Friday, August 19, 2011

This Week the Gold Price Told us Very Loudly that it Intends to Make a New Leg Up

Gold Price Close Today : 1,848.90
Gold Price Close 12-Aug : 1,740.20
Change : 108.70 or 6.2%

Silver Price Close Today : 4242.8
Silver Price Close 12-Aug : 3910.1
Change : 332.70 or 8.5%

Gold Silver Ratio Today : 43.577
Gold Silver Ratio 12-Aug : 44.505
Change : -0.93 or -2.1%

Silver Gold Ratio : 0.02295
Silver Gold Ratio 12-Aug : 0.02247
Change : 0.00048 or 2.1%

Dow in Gold Dollars : $ 120.95
Dow in Gold Dollars 12-Aug : $ 133.86
Change : $ (12.92) or -9.6%

Dow in Gold Ounces : 5.851
Dow in Gold Ounces 12-Aug : 6.476
Change : -0.62 or -9.6%

Dow in Silver Ounces : 254.96
Dow in Silver Ounces 12-Aug : 288.20
Change : -33.24 or -11.5%

Dow Industrial : 10,817.65
Dow Industrial 12-Aug : 11,269.02
Change : -451.37 or -4.0%

S&P 500 : 1,123.53
S&P 500 12-Aug : 1,178.81
Change : -55.28 or -4.7%

US Dollar Index : 73.993
US Dollar Index 12-Aug : 74.579
Change : -0.586 or -0.8%

Platinum Price Close Today : 1,876.00
Platinum Price Close 12-Aug : 1,796.00
Change : 80.00 or 4.5%

Palladium Price Close Today : 750.00
Palladium Price Close 12-Aug : 743.55
Change : 6.45 or 0.9%

This week the GOLD PRICE told us very loudly that it intends to make a new leg up. Not only did it gain US$108.70 this week for a new all time dollar high today (3 in the last 3 days), but the GOLD PRICE also closed at a new high in Euros (e1,287) and yen (Y141,700). Another face of the new phase: the GOLD PRICE is climbing against ALL fiat currencies.

Y'all need not remind me how overbought gold is. The RSI and MACD both tell me that. But yesterday to all the rest of the panic, Venezuela's Hugo Chavez ordered foreign depositories to send Venezuela's gold home (Venezuela is the world's 15th largest gold holder), 211 metric tonnes or 6.783 Million Ounces (Moz). Bank of England holds 99 tonnes of that (3.183 Moz), while the rest is scattered amongst the usual suspects: JP Morgan Chase, Barclays, HSBC, Standard Chartered, BNP Paribas, and Bank of Nova Scotia. Some speculate that Chavez has precipitated a "short squeeze," i.e., is forcing those short gold to deliver. Nothing quite drives the price of anything like shorts scrambling to deliver, covering at any price. I am of course not accusing ancient, hoary, and respectable institutions like the BoE or JP Morgan or BNP of shorting gold they were supposed to be storing -- why, perish the thought! Yet how else does one account for gold's perpendicular rise?

Cheery Chavez also nationalized all the private gold producers in Venezuela, which casts a pall over the gold mining community. Also reminds owners of gold stocks what the words "political risk" mean. Bound to make it harder for miners to borrow and float shares, if only for a while.

So today the GOLD PRICE rose $30 to a new all time high of $1,848.90. Yes, it's high, parabolic, and overbought, but how much higher will panic drive it? $2,000? $2,050? $2,100? Higher? I bought some at $1,854, and will buy more.

The SILVER PRICE gobbled down a colossal 332.7c this week, rising 8.5% to close Comex today 4242.8. I knew once it got thru 4100c resistance it would jump, but 174.1c in one day? Time I got up this morning SILVER had already burst thru 4150c (about 6:45 New York time), then it shot clean to 4250c. It backed off a little on the open, rose to 4250c again, reacted after testing that ceiling, then bulldozed from 4140c the rest of the day to trade at 4289c in the aftermarket.

