Monday, June 06, 2011

Seasonal Cards are Stacked Against a New Gold Price High Here

Gold Price Close Today : 1546.50
Change : 4.80 or 0.3%

Silver Price Close Today : 36.776
Change : 0.589 or 1.6%

Gold Silver Ratio Today : 42.05
Change : -0.552 or -1.3%

Silver Gold Ratio Today : 0.02378
Change : 0.000308 or 1.3%

Platinum Price Close Today : 1811.30
Change : -2.40 or -0.1%

Palladium Price Close Today : 788.35
Change : 6.60 or 0.8%

S&P 500 : 1,286.17
Change : -13.99 or -1.1%

Dow In GOLD$ : $161.60
Change : $ (1.31) or -0.8%

Dow in GOLD oz : 7.818
Change : -0.063 or -0.8%

Dow in SILVER oz : 328.75
Change : -7.04 or -2.1%

Dow Industrial : 12,089.96
Change : -61.30 or -0.5%

US Dollar Index : 74.01
Change : 0.319 or 0.4%

Often you can learn more about one market by comparing it to another than you can by looking at that market alone. That's why I watch the Dow in Gold Dollars (DiG$), which measures the value of the Dow by gold. (A statutory "dollar of gold" equals 0.048375 troy ounce, and gives me one consistent measuring stick back to 1896). The DiG$ has been in a primary downtrend since it topped in August 1999 at G$925.42 (44.767 troy ounces).

Today the DiG$ closed at a new low for the recent move, and below the uttermost limit of support at G$161.60 (7.818 oz), down a massive 82.5% from its peak. As it hath lost 80% so far, so it will lose another 80% before stocks bear market against gold endeth.

Critical here is what this new low and -- for now at least -- new breakdown means: stocks will fall further.

Stocks made a good start on another leap off the cliff with almost every index falling today. The Dow, having crossed the bottom channel line at 12,200, lodged on a ledge at 12,089.96, down 61.3 or 0.50%. S&P500 punctured psychological support at 1,300 to lose twice as badly as the Dow, 13.99 points or 1.08%, closing at 1,286.17.

Sometimes life flashes warning signs, but without explaining much. Maybe the man who puts up the sign "Road closed" expects you to guess that the bridge is washed out ahead.

The scrofulous US dollar index danced today toward the 74 level, up from an overnight low of 73.64, following up on Friday's plunge. This chart doesn't look like it is even KIN to any recovery soon. Resistance was left last week at 74.20, and the dollar was able only weakly to cross 74 for a moment today. How will it grab another 20 points soon? Most likely that dollar has its eye set on the last low at 72.95, and has all the feebleness needed to meet its goal.

The Frankenstein euro stubbed its toe today and closed down a bit at 1.4589. Changes nothing. Nor did the yen's 0.37% higher close at Y80.073/$ (124.89c/Y100) change anything. Dollar made a dead cat bounce, and tomorrow both scabrous competitors to the scrofulous dollar will probably rise.

Looking at the 5-day GOLD PRICE chart I'd hazard that it completed today the upmove begun last Thursday. That could lead to a day or two's rest, but doesn't even whisper that gold's rise has ended. Gold continues to ratchet upwards, with each new resistance step conquered becoming the launching pad for the next. Right now gold is wrestling with $1,550 -$1,553.50 resistance. Look for any decline to be corralled by $1,535. If it's not, then dodge and see if $1,530 and $1,520 hold. Upside any punch through $1,555 will carry gold to the old high at $1,575, but we won't know until we get there whether that is a double top, or platform for continuing a rally.

I remind y'all that the seasonal cards are stacked against a new GOLD PRICE high here. Rather, we have slid into that season when gold makes lows. Between now and end-June we will probably have seen that low, but it might delay until July.

When they shuttered Comex todfay, the GOLD PRICE had gained $4.80 and settled at $1,546.50.

The Gold/Silver Ratio today rose to 42.052, just above the 20 day moving average (41.94). It has at least one more grand leg up before it reverses. 200 DMA offers a minimum target at 48.02, and 300 DMA another at 53.88.

Don't let this confuse you. That ratio can occur in a number of ways mathematically: the gold price can rise while silver flatlines, or gold can flatline while silver falls, or gold can rise and silver fall, or pick your combination. Important point? That the price low in silver usually strikes near the ratio high.

Speaking of SILVER, these last two reaction peaks -- May 10 at 3847c and June 3 at 3848c -- both nestle comfortably below the 50 DMA (3925c). Thus the silver correction's rally leg has been rather weak so far. Today silver bounced off its 20 DMA (3621c) and turned up enough to avoid shame. Comex silver closed up 58.9c at 3677.6c, and has probably completed its rally-ette that began Friday. Behold! 37.50 stands in the way like a brick wall. High today was 3728c. If tomorrow's trading treads below today's low at 3633c, look for silver to slip.

Silver's seasonal pattern, following that end- April high, is bringing on its sleepy season. I am still looking for a low anytime between now and 28 July. Any silver price close above 3850c would gainsay that and jerk me around to go long silver.

Whether you wait further for a lower silver price or buy now, keep your eye on that calendar. You need to have your purchase made no later than end-July. Bottom might come any time before that, but don't push it further than that UNLESS you see Europe dissolve in financial panic.

Did y'all ever watch roosters fighting over who would get to stand on the top of a dung heap and crow? They'll fluff out their manes and hop up and down and spur each other to death if they can, just to get stand atop that dung heap and crow.

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.