier is G$164.47 (7.956 oz). When the DiG$ clears that it will drop to G$147 (7.111 oz). Oddly enough, silver was strong today while stocks were weak. In general, although not always day by day, silver outperforms gold when stocks are strong, and underperforms when stocks are weak.

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.