Technically silver's close today takes it above the last intraday high (4229c) and clears the way for another test of 5000c. Unlike GOLD -- get this -- the SILVER PRICE is NOT overbought and has only this week crossed its 20 DMA (3988c). Plenty of room for a sprint to 5000c.

Panic has grown with the week. The GOLD PRICE rose an astounding $108.70 or 6.2%, while the SILVER PRICE rose 332.7c or 8.5%. Dow lost 4.7%, S&P500 4.7%. We are now seeing volumes near what we saw in the 2008 panic, and wholesalers are stretching out delivery.

Stocks fell off the cliff at 11,300 on Thursday. Hard for me to ken how anyone might still argue stocks are coming back in the next decade or so. Stock decline looks like a completed 4 waves beginning another down leg.

Dow in Gold Dollars passed a new milestone this week, falling below G$$124.03 (6.00 ounces). Closed today at G$120.95, or 5.851 oz. Let me make clear what that means. For 5.851 oz you could buy one share of all the stocks that make up the Dow Jones Industrial Index -- 10,817.5/$1,848.90 = 5.851.

Dow in silver ounces likewise has fallen to a new low. Now you need on 254.96 ounces to buy the Dow, while at the top in 2001 you needed 2,560.

Do y'all understand that we are entering a new phase of development? That everything is moving faster, more violently, with more volatility? You must protect yourself. Ask, and linger over the meditation: with the stock market collapsing, WHAT WILL BEN DO? Will he stay on the wagon, or will he reach for that jug labeled "QE3"?

Stocks -- your ticket to a retirement under an interstate overpass in a splendid cardboard shack with access to fine dumpster dining.

One face of the new phase is that instead of falling with stocks in this panic, GOLD has risen, meaning that flight capital is fleeing into gold this time, not US dollars. More astonishing, SILVER is accompanying GOLD up, not following stocks down. O, brave new world!

Losing a modest 25.1 basis points, the US DOLLAR INDEX now flirteth with 74, in fact, 73.993. It dropped 0.32% today, but point to watch is that it seems to have bottomed Wednesday and today confirmed that bottom. Whichever Nice Government Men are managing it are laboring mightily to keep it beneath its 20 day moving average, now 74.28. Unless it breaks 73.40, they'll be hard pressed to corral it, faced by a panic.

Euro rose 0.45% today to close 1.4394, but remains in a downtrend. Only closes above 1.4697 and 1.4940 can change that. Personally, I think y'all will see 1.2000 first. Yen made an new all time intraday high today and closed at 130.65c/Y100 (Y76.54/$). Pity the NGM working for the Bank of Japan.

On 19 August 1848 the gold discovery in California was reported in the New York Herald.

YESTERDAY I encouraged y'all to go back and review the crisis recommendations I made earlier. The date was wrong, so I am reprinting the recommendations from 5 August below:

HERE ARE THE RECOMMENDATIONS FROM 5 AUGUST 2011. Europe will drag the US into crisis. Here are my suggestions for self-protection:

1. Get liquid. Pay down debt as much as you can. Sell non-performing investments, like stocks, or investments that will suffer from depression or inflation.

2. Close out leveraged positions. Markets are way too volatile for that.

3. Hold on to silver and gold.

4. Hang on to cash anticipating great bargains in a crisis. Remember gold went to $700 and silver to 880c. Gold/silver ratio went to 84, offering a great gold to silver swap. Not expecting those numbers again, but we might see the analogs.

5. Fill up propane tanks, home gasoline or diesel tanks.

6. Stock up on food -- long term storage food, not smoked oysters and tomato soup. Rice, for instance. Dehydrated food. MREs.

7. Stock up on ammo.

8. Get out of the city, or at least have a country place waiting to receive you.

Don't be fooled by my calm words, either. Y'all are reading the equivalent of an air raid siren, and y'all had better run for cover.

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.