Friday, March 16, 2012

The Gold Price is Trapped Between $1,640 and $1,665 One Way or Another this will Break Next Week

Gold Price Close Today : 1,655.50
Gold Price Close 9-Mar : 1,710.90
Change : -55.40 or -3.2%

Silver Price Close Today : 3257.3
Silver Price Close 9-Mar : 3417.5
Change : -160.20 or -4.7%

Gold Silver Ratio Today : 50.824
Gold Silver Ratio 9-Mar : 50.063
Change : 0.76 or 1.5%

Silver Gold Ratio : 0.01968
Silver Gold Ratio 9-Mar : 0.01997
Change : -0.00030 or -1.5%

Dow in Gold Dollars : $ 165.23
Dow in Gold Dollars 9-Mar : $ 156.13
Change : $ 9.10 or 5.8%

Dow in Gold Ounces : 7.993
Dow in Gold Ounces 9-Mar : 7.553
Change : 0.44 or 5.8%

Dow in Silver Ounces : 406.24
Dow in Silver Ounces 9-Mar : 378.11
Change : 28.13 or 7.4%

Dow Industrial : 13,232.55
Dow Industrial 9-Mar : 12,922.02
Change : 310.53 or 2.4%

S&P 500 : 1,404.16
S&P 500 9-Mar : 1,370.87
Change : 33.29 or 2.4%

US Dollar Index : 79.801
US Dollar Index 9-Mar : 80.003
Change : -0.202 or -0.3%

Platinum Price Close Today : 1,672.70
Platinum Price Close 9-Mar : 1,689.25
Change : -16.55 or -1.0%

Palladium Price Close Today : 697.80
Palladium Price Close 9-Mar : 711.25
Change : -13.45 or -1.9%

The more I pore over the silver and
GOLD PRICE charts, daily and weekly, the louder those upside down head and shoulders formations shout. I'd say that within a month, maybe a little longer, they will be completed and ready to break out over the neckline.

Meantime, we suffer.

The GOLD PRICE shuffled down $3.60 to $1,655.50. Now that doesn't look like much of a performance, but the sellers attacked about the time New York opened and drove gold clean down to $1,640. But gold climbed right back to $1,664.70, leaving a clean V-reversal behind. Problem remains that gold did not exceed yesterday's high at $1,665.60 and indeed gave a little ground.

Thus $1,640 shapes up as strong support, but $1,665 as tough resistance, and like that little steel sphere in a pinball machine, gold seems trapped. One way or the other this will break next week.

The SILVER PRICE gave back a miserly 12 cents today to a 3257.3c close. Silver was attacked by sellers today, too, and fought them off but also failed to advance above yesterday's highs. Like a man trying to climb a cliff, I am watching 3150c support below, and 3300c resistance above.

'Twas a tough week for silver and gold, but a good week for stocks and a flat week for the US Dollar. And it's got me scratching my head. The one thing you have to keep on doing constantly is to keep questioning your own presuppositions. Is the chart changing primary trend, or pulling your leg? Stop asking that and the market will one day behead you.

Stocks finally broke through 13,000 this week, and shot 2.4% higher. Stock indices spake with the Voice of Babel today, most lower but the S&P500 higher. Dow shaved off 20.12 (0.15%) to stop at 13,232.55. S&P500 won a psychological victory this week by crossing above 1,400, and rose today 1.56 (0.11%) to 1,404.16.

What has me scratching my head is not lice (I hope), but the Dow in Gold Dollars, my most reliable indicator. It has been headed down since August 1999 at about G$940.50 and today stands at G$165.28 (7.993 oz). This takes the DiG$ out above the current downtrend line. Normally when the DiG$ bumps its forehead against a downtrend line or even slightly crosses it, it foretells a big drop in stock coming against gold. In other words, that bump into the downtrend line marks the spot where stocks have spent all their strength against gold -- generally.

Yet the DiG$ rose a little higher. Could mean two things, either that the DiG$ may make a foray up to its 200 day moving average, which has happened before and would change no primary trend, or that the primary trend has changed. That would change everything, since the primary trend we have been riding is "Gold and Silver up, Stocks and Dollar down."

I resist the latter conclusion, even while I look it in the eye, because no upside blow-off has yet overtaken metals. At the end of every bull market in every investment, a blow-off occurs. So this may be a painful time when stocks outperform gold, even send the DiG$ to the 200 DMA, but there's no hard evidence the primary trend has turned.

Yes, I am not unaware that multitudinous croakers from Wall Street are singing like spring peepers that gold and silver have passed their peak, and that the US economy is on its way to recovery. The first is wrong, the second is the triumph of hope over reason.

Meantime, we hold our silver and gold and stick with a strategy that has brought success since 2001 and that has not yet been gainsaid by events. Tried, but not gainsaid.

US dollar index dipped lower today than I expected, and reached the lower limit of believability. Dollar closed down 0.45% to 79.80 after a 79.68 low. Either the dollar turns around here, or the Nice Government Men mean to send it down again for a while, and let the other Potemkin currencies rise.

The euro and yen both rose today, but let's address them one by disgusting one. I say "disgusting" because any morally and rationally fastidious mind must recoil in pain and horror at the monetary set up we use every day without the least shiver or tremor of nausea. If a man from Mars should arrive, I don't want the job of explaining the monetary system to him. He would just look at you in disbelief and disgust, spin on his eight heels, climb back into his flying soupbowl and spin away to some saner planet, shaking both heads.

But I digress. Euro today rose 0.67% to $1.3168. That has the look of a turnaround upward on the 5 day chart, but to make good on that threat, the Euro must close above 1.3200. Euro appears a bit more equivocal on a longer chart, but has in the last 6 days smashed into its critical moving averages -- 50 and 62 day -- and turned up. However, above remains the 20 DMA at 1.3227 and a little gap. Euro may be doing no more than filling that gap before it resumes its earthward trajectory.

The yen, having made the huge downward adjustment the Nice Government Men wanted, today posted the first half of a Key Reversal. Specifically, it hit a new low for the move yet closed higher on the day. It will complete the Key Reversal if it closes higher on Monday. Remember, however, that if it fails to close higher it will negate the Key Reversal. Close was 120.01c/Y100, up 0.18%.

There you go again, Moneychanger, filled with suspicion of the Nice Government men whose only intention is to do good. Why do you look at that nice Round 120 Number and say automatically, "Central Bank Target determined over rubber chicken at the monthly BIS meeting in Basel"? I am so ashamed of myself.

Y'all enjoy your weekend!

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.