Monday, October 31, 2011

Gold Price Dropped As Dollar Rallies, Bull Market Is Alive and Well, Just Undergoing a Correction

Gold Price Close Today : 1724.20
Change : (22.00) or -1.3%

Silver Price Close Today : 3433.7
Change : 93.3 cents or -2.6%

Gold Silver Ratio Today : 50.21
Change : 0.705 or 1.4%

Silver Gold Ratio Today : 0.01991
Change : -0.000283 or -1.4%

Platinum Price Close Today : 1606.10
Change : -39.40 or -2.4%

Palladium Price Close Today : 649.00
Change : -14.85 or -2.2%

S&P 500 : 1,253.31
Change : -31.78 or -2.5%

Dow In GOLD$ : $143.33
Change : $ (1.45) or -1.0%

Dow in GOLD oz : 6.934
Change : -0.070 or -1.0%

Dow in SILVER oz : 348.17
Change : 1.38 or 0.4%

Dow Industrial : 11,955.01
Change : -276.10 or -2.3%

US Dollar Index : 76.55
Change : 1.454 or 1.9%

GOLD and SILVER are the currency alternatives -- competitors, if you will -- to the euro, yen, and dollar. Thus when the dollar rallies, you can expect silver and gold to take body blows.

Today they did. THE GOLD PRICE dropped $22 (1.3%) to turn off the Comex lights at $1,724.20. Big drop had already happened on the other side of the world time the globe's turning brought midnight Sunday/Monday to the Eastern Time zone. That's the great thing about government surprise parties, no way to decline the invitation.

Most of the day GOLD traded from $1,725 to $1,712, although the low came before New York opened at $1,704.60. Closing under that $1,725 support offered no encouragement to gold bugs, and will likely knock prices again tomorrow. $1,705 is the support to watch.

That marks the upper boundary line of gold's trading from the end-September collapse until last week's upside breakdown. Falling through that mark opens a trapdoor for the GOLD PRICE with a $1,650 basement. $1,605 is possible, and home to the 150 day moving average.

The SILVER PRICE, more manic as usual, lost 2.6% today, 93.3c, to close Comex at 3433.70, beneath 3450c support. Likely target is 3200-ish, about where 'twill meet the rising trend line. If it falls thru that, silver holders will be writhing in pain.

BOTTOM LINE: Bull market is alive and well, just undergoing a correction. Y'all hang on -- don't let that bull shake you off!

I'm going to share a little secret with y'all. I've been working on a book. For 15 years. No, not about silver and gold, hardly mentions them. Rather, it’s the tale of moving with my family to a farm waaayout in the country, so far out you have to order sunlight from Sears and Roebuck. It exposes all, from colossal mistakes to miniscule successes. I'll tell you where the dead animals are buried, and who (probably) killed them. You'll learn how we got to 27 dogs at one point, how we fell into the pig business, and how not to herd sheep (Hint: gotta have a Border Collie). You'll hear about the joys -- Bodacious Hoedowns and Agrarian Challenges -- and the sorrows -- how many chickens can a skunk kill? You will also no doubt find it even easier to laugh at me than I do to laugh at myself, and you will meet my whole family and others for miles around.

Stocks stir my soul to poetry:

Under water everywhere,

and all th'indices did shrink!

Underwater everywhere,

and every stock did stink!

Last Thursday I wrote that you should look around and fix the sight in you mind, because for stocks that was as good as it gets. Now y'all see why I said that. Today the Dow closed at 11,955.01 and lost 2.26% or 276.1 points, all but 85.97 points of what it gained in the last two days. It lost 76.25% of the last two days gains.

S&P500 lost 31.78 or 2.47% today.

Now all those who bought the euro "fix" are beginning to sober up, rub their eyes, and wonder what in the WORLD they were thinking to buy stocks like that?

Now I bet y'all understand why they serve free drinks in casinos.

I was wondering when the Nice Government Men in Japan were going to act to save their export addicted economy, and they did this morning. I will forbear the obvious martial arts and samurai and ninja references, and observe merely that they slapped the yen winded. It dropped to 127.92 c/Y100 (Y78.17/$1, down 3.02% from Friday. Since it was a government surprise party, they threw it over the weekend for the rest of us) so that it all happened at once and beat the longs senseless. 'Twill be a while before they go long yen again. Chart damage will last a while, too.

Yet the Japanese only set the stage for more trouble down the road, since they did not announce, like the pragmatic Swiss, that they would not tolerate the yen over such and such a rate. Thus they again have to make another surprise raid on their own currency.

Central banking is NOT the road to currency stability.

Euro's day in the sun is over, too. Japanese move today sent money screaming into dollars for safety, so the Euro gapped down -- largely -- below its 200 DMA (1.40.86) then fell to the 50 DMA (1.3842) for good measure, wiping out all the last week's gains. Closed at 1.3852, down 2.1%.

And who was the gainer in all this, save the US dollar, the currency everyone loves to hate but buys anyway. Dollar bounded up off 75 to end the day up 145.4 basis points (1.87%) at 76.551, leaving the last two days behind as a spike bottom and suspected turnaround -- as suspect as a cat with yellow feathers on his chin when your canary goes missing.

For a while at least, the dollar will rally. Until the next crisis, which might be two days or two weeks or two months or two minutes, but surely will come.

Today will be the last day I will send a commentary until 8 November. I'll miss y'all, but I have to attend a timber framing class.

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 bubble has burst, primary trend down.

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.