Monday, August 01, 2011

The Gold Price Reached $1,635 on Friday, and About the Same Today - Looks Like a Double Top

Gold Price Close Today : 1619.00
Change : (9.30) or -0.6%

Silver Price Close Today : 39.298
Change : (0.794) or -2.0%

Gold Silver Ratio Today : 41.20
Change : 0.584 or 1.4%

Silver Gold Ratio Today : 0.02427
Change : -0.000349 or -1.4%

Platinum Price Close Today : 1792.70
Change : 14.60 or 0.8%

Palladium Price Close Today : 828.00
Change : 1.90 or 0.2%

S&P 500 : 1,286.94
Change : -5.34 or -0.4%

Dow In GOLD$ : $154.91
Change : $ 0.76 or 0.5%

Dow in GOLD oz : 7.494
Change : 0.037 or 0.5%

Dow in SILVER oz : 308.73
Change : 5.85 or 1.9%

Dow Industrial : 12,132.49
Change : -10.75 or -0.1%

US Dollar Index : 74.31
Change : 0.285 or 0.4%

I wish I had thought of something Steve Saville of mentioned in his last commentary. While all the media Mo-Ros were propagandizing a US credit default, the market was saying something else. Yield on the 10 year US treasury note plummeted on Friday. Remember the rule for bonds, "Yield rises, price falls; yield falls, price rises." Therefore, a lot of savvy investors on Friday were piling in to US Treasuries, well aware that the US was not about to default. They were right.

First, deal with the questions: when silver and gold and stocks all dropped, why did platinum and palladium rise? What does THAT say? Anomaly or augury?

Comrade O'Bama and the Debt Ceiling Drama worked markets over. There is a deal, there isn't a deal. Stocks tried to rise on the open, then about 10:00 fell into negative-land. By noon the Dow was below 12,000 barely, but FEAR NOT! Help appeared (thanks, Nice Government Men!) to bring the Dow nearly to unchanged at 12,132.49, down 10.75 or 0.09%. Odd, wonder why the S&P500 dropped 5.34 or 0.41% to 1,286.94. Sloppy work, NGM!

Stocks have now worked their way nearly to their 200 DMA (for the Dow, 11,982.96). Even if it were dead as a quarter-inch thick armadillo in the road, the Dow ought to bounce off of that. (Which reminds me, do y'all know what an armadillo's defense mechanism is? They jump straight up flat-footed. Which may explain why so many armadillo corpses litter the road, as a straight-up jump gets them just about truck-bumper high.)

But looking out more than a week or two, I can't see anything but a massive double top in the Dow, confirmed by a second double top (two in July), and a decline to a lower low for the move. Me, I'm not attracted to that sort of action, any more than I'm going to shoot craps when a man's dice have two 2s on both cubes.

Stocks -- the biplane of Investment Aerodynamic Design.

Here's why the debt ceiling deal did nothing: it made no structural changes. US economic woe arises from government spending contributing over 50% of income. Get it? Government is 50% of the economy. Until that is reduced, no change has taken place. No solution, only more play-acting.

The US dollar took a goose from the debt ceiling "solution." From the last price I saw Friday until now, the dollar index rose 44.4 basis points or 6/10%. Five day chart made a sort-of spike bottom down to 73.6, but it rose clean back to Friday's high at 70.50. Expect the dollar to rise. It may take it a while to work out of this hole, but it will.

Euro was brought back to reality today with a 1.4250 close, down 1.06% and beneath its 20 and 50 day moving averages (1.4269 and 1.4319). Lower, lower. Yen came off its high horse today after its highest close ever on Friday. Closed Y77.24/$ (129.46c/Y100). Expect Japanese NGM to begin attacking the yen to bring it down.

The GOLD PRICE reached $1,635 on Friday, and about the same today. Looks like a double top, and a close below $1,615 then $1,605 will confirm that.

GOLD PRICE was confused today, dropping down to $1,610 at 10:30, then rallying clean to $1,630 by 11:00 am. Afterward it rolled over and whimpered around $1,620.

Any close above $1,630 will gainsay my conclusion that gold will decline. As confused as today has been, it might come back. Don't discount it too quickly.

SILVER PRICE has been trending downward since last Wednesday, and nothing changed today: lower highs and lower lows. 3900c stopped silver today, but will that stop silver tomorrow? Just beneath us at 3860c is the 20 day moving average. If/when silver crosses that, momentum traders will sell more.

What target? Possible that silver will re-visit its 200 DMA at 3334c. Comex today closed at 3929.8, down 79.4c. 3800c is the line silver must hold if it is not destined to revisit the 200 DMA.

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.

Be advised and warned: Do NOT use these commentaries to trade futures contracts. I don't intend them for that or write them with that outlook. I write them for long-term investors in physical metals. Take them as entertainment, but not as a timing service for futures.