Tuesday, October 04, 2011

Maybe the Gold Price is Bracing Up to Run to $1,725, but "to" that Mark Without "thru" that Mark Proves Nothing

Gold Price Close Today : 1655.00
Change : 35.60 or 2.2%

Silver Price Close Today : 30.750
Change : 0.709 or 2.4%

Gold Silver Ratio Today : 53.82
Change : -0.085 or -0.2%

Silver Gold Ratio Today : 0.01858
Change : 0.000029 or 0.2%

Platinum Price Close Today : 1512.00
Change : -15.00 or -1.0%

Palladium Price Close Today : 591.00
Change : -20.00 or -3.3%

S&P 500 : 1,099.23
Change : -32.19 or -2.8%

Dow In GOLD$ : $133.09
Change : $ (6.21) or -4.5%

Dow in GOLD oz : 6.438
Change : -0.300 or -4.5%

Dow in SILVER oz : 346.51
Change : -16.77 or -4.6%

Dow Industrial : 10,655.30
Change : -258.08 or -2.4%

US Dollar Index : 78.57
Change : 0.544 or 0.7%

The body of Friday's commentary contained an error that was corrected elsewhere. The Dow did not close dead on 11,000 but down 240.60 (2.16%) at 10,913.38. The data error changeth not the conclusions. Sorry, I was racing to get up to Nashville to catch a plane for a wedding in Wichita. Great wedding, but awfully fast trip.

And that Kansas is NOTHING like Tennessee. I looked around and I said to myself, "Dorothy, you're not in Tennessee anymore."

Y'all also need to understand something: I am not a fortune-teller. I don't even believe in fortune-telling, astrology, crystal-balls, and most market prognostication systems, or leastways, I'm too dumb or lazy to understand them. Fool that I am, I only know a few things, chief of which is "A Train Will Run Till It Reaches The Station." First principle of investing is, Always align your investments with the primary trend. That's the trend that runs 15 - 20 years, generally up or down (GOLD and SILVER, 1960-1980; stocks 1982 - 2000; GOLD and SILVER, 2001 - ?). You get onto that primary trend train as soon as you hear that whistle blowing, and get off it when it reaches the station. All the lurching, bumps, and stops inbetween don't amount to a hill of beans to a man riding to the last station.

Therefore, if y'all are expecting Cosmic Revelations about what will for sure take place tomorrow, better betake yourselves somewhere you won't be disappointed. I'm just riding this train until we reach the Sixteen-to-One Station, where I get off, and pointing out the scenery while we ride.

So many of y'all asked me about the performance comparison, I'm giving it to you again, as of today. Figure in parenthesis is the gain or loss calculated from 3 October 2011.

3 October 11 4 Oct 10 3 Oct 06 Dow 10,655.3 10,751.27 (-0.9%) 11,727.34 (-10.1%)
Gold $1,655.00 $1,315.40 (+20.5%) $576.3 (+65%)
Silver $30.75 $22.013 (+28.4%) $10.955 (+64.4%)

Now y'all have to be careful with comparisons like this, because the period chosen makes all the difference in the world, but this is sort of entertaining to thrust under the nose of those who insist stocks aren't in a bear market or metals are a terrible investment.

Stocks followed through downside today. Dow lost 258.08 or 2.36% and landed at 10,655.30. S&P500 lost even more, 2.85% (32.19) to end at 1,099.23 -- OWCH! -- below the psychologically sensitive 1,200 level.

Stocks -- the Grand Theft Auto of retirement expectations.

I don't reckon the panic in Europe is over right yet, despite all the assurances from the Eurocrats, commentators, etc. Stocks sure showed that, and so did the Euro, down a colossal 1.82% to 1.3172. Back when the Euro was lolling around 1.3900 folks were laughing about me expecting to see the Euro at 1.3000. Now that's not nearly as funny as it was, or my awaiting it's trip to 1.2000. Watch for it. It might delay, but it will come.

Japanese yen closed at 130.57c/Y100 (Y76.58/$1), bouncing up off the triangle line and its 20 and 50 DMAs. Doesn't want to give up, and may not.

US DOLLAR INDEX rose a gargantuan 103.1 basis points (1.31%) from where 'twas trading Friday, to 79.603. Will reach 81.25 at least, creating bad suction on stocks, silver, and gold.

What's wrong with a man so suspicious he watches the GOLD PRICE rise $35.60 and close at $1,655 on Comex, then rise another ten bucks in the aftermarket to $1,664.20 and still refuses to jubilate? He might be remembering last week when the GOLD PRICE ran out of gas and failed at $1,675, especially when he sees today's high at $1,672. Maybe he's just tired and hungry, maybe he's missing something, but he doesn't see any cause for gloating short of the GOLD PRICE clearing $1,725 and advancing like a hog running for supper. This back and forth over the same territory -- $1,675 to $1,575 -- doesn't build anything and it burns up buying power.

Okay, maybe gold is bracing up to run to $1,725, but "to" that mark without "thru" that mark proves nothing. A downtrend in force remains in force until broken, and it's not near breaking yet.

Silver's no different. It rose 70.9c today to close Comex at 3075, but remains trapped beneath 3100c (high today came at 3139c). Both the SILVER and GOLD charts appear to be tracing out pennants or flags, and the rule says, "Flags always fly at half-mast." That is, they form about half-way through a move. If those are flags, then they're storm flags and y'all better screw some plywood over your windows, put your lawn chairs in the garage, and get inside.

The POINT: Silver and gold remain in a long term primary uptrend that will last another 3-1/2 to 10 years, but they are presently undergoing a major correction that hasn't ended yet.

Y'all will appreciate this tid-bit of historical irony. On 3 October 1776 the Continental Congress borrowed $5 million to halt the rapid depreciation of paper money in the colonies. If anybody here thinks that worked, call me about some great beach front property in Kansas.

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.