Monday, December 12, 2011

Gold Price Dropped Through the 150 Day Moving Average, Will it Drop Farther?

Gold Price Close Today : 1664.20
Change : (48.60) or -2.8%

Silver Price Close Today : 3093.50
Change : 123.80 cents or -3.8%

Gold Silver Ratio Today : 53.797
Change : 0.559 or 1.1%

Silver Gold Ratio Today : 0.01859
Change : -0.000195 or -1.0%

Platinum Price Close Today : 1486.70
Change : -27.05 or -1.8%

Palladium Price Close Today : 659.90
Change : -24.05 or -3.5%

S&P 500 : 1,236.47
Change : -18.72 or -1.5%

Dow In GOLD$ : $149.32
Change : $ 2.29 or 1.6%

Dow in GOLD oz : 7.224
Change : 0.111 or 1.6%

Dow in SILVER oz : 388.60
Change : 9.89 or 2.6%

Dow Industrial : 12,021.39
Change : -162.87 or -1.3%

US Dollar Index : 79.58
Change : 0.948 or 1.2%

The GOLD PRICE dropped clean through its milestone 150 day moving average (now $1,664) when it struck bottom at $1,657.32. Here's a catchy footnote: during the life of this bull market, you could hardly have gone wrong, even for a short time, blindly buying gold at its 150 DMA. Only on one occasion -- 2008 -- did it stay below the 150 DMA for enough time to scare you, and even then it came back.

What about other destinations? The 200 DMA stands at $1,613, and the last low at $1,535.

Everyone who called today asked, "Will it drop farther?" Might as well flip a coin as ask me. That 150 DMA is a place I like to buy gold. I will buy more at the 200 DMA, and I will be looking around to sell grandchildren if it reaches $1,535.

The SILVER PRICE broke 3150c support and fell all the way to 3086c, a little higher than the November low (3069c).

I like to look at the worst possible outcome whenever the roof appears to be caving in. If silver fell the height of the even-sided triangle that it has sketched out, it would fall to about 1750c. Not impossible, but not likely. That flash low at 2615c in late September offers another target, as does 2000c below that.

Before y'all start looking for a rope to lynch me with, let me remind y'all that the SILVER PRICE is VOLATILE, way more volatile than the GOLD PRICE. Always is, and the scary side of that appears when silver corrects. The side you like, the outperform-gold-four-to-one side, comes when silver rallies. You don't get one without the other.

SILVER and GOLD have just fallen out of even sided triangle formations. I would buy gold because it's at the 150 DMA, as I mentioned above. Silver, on the other hand, has fallen below its 300 day moving average. In this bull market, if you had done nothing brighter than merely buying silver whenever it sank below its 300 DMA, you would now be sitting on a pile of cheap silver. Only in 2008 did silver stay below its 300 DMA for long, and then only for about 8 months.

Yes, most everybody who now owns silver or gold is puking in his wastebasket today, with visions of having to buy a hurdy-gurdy and monkey to make a living, but wait. Exactly when they are all sticking their heads in the wastebasket is the time we want to be buying.

Or do y'all think that over the weekend Ben the Bernancubus and all the other central bank heads suddenly got religion and decided they weren't going to gut the public anymore? They are caught in their own trap. Either they inflate, or they die.

Y'all know as well as I do which they'll keep on choosing.

Another Euro-bobble, as the eurocrats failed again to enact any substantial solution to their bank solvency crisis. They are, however, tightening the power stranglehold on member countries and centralizing power like a drunk ordering highballs at a free bar.

The outcome was a spectacular dollar rally. US dollar burst through 79 and is now trading at 79.58, up 1.22% or 94.8 basis points.

The dollar's opposite numbers, of course, tumbled. Euro gapped down and fell to the October low (131.64). Ended at 1.3182. If the euro cannot check its fall here, it will tumble to 1.2500 to 1.2000. Yen fared somewhat better, but also gapped down. Remains in the 4-1/2 month range. Closed 128.33c/Y100 (Y77.92/$1), down 0.4%. Euro's greatest enemy now is gravity.

Back away from the US dollar chart and look. It has now nearly reached the 79.84 early October high, and the 79.70 November high. This makes the dollar's THIRD time to knock at that 79.80 door, so the outcome won't be indifferent. Either it will slice through that 79.80 resistance like the Golden Horde of Mongols slicing through Eurasia, or it will fail and fall like your reading glasses out of your shirt pocket when you leaned over the rail to look down off the Empire State Building.

I'm laying my bet on the dollar rising, because the Eurocrats' stubborn clinging to their unblemished fecklessness may be, at last, spooking the market into a REAL panic, just like 2008. When that happens, everybody will drop everything and run to the dollar for salvation.

Boy. Will they ever get THAT wrong.

I see reports that European commercial and central banks may be selling gold to raise dollars. May be, I have no way of checking that and they aren't about to tell me. But in a panic folks always rush into whatever the majority perceive as the safest instrument. Right now that's the dollar, so you have to expect silver and gold to suffer in a panicked dollar rally.

Could be worse -- they could be stocks. Stocks have rolled over on their belly again, and are about to roll off the wall. Dow today barely held on at 12,000, closing down 1.34% (162.87) at 12,021.39. S&P500 lost 1.64% (18.72) to 1,236.47.

Here's a guess. The Dow's decline began off the May top, fell to 11,950, rallied back to 12,700, then fell to 10,400 in October. That last was the big tough leg (so far), and all the drama since October has been nothing more than a correction of that fall. Correction ended at 12,200, where it failed. Now stocks have in front of them a "journey", as the pompous like to intone. Their journey will carry them below that October low at 10,400, and on down into the bowels of the earth.

How could any enterprise prosper in the government-caused regulatory and financial anarchy that terrorizes markets today?

That brings us to silver and gold, whose plugs were yanked today. Gold fell $48.60 (2.8%) to 1,664.20 on Comex. Silver fell 3.8% (123.8c) to 3093.5c.

I'm not trying to cover myself, but remember I did warn y'all that metals could break up OR down out of their even-sided chart formations. Down it was.

Y'all will find this hard to believe coming from a Tennessean, but 3 years ago my son and I went to New Hampshire, shopping for a Scotch Highland bull. We found Bill and Kathy Baker, who for over 30 years had been line breeding and ruthlessly culling for perfect animals. When I saw their cattle, they literally took my breath away.

More than that, down the road Kathy has a shop where she makes wreaths. No, no, not those cheesy plastic things, but REAL wreaths out of dried flowers or fresh balsam. Everything they use is locally grown or gathered, they never use any additives or chemicals, and Kathy and her crew make the most exquisite Christmas wreaths you have ever seen, and ship them all over the US. They are all made to order. I think Kathy sells out every year, but she probably still has time to make a few more wreaths. You'll find them at

On 12 December 1946 a United Nations committee voted to accept a six-bloc tract in Manhattan to be the site of UN headquarters. The land was a gift from John D Rockefeller, Jr. That was sure-enough disinterested and public spirited, wasn't it?

On 12 December 1862 came the Battle of Fredericksburg, Virginia where Union General Ambrose Burnside smashed regiment after regiment against entrenched Confederates behind stone walls atop Marye's heights. Burnside took 12,653 casualties to Lee's 5,377, and shortly had to look for a new job. The battle lasted from 11 December to 15 December, and was probably the most lopsided engagement of the war. The battle was a tragic monument to what one dedicated man can do with stupidity AND professional military training.

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.