Tuesday, May 01, 2012

The Silver and Gold Price Continue to Confuse Both Must Climb from here to Make Good Their Escape

Gold Price Close Today : 1661.70
Change : (1.70) or -0.10%

Silver Price Close Today : 3087.70
Change : 8.2 cents or -0.26%

Gold Silver Ratio Today : 53.817
Change : 0.088 or 0.16%

Silver Gold Ratio Today : 0.01858
Change : -0.000030 or -0.16%

Platinum Price Close Today : 1570.90
Change : 6.60 or 0.42%

Palladium Price Close Today : 679.65
Change : -2.05 or -0.30%

S&P 500 : 1,405.82
Change : 7.91 or 0.57%

Dow In GOLD$ : $165.20
Change : $ 1.00 or 0.61%

Dow in GOLD oz : 7.991
Change : 0.048 or 0.61%

Dow in SILVER oz : 430.07
Change : 3.26 or 0.76%

Dow Industrial : 13,279.32
Change : 65.69 or 0.50%

US Dollar Index : 78.84
Change : 0.034 or 0.04%

The SILVER and GOLD PRICE continue to confuse and bewilder their supporters. Gold did challenge $1,670 today -- on a spike -- but fell back just as quickly to bump along $1,660 support. Closed Comex at $1,661.70, down $1.70. It's stalling, and in this world you either go forward or backward, but you can't stall. Move that thing!

The SILVER PRICE lost a tiny 8.2c to close at 3087.7. Chart looks like an EKG, just moving right across the paper. Silver is range bound by 3060c beneath and 3140c above. Nothing happens till it breaks one of those lines.

As to those falling wedges the silver and GOLD PRICE have traced out, there's no change. Gold remains above the upper boundary line of its wedge, as does silver, but both must climb from here to make good their escape.

The market was kind to stock investors today. The Dow made a 4 year intraday high, 13,338.66, but backed off that to close 13,279 (up 65.69 or 0.5%). That barely bested, but bested still, the previous high at 13,264.49 on 2 April 2012. (Odd, just exactly a month later?) S&P500 did not make a new high, offering a mild divergence. S&P 500 rose 7.91 (0.57%) to 1,405.82.

Assuming that the Dow can advance tomorrow, that will prove the head and shoulders we have been watching is a consolidation pattern and not a topping formation. As long as this continues and doesn't fizzle in the next few days, that sets the Dow on track to challenge the October (14,164.53).

No, I still would not buy stocks, but today does illustrate a well known principle of human behavior: people buy a rising market. I suppose that's one strong driver of bull markets, that so few people are willing to buy when the price is flat, and after a long decline. Then as the market begins gaining, only a few more will hop on. Ahh, but when the big rises come, you have to beat the buyers away with a stick. That's how you know a top is near.

And of course frenzied stocks and plentiful headlines suck investor dollars away from silver and gold.

Therefore it will do little good if any for me to point out to y'all that stocks are at the end of a long rise and face every fundamental economic headwind, while silver and gold have spent 12 and 7 months respectively correcting. People like the pizzazz and razzle-dazzle of rising markets, and never mind the fundamentals. That's what drives bubbles. Ask any former real estate agents.

CURRENCIES did very little today. Appears on the 5 day chart that the US Dollar Index double bottomed yesterday and today, then bounced up off that bottom for a 78.97 high. At the end of the day, though, it's all smoke and dust, 'cause the dollar gained only 3.4 basis points to wind up at 78.835. Euro played the mirror image of the dollar, breaking at mid-day from a high, closing up 0.02% to $1.3243. These moves are becoming too small to measure. Yen backed off 0.49% today to 124.73c (Y80.17/US$1), but is in a roaring uptrend.

I received two good questions from a reader: "At what point do you think the declining silver American Eagle sales will affect the price of silver? Doesn't that along with the climbing silver stocks in Comex depositories show a bearish sign?"

No, declining silver AE sales is an EFFECT, not a cause. Sales are declining because silver has been correcting, and therefore losing investor attention, since April 2011. Just as the US Mint minting silver Eagles does not CAUSE the public to buy them, so declining sales does not cause silver to drop.

I pay no attention whatever to silver stocks or to physical supply/demand (commodity) analysis for silver, because all that is immaterial to this bull market and does not drive it. Monetary demand alone is driving this bull market. Warehouse stocks and increased scrap reclamation don't change that at all.

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

- Franklin Sanders, The Moneychanger
10:00am-5:00pm CST, Monday-Friday

© 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. No, I don't.