Tuesday, September 20, 2011

Must-hold Gold Price Support Remains $1,765 Critical Resistance Above is $1,825

Gold Price Close Today : 1806.90
Change : 30.20 or 1.7%

Silver Price Close Today : 40.087
Change : 0.969 or 2.5%

Gold Silver Ratio Today : 45.07
Change : -0.345 or -0.8%

Silver Gold Ratio Today : 0.02219
Change : 0.000168 or 0.8%

Platinum Price Close Today : 1782.00
Change : 8.00 or 0.5%

Palladium Price Close Today : 720.00
Change : 6.00 or 0.8%

S&P 500 : 1,202.09
Change : -2.00 or -0.2%

Dow In GOLD$ : $130.52
Change : $ (2.12) or -1.6%

Dow in GOLD oz : 6.314
Change : -0.102 or -1.6%

Dow in SILVER oz : 284.60
Change : -6.85 or -2.4%

Dow Industrial : 11,408.66
Change : 7.65 or 0.1%

US Dollar Index : 76.99
Change : -0.154 or -0.2%

On Thursday and Friday, 22 and 23 September, I will be travelling and so will not be sending out commentaries. God willing, I will return on Monday, 26 September.

What does IMF-imposed austerity look like? Here's a hint from an astute friend in Greece. I asked him if the Greek government would default, since he had several months ago written that default was a question of when, not if. He wrote:

"We have already been under a 'controlled bankruptcy state' for a few months.

"We are now watching the epilogue of the Greek drama, and I think it will not last much longer. Actually, it can't. Practically.

" * The state has imposed ridiculous anti-constitutional taxes in order to fill fiscal holes, people simply cannot pay any more.

" * Real unemployment (part-time jobs do not count) is 30% already.

" * One out of two Greek families is touching the "being poor" limit.

" * The prime minister declared that the government intends for every family to have at least one family member with a job. (!)

" * Our economy is wrecked, we do not produce, only import.

" * There are cuts everywhere, life is getting more expensive, but salaries get lower. Imagine life getting about 7-8% more expensive in a year and salaries/retirements to get cut about 20%. Add to this some outrageous "special" taxes. People simply cannot take it.

"I cannot estimate how far this can go, soonest is by the end of this year, latest seems sometime within the next year."

Just apply those same "austerity measures" to yourself right here. Is anybody surprised that Greeks have been pulling their money out of the banks and buying gold?

Another 7-league boot fell late yesterday when Italian government debt was downgraded from A+ to A rating. Italian government blustered, but nobody was much surprised. Euro actually rose, a classic case of buy the rumor, sell the news.

What frustrates me so much is that none of these measures make even baby steps toward reforming these economies. Nobody ever addresses the presuppositions underlying their failures, namely, that governments OUGHT to run economies, that prosperity can be accomplished by government spending and borrowing (government and private), that borrowing, flipping burgers, and selling each other computer programs can really replace PRODUCTION, real production, in an economy. Wealth of the world begins with the things men take out of the ground. As that processes thru the economy, it creates income for all who handle it. But what happens when production is shipped overseas? How is the lost income replaced? Our Rulers answer is, borrowing. Ask the Greeks how well that works. Mercy, ask the Americans!

Nice Government Men were busy painting the tape today. All the stock indices dropped slightly, while the Dow alone gained an insignificant 7.65 points (0.07%) to close 11,408.66. S&P lost 2 (0.17%) to close 1,202.09.

Dow tried all day to get through the same 11,550 resistance that stymied it on Friday, but in vain. Wasted a lot of buying power trying, though, and has traced out on a 5-day chart something that looks remarkably like a double top. Longer term chart is choppy and indecisive, but looks to be meditating another, larger drop.

US dollar index fell 15.4 basis points today (0.2%) to 76.992, yet it remains above its 20 day moving average (75.51) and 50 dma (74.9) and 200 dma (76.12). That, and a stirring rise in the last 3 weeks pretty well defines a rally.

The Franken-currency, the euro, rose 0.68% to 1.3699 today. Meaningless. It's falling down the wall like some alien slime monster in a Grade B movie from the 1950s, with little hope of rallying any time soon. Yen is giving the Nice Government Men fits, refusing to get with the program and fall. Closed today at 130.86c/Y100 (Y76.42 = $1).

The GOLD PRICE is playing the same tricks on us it played in mid-August when it posted a downward key reversal and upside key reversal back to back. Yesterday's break should have taken it lower, but instead it gained $30.20 today (versus losing $35.80 yesterday) to close Comex at $1,806.90.

The breakdown thru the uptrend line remains, but today the GOLD PRICE closed smack under it. It can clamber above that line, it will scramble for higher ground. Gold abideth still beneath its 20 dma ($1,823.20), and that wide spread between the 50 dma ($1,737.19) and the 200 dma ($1,517.89) is begging to be narrowed. Momentum, in other words, points down but gold keeps on refusing to give up and drop.

Must-hold support remains $1,765. Critical resistance above is $1,825. Break either of those lines, and gold will travel much further in the direction of the break.

The SILVER PRICE built on yesterday's bounce off 3900c support and reached as high as 4026. Like gold, silver contradicted yesterday's 167.1c loss by regaining 96.9c and closing Comex at 4008.7c. It weakened off in the aftermarket, however, to 3975c, not an encouraging move.

Even tho the SILVER PRICE rose today, it remains BELOW its rising trend line, which of course constitutes a breakdown. It also lingers below its 20 dma (4116c) and even 50 dma (4032c). Absent a rise shooting through 4250 and then 4400c, silver will see lower prices.

Having said all that, I still note that a crisis and panic is slowly sizzling in Europe while the cooks are out on the porch smoking and piddling. That panic could catch fire and burn out of control at any time, so don't get too cocksure that silver and gold will fall sharply. If that crisis fizzles instead of sizzles, they'll drop. Otherwise fear will keep buoying them up,.

Must hold support for silver is 3875c.

On 20 September 1873 began the Panic of 1873, which introduced a severe international economic depression that lasted until 1879. Not much to anybody's surprise, it was caused by speculation financed by the banks. It began with the demonetization of silver in the US ("The Crime of '73") and following demonetization by the new German empire. Wild optimism in Germany and Austria with the founding of the new Reich provoked more speculation, and it broke in the US with the failure of the Northern Pacific Railway that declared bankruptcy on 18 September. On 20 September that took down Jay Cooke and Co., a major New York banking establishment that today would be classed as "too big to fail." What lesson can we learn from this? That the so-called business cycle and depressions are really not anything more than a "banking cycle" where the banks pump out credit then withdraw it when the bubble bursts. Where have we heard this story before?

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.