Monday, June 13, 2011

Silver and Gold Prices Appear to be Completing the Last Leg of an A-B-C Correction

Gold Price Close Today : 1515.10
Change : (13.50) or -0.9%

Silver Price Close Today : 34.736
Change : (1.590) or -4.4%

Gold Silver Ratio Today : 43.62
Change : 1.538 or 3.7%

Silver Gold Ratio Today : 0.02293
Change : -0.000838 or -3.5%

Platinum Price Close Today : 1798.80
Change : -33.40 or -1.8%

Palladium Price Close Today : 793.50
Change : -22.20 or -2.7%

S&P 500 : 1,271.83
Change : 0.85 or 0.1%

Dow In GOLD$ : $163.08
Change : $ 1.47 or 0.9%

Dow in GOLD oz : 7.889
Change : 0.071 or 0.9%

Dow in SILVER oz : 344.11
Change : 15.09 or 4.6%

Dow Industrial : 11,952.97
Change : 1.06 or 0.0%

US Dollar Index : 74.49
Change : -0.384 or -0.5%

Some things people just have a hard time grasping. Take boys and chewing tobacco. You can tell 'em ten or fifteen times that it will make 'em sick, but they are just bound to try it themselves. When they turn green and start puking, you aren't surprised because that was bound to happen.

Same thing with arbitrage. Things equal to each other in value ought to be equal in price, but markets are inefficient for various reasons, and prices of those equal value items get out of whack with value. Still, eventually they are BOUND to come back to the same price.

Here's a case in point, the silver and gold American Eagle coins. They carry huge premiums right now because the mint's marketing cartel can still enforce that premium. However, over the last 10 years those premiums have eroded, and by the time silver and gold peak they will disappear altogether. At market peak, and ounce of gold or silver will be an ounce, no matter what stamp it bears, and all ounces will travel at the same price. Same thing applies to numismatic coins, US $20s, St. Gaudens, etc., only they've been bigger losers still.

It will all happen eventually, but no matter how many times you explain, people still reach for that plug of chewing tobacco.

The stick that gave stocks such a liking on Friday was applied to SILVER and GOLD PRICES today.

Knocked GOLD off its perch at $1,525 support and fell to $1,514.85. Comex closed near the bottom of the range, down $13.50 at $1,515.10. That's two straight days of losing $13.50 -- exactly. Passing odd.

Now gold must defend itself around $1,505 but gravity has the market in its grip. Today the gold price dropped through its 20 DMA (1,523.60), first confirmation of lower prices. 50 DMA lies at $1,505, along with horizontal support. If the gold price can't hold on above $1,500, it will dip toward $1,450, probably quickly.

SILVER also fell below its 20 day moving average (3623c) and the market kept battering it all day. Once it crossed 3600c a big fall was inevitable. From 10:30 until 1:15 Eastern silver steadily retreated. Comex caught it 159c lighter than Friday at 3473.6c. The SILVER PRICE is now flirting with its low for the move so far. A break of 3460c pulls the legs out from under silver and sends it scooting toward the 200 DMA (now 3064c).

Both silver and gold prices appear to be completing the last leg of an A-B-C correction, ready at any time to post a bottom for the correction. Well, "at any time" -- true, but silver will probably push out a week to seven weeks. Confirming that correction were platinum (down 33.40) and palladium (down 22.20).

The US Dollar Index, exploiter of the underprivileged, mainstay of the Tapeworm economy, world leader in larceny, lost 38.4 basis points today and ended at 74.495. Five day chart boldly states that 74.40 is strong support, or 74.20 at least.

Looks like the dollar will correct for a couple of days. Still, it stands in a rally and as long as it doesn't break below 74 will keep rising. (I'm having trouble with my data today as sources don't agree on the $ index. Either way the pattern says that the dollar will correct for a couple of days.)

The euro rose 0.47% to 1.4414, bouncing off its 20 day moving average (1.4337) but trapped by the 50 day 1.4415). Once again the Yen laid low, barely moving from Friday's close. Now at Y80.22/$ (124.56c/Y100).

Friends arrived at the stock market today with pockets full of cash (don't be shy, Nice Government Men! You are serving your country -- and the Fed) but buy as they might, stocks kept pointing nose downward. End of the day the Dow had been slapped back from its 12,011 high to close a mighty 1.06 points above Friday at 11,952.97. S&P gained a mighty 0.85 to close 1,271.83.

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.