Wednesday, October 12, 2011

The Gold Price Closed Up at $1,681.30 Must Hold Above $1,655

Gold Price Close Today : 1681.30
Change : 21.60 or 1.3%

Silver Price Close Today : 32.754
Change : 0.790 or 2.5%

Gold Silver Ratio Today : 51.33
Change : -0.593 or -1.1%

Silver Gold Ratio Today : 0.01948
Change : 0.000222 or 1.2%

Platinum Price Close Today : 1555.00
Change : 28.00 or 1.8%

Palladium Price Close Today : 612.00
Change : 6.00 or 1.0%

S&P 500 : 1,207.25
Change : 11.71 or 1.0%

Dow In GOLD$ : $141.63
Change : $ (0.55) or -0.4%

Dow in GOLD oz : 6.851
Change : -0.027 or -0.4%

Dow in SILVER oz : 351.68
Change : -5.48 or -1.5%

Dow Industrial : 11,518.85
Change : 102.55 or 0.9%

US Dollar Index : 77.00
Change : -0.590 or -0.8%

The GOLD PRICE and SILVER PRICE confounded me today once again. I was interpreting yesterday as gold's third failure to pierce $1,675, but today it closed Comex at $1,681.30, up $21.60. I ain't nothing but a natural born fool no way, so I got no reputation to protect. Still, that little hook up to $1,681 just looks like a sidlin' move from Monday and Tuesday, and not a determined rise. Tomorrow gold will prove me clean wrong if it trades up to $1,700. A break thru $1,655 will drag gold down like concrete overshoes on a New York gangster.

Even if the GOLD PRICE breaks upside tomorrow and reaches $1,700 or $1,725, I will still be suspecting it's no more than a rally in a correction. A close over $1,775 would slap my jaws and prove me wrong.

The SILVER PRICE stole another 79 cents on Comex to close at 3275.4c, breaking that pesky 3250c resistance. The 20 dma stands slightly higher, at 3357c, and crossing above that would turn silver up, if only temporarily. SILVER could trade clean up to 3950c and still not prove it's going higher. But the MACD indicator says silver will move higher for a while, so it probably will climb for a few days.

Big question that the SILVER PRICE and GOLD PRICE will answer here is, Have they made their lows for the correction? This rally will tells, either by shooting moon-ward or climbing and falling back.

Ours is an Age of Illusion in which we elect actors as presidents and governors and pretend they can rule. Appearance is all, reality nothing.

But appearance can kill you. Doesn't matter whether a fire really is blazing in the crowded theater, if a little smoke sends the crowd stampeding out, they can still run over you and kill you.

So markets today run on illusion. The illusion's effect is further amplified many-fold by the huge degree of leverage available in every market. In gold futures, for instance, you put up about 6.25 cents to control a dollar's worth of gold -- your 6.25 cents controls 16 times its value, the illusion of wealth.

I seek to pinpoint why Our Age so frustrates rational and realistic people, namely, illusion overpowers reality and reason everywhere.

Thus a rational and realistic bank examiner would slap his briefcase together, put his fountain pen in his pocket, stand up, brush the bank's dust off his feet, and leave to report that the European and American banks are a hopeless case, dead on arrival. But the banks own the illusionists we call "government officials," and those worthies are constantly creating the illusion that somehow or other, the banks and the financial system will all muddle thru, if we hoi polloi will only suck up our guts, tighten our belts, and pay for the bailouts.

Which brings me to Europe and its basket case. EC President Jose Barroso, who resembles a very worried toad, called for reinforcing (a.k.a, bailing out) the banks, paying out the 6th loan to Greece (altho Greece admits it can't meet the criteria), and a fast start for the permanent rescue fund (sovereign debt bail out fund or "bucket"). Meanwhile, Slovakian legislators, urged no doubt by muffled phone calls explaining how likely they were to jump out of windows spontaneously if they didn't change their votes, agreed to vote again on supporting the euro bailout fund, and get it right this time, after they failed to approve it yesterday.

Now y'all bear in mind that none of this offers a genuine, effective solution to the crisis. It's all feckless illusion.

On the basis of these Illusionists' performance, the Stock Market Illusion jumped today, along with the euro. Stocks did not overnight somehow secure a more profitable outlook, the euro was not backed by gold or goats or fava beans. Nothing changed but the illusion, but Ahhh! That was enough.

Have y'all ever seen that movie, Lars and the Real Girl? This fellow orders a life-sized blow-up doll then walks her around town introducing her as his new girlfriend. Everybody, even his family, plays along. Folks in his church throw a birthday party for her. Even have a funeral for her near the movie's end. Happens right there in Minnesota. They ought to make a sequel, Ben and the Real Economy.

STOCKS rose 102.55 or 0.9% to 11,518.85. S&P500 rose 11.71 or 0.98% to 1,207.25.

The Dow has now climbed thru its 20 day moving average (11,135) and 50 dma (11,204) and crossed above the bottom jaw of the Jaws of Death topping formation. 200 DMA, a possible target, stands at 11,968, which roughly coincides with support/resistance about 11,860.

If the Dow can pierce that 11,860 and the S&P500 the 1,250 level, stocks could rally to 12,750. I doubt that, but if stocks don't crumble at that resistance, it's possible.

More likely is that the mad-dog leveraged traders are driving the move by the latest wave of illusion/optimism out of Europe, and their manic-depressive mood will swing again on the next bad news.

All this holds true, too, for the Franken-currency, the euro. Off the 1.3164 bottom it has risen to close at 1.3787 today, up on the day 1.03%, and at the bottom of the trading range (May-September) it broke down from. In making this leap it has left two gaps behind so it looks like a strong runaway move, but I've learned to distrust the euro's gaps some what. It left them on the way down too, and thru the summer. They run a little way, then fizz out. BICBW, and if the euro crashes thru the resistance at the bottom of the channel, call it 1.3950, it might rise to 1.4000. Go ahead, Illusion-eaters! Y'all buy a bunch of 'em. Y'all might get rich doing it, or you might just pick your own pocket. Me, I wouldn't buy euros with stolen money, recalling that this rally only marks a 50% retracement of the fall.

The yen dropped today 0.76% to 129.46c/Y100 (Y77.26=$1), a big fall that sank it beneath the 20 dma (130.41) but still rides atop the downtrend line from August. Breaking, but not broke.

US dollar index today lost 59 basis points and is now trading at 76.995. This remains within the range of a normal correction, and stubborn fool that I am, I still expect a costlier dollar.

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.

WARNING AND DISCLAIMER. 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 short term trading outlook. I write them for long-term investors in physical metals. Take them as entertainment, but not as a timing service for futures.

NOR do I recommend investing in gold or silver Exchange Trade Funds (ETFs). Those are NOT physical metal and I fear one day one or another may go up in smoke. Unless you can breathe smoke, stay away. Call me paranoid, but the surviving rabbit is wary of traps.

NOR do I recommend trading futures options or other leveraged paper gold and silver products. These are not for the inexperienced.

NOR do I recommend buying gold and silver on margin or with debt.

What DO I recommend? Physical gold and silver coins and bars in your own hands.

One final warning: NEVER insert a 747 Jumbo Jet up your nose.