Tuesday, August 02, 2011

If the Dollar Index at 74.5 Means the Gold Price at $1,660 What Does the Dollar Index at HALF that Value Imply for Gold?

Gold Price Close Today : 1641.90
Change : 22.90 or 1.4%

Silver Price Close Today : 40.081
Change : 0.783 or 2.0%

Gold Silver Ratio Today : 40.96
Change : -0.233 or -0.6%

Silver Gold Ratio Today : 0.02441
Change : 0.000138 or 0.6%

Platinum Price Close Today : 1795.50
Change : 2.80 or 0.2%

Palladium Price Close Today : 827.40
Change : -0.60 or -0.1%

S&P 500 : 1,254.05
Change : -32.89 or -2.6%

Dow In GOLD$ : $149.40
Change : $ (5.49) or -3.5%

Dow in GOLD oz : 7.227
Change : -0.266 or -3.5%

Dow in SILVER oz : 296.07
Change : -12.66 or -4.1%

Dow Industrial : 11,866.62
Change : -265.87 or -2.2%

US Dollar Index : 74.47
Change : 0.212 or 0.3%

Well, SILVER and GOLD fooled me yesterday and I got an answer to why PLATINUM and PALLADIUM rose yesterday when silver and gold fell. I salvaged something by warning y'all not to write gold off yet.

US DOLLAR INDEX continues to confirm that it has bottomed. Grabbed another 21.2 basis points today to close at 74.474. Needs to better its 20dma at 74.75, then the 50 dma at 74.78, and then will draw a bead on 76.

By the way, I looked at a long term dollar index chart today, back to 1971, and it projects a dollar index move to -- y'all, I am NOT making this up -- 39. Simple head and shoulders target measurement, which almost always works.

Still want to hold on to those dollar-denominated investments? Certificates of Deposit? Bonds? Annuities? Any promise to repay dollars tomorrow is a guaranteed loser. Happy de-capitalization! Merry expropriation! Jolly impoverishment!

My upside target for the GOLD PRICE when it broke through $1,560 was $1,675. Right now it's trading over $1,660. Yeah, yeah, yeah, ought to slow down, ought to correct, but . . .

Why did gold rise after what should have been for gold the BAD news of the debt ceiling deal? Why did it do the same after the Greek bailout deal?

Maybe no more complicated than gold has the bit between its teeth in a third wave up and it will astonish even its wildest fans. Don't know. Working at finding a higher target.

Oh, and don't forget this: when some uninformed clown, paid by media or government or otherwise, tells you that silver and gold are in a bubble, ask him this: If the dollar index at 74.5 means gold at $1,660, what does the dollar index at HALF that value imply for gold? A double? More?

Gold rose 1.4%, the SILVER PRICE rose 2% or 78.3c to close Comex at 4008.1. In the aftermarket shorts panicked and now it's trading at 4082c.

4040c was the kryptonite barrier, and when silver leapt over that, why not run farther? May take a breather tomorrow, but silver has its eye on 4100c and higher.

Markets are demoralized and confused -- well, stocks and currencies are, while silver and gold were a bit bewildered then roared. Still, this sort of volatility often accompanies turnarounds, so be careful.

Both metals may take a breather tomorrow. As long as the GOLD PRICE remains higher than $1,620 and the SILVER PRICE above 3900c, they will move higher.

DOW IN GOLD DOLLARS in the last three days has fallen nearly to its March 2009 low of G$145.37 (7.032 oz), stopping today at G$149.40 (7.227 oz). Target for this fall might be the last low, but the turnaround there will be brief. Better target is G$114.28 or 5.528 oz of gold.

Problem with reading markets is that the market's enthusiasm or depression is catching. Somehow you have to guard yourself from believing a falling market, especially one that has fallen a long way recently, will just keep falling for every. You have to keep looking for that rally, and vice versa for rising markets.

Bur mercy's sake, what can you say about stocks? The Dow today fell 265.87 points, crashing through support at 12,000 like pushing through wet toilet paper, never even slowed down. That fall took it to the last intraday low (11,863) and way below the 200 day moving average (11,987).

Well, take a deep breath. Dow is in a bear market, and has spent much of its life since 2000 beneath that 200dma as bear markets always do. This time the 200dma might catch it, but sooner or later it will sink beneath that wave and not be seen again.

Add to this the Dow's plunging after the uncertainty of the debt ceiling drama was removed. Shouldn't that good news make it rise? Falling on good news, well, as Tarzan's safari leader would say, is "Bad juju, Bwana." You can almost hear those drums beating through the jungle.

Then there's the little item of that double/double top the Dow traced out in July, matching the May top.

I add all that up and conclude the Dow might rally from here, but more likely it will drop to 11,555, the last low. If it fails to get a grip there, look for 11,258.

Stocks -- they are as reliable as a cat's love or a dog's compliment.

Euro closed 1.4196, continuing to decline toward its intrinsic value of zero. Japanese yen rose to 129.74 (Y77.07/$).

On 3 September 2011 we will host our yearly Bodacious Hoedown at the Top of the World farm. More details as they feed them to me. So far I know: food, dancing, Old Time band, games (one or more of which I will be the goat for.)

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.