Friday, January 13, 2012

The Gold Price Has Most Likely Bottomed Working Through Two Resistance Levels up $14.50 for the Week to Close at $1,616.10

Gold Price Close Today : 1,630.60
Gold Price Close 6-Jan : 1,616.10
Change : 14.50 or 0.9%

Silver Price Close Today : 2949.3
Silver Price Close 6-Jan : 2865.3
Change : 84.00 cents or 2.9%

Gold Silver Ratio Today : 55.288
Gold Silver Ratio 6-Jan : 56.402
Change : -1.11 or -2.0%

Silver Gold Ratio : 0.01809
Silver Gold Ratio 6-Jan : 0.01773
Change : 0.00036 or 2.0%

Dow in Gold Dollars : $ 157.48
Dow in Gold Dollars 6-Jan : $ 158.10
Change : $ (0.62) or -0.4%

Dow in Gold Ounces : 7.618
Dow in Gold Ounces 6-Jan : 7.648
Change : -0.03 or -0.4%

Dow in Silver Ounces : 421.19
Dow in Silver Ounces 6-Jan : 431.37
Change : -10.17 or -2.4%

Dow Industrial : 12,422.21
Dow Industrial 6-Jan : 12,359.92
Change : 62.29 or 0.5%

S&P 500 : 1,289.10
S&P 500 6-Jan : 1,277.81
Change : 11.29 or 0.9%

US Dollar Index : 81.531
US Dollar Index 6-Jan : 81.264
Change : 0.267 or 0.3%

Platinum Price Close Today : 1,485.80
Platinum Price Close 6-Jan : 1,401.00
Change : 84.80 or 6.1%

Palladium Price Close Today : 636.70
Palladium Price Close 6-Jan : 613.20
Change : 23.50 or 3.8%

The GOLD PRICE and the SILVER PRICE proved that I had misread the chart yesterday, thinking they had yet one more small leg to rise. However, that euro fall/dollar spurt knocked them back.

The GOLD PRICE lost $16.70, closing Comex at $1,630.60; silver gave back 59.9c to end at 2949.3. How much damage was done?

Very little. The GOLD PRICE remained above $1,630 support/resistance. Not bad after a week working through two resistance levels ($1,607 and $1,625). However, if gold closes BELOW $1,630, there's no safety net above $1,607, and a fall through $1,607 - $1,600 would evoke painful defections from gold's newly won fair weather friends.

Yet this, too, is valuable. Extent of this fall will tell us how healthy gold is, and whether it has bottomed in truth. Even if it fell to $1,550 (don't I wish!), that would merely confirm the previous (29 December) low as a bottom. Only violating that bottom ($1,523.90) would imperil gold with new low prices.

If I had to say, and I never can seem to resist saying, it appears that gold has moved stoutly off its bottom and will make one further leg up toward $1,680 before it is dragged back into another correction. If so, Monday or Tuesday surely will see gold rise through $1,650 resistance, perhaps as high as $1,705 before it relents.

After all's said and done, the SILVER PRICE gained 2.9% this week, passing several milestones along the way. First, it crossed above the 20 day moving average (2908c). Next, it punched thru the downtrend line from the September highs, and for four days has abided above that line. From a close to the ground viewpoint, silver broke out then went back to the trend line today to plant a final kiss good-bye on its forehead.

All this makes it all the more important that silver hold 2950c support, lest the newly boarded rats jump ship. Above silver must clear 3050c resistance.

A break of 2950c support would not necessarily take silver below 2850c again, but it would lean it that way sharply. Monday will reveal silver's mind for the week. My money is on higher silver next week.

IN SUM, GOLD has most likely bottomed, although SILVER might have one more drop in mind, not necessarily to a new low. Time to start buying.

Doing a little thinking the last few days has led to some gold targets I am almost loath to share with y'all, they sound so high. By end of 2012 or January 2013, gold ought to cost $2,660 an ounce. Top of this next wave that just began stands somewhere ABOVE $4,500. Yes, yes, I know it sounds crazy, but I'm just the reporter, not the creator. At $4,500 gold a 30:1 ratio puts silver at $150.

Crazy, but y'all will behold it, and with your own eyes.

This week's big gainers were platinum (up 6.1%), palladium (3.8%), and silver (2.9%). Gold gained only modestly (0.9%), as did stocks. US dollar index remained above 81 and gained a little ground: rally intact.

Tomorrow is the 12th anniversary of the 14 January 2000 all time inflation-adjusted high in the Dow: 11,722. That would equal 15,325 today. So in value-terms, although the Dow today stands nominally above that 11,722 close, it's an illusion. In inflation adjusted dollar terms, the Dow since 2000 has lost 19% of its value. Against gold and silver it has lost much more, over 80%.

Today the Dow lost 48.81 (0.4%) to close 12,422.21. S&P500 lost 6.4 (0.5%), ending at 1,289.10. For the week, the Dow tried to penetrate doubled resistance at 12,600 from the long narrow triangle it fell out of last August, failed even to beat 12,500, and has rolled over almost off the bed. Next move will be an Edgar Rice Burroughs special, headed toward The Earth's Core. Will look like a mole with a motor.

(Yesterday I wrote that the Dow had fallen out of a "long narrow equilateral" triangle. One puzzled reader wrote to ask me how a triangle could be both long and narrow AND equilateral. I wore out three try-squares trying to figure a way, but couldn't. So scratch the "equilateral." The triangle was just long and narrow, period.)

Today the US dollar gained a massive 76.1 basis points (0.98%) to close 81.531, while the euro lost 1.11% to close at a new low for the move, 1.2675. What happened?

When talks on cutting Greece's debt looked close to collapsing, the S&P rating agency downgraded government debt of France, Austria, Italy, and Spain by a notch each. From AAA France and Austria fell to AA+, Italy was lowered to BBB+ and Spain twitched from AA- to A. That spooked investors out of euros and into dollars, which may be likened to hiding from a lion in a bear's den.

Folks may pretend that Greece, with less than 2% of the Eurozone's GDP, raises no waves when its boat sinks. However, they can't pretend that France doesn't matter, since portfolios all over Europe are stuffed with France government debt which today became worth much less than yesterday.

The pretence of debt and fiat money is melting like a wax mask too near the fire. What can any investor count on any longer, when what was supposed to be the lowest risk investment -- government debt -- suddenly devalues overnight, or may even be wholesale devalued in banking deals out of control of investors or citizens?

Under these circumstances, I remember those great sentiments of Omar Khayyam, "Ahhh! Take the cash, and let the credit go, nor heed the rumble of a distant drum." You'd better get value in your own hands and in real things, because all the abstracts and illusions are leaving the planet for money heaven.

Argentum et aurum comparenda sunt -- -- Gold and silver must be bought.

- Franklin Sanders, The Moneychanger

© 2012, 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.