Monday, July 16, 2012

The Gold Price will not Drop to Lower Lows Physical Demand Too Strong

Gold Price Close Today : 1591.20
Change : -0.40 or -0.03%

Silver Price Close Today : 2729.70
Change : -4.7 or -0.17%

Gold Silver Ratio Today : 58.292
Change : 0.086 or 0.15%

Silver Gold Ratio Today : 0.01715
Change : -0.000025 or -0.15%

Platinum Price Close Today : 1414.80
Change : -17.70 or -1.24%

Palladium Price Close Today : 577.55
Change : -7.80 or -1.33%

S&P 500 : 1,353.64
Change : -3.14 or -0.23%

Dow In GOLD$ : $165.34
Change : $ (0.59) or -0.36%

Dow in GOLD oz : 7.998
Change : -0.029 or -0.36%

Dow in SILVER oz : 466.25
Change : -1.02 or -0.22%

Dow Industrial : 12,727.21
Change : -49.88 or -0.39%

US Dollar Index : 83.09
Change : -0.254 or -0.30%

The silver and GOLD PRICE are range bound at their slow, low season, so most trading we are witnessing amounts to no more than white noise, meaningless static, UNLESS they close outside that range. Bottom of that range for the SILVER PRICE is 2600c, top is 2800c; for the GOLD PRICE, $1,550 and $1,640. While you're waiting, it's a good idea to buy whenever they fall toward those bottom boundaries.

Today GOLD lost a meaningless 40c to close Comex at $1,591.20. Meaningless, except that a stall means something, too. Gold did close above its 20 DMA ($1,588.42) today and smack on its 50 DMA ($1,590.19). That rouses hope, but decides nothing.

Most likely Gold is headed for that triangle's top boundary line, today about $1,620, and may bounce off that for another round trip. Won't know till it gets there and shows us.

Pay attention here: I'm not blackening gold or its prospects, merely pointing out what "range-bound" means.

The SILVER PRICE eked out a 4.7c loss today to close 2729.7 cents. I'm encouraged that's above 2700c, and it's bumping up against the 20 DMA (2737c).

One more reason arguing silver and gold will not drop to lower lows is the high premiums on US 90% silver coin and on Krugerrands and American Eagles. These subtle but eloquent clues point to strong physical demand.

Y'all bridle your impatience. It's summer, and summer'll be over soon enough. Gold and silver are doing just fine, thank you very much, still in a bull market.

While markets are becalmed in the summer doldrums I'd like to re-visit some eternal verities. Well, not eternal, really, but rock-bottom, never-going-to-go-away, understand- this-first-or-understand-nothing verities of the fascist economic and political system we live under. (Don't y'all bother writing me a bunch of smoking emails about the word "fascist." I am using the word technically because it precisely describes a system of "government-business partnership" run by government for benefit of big business, a form of socialism. Look it up.)

First, stability above all. Central bankers and governments above all are trying to keep everything from exploding into panic and collapsing.

Second, they care not a hoot for the long run. Like the pseudo-economist Keynes said, "In the long run we're all dead." All they care about is keeping the system running until they get off at 5:00 p.m. Permanent reforms, economic justice, equal opportunity, debt relief, rule of law, all these are just labels to make the public drink the jugs of hogwash.

Third, not a single central banker, US or otherwise, wants to see the dollar gain or lose drastically against its own currency. When a currency rises against others, that raises the price of its exports and lowers internal economic activity. If a currency drops too fast, it might spark a panic out of the currency. Nope, they want those exchange rates steady within a tight band, and they do manipulate currency markets to keep them there.

Fourth, and most important for y'all to understand because it determines the future, massive debt and government deficit spending are not an accident, not an excess of the system, but as organic to it as blood to the human body. Therefore, though they may criticize borrowing and spending, they cannot stop it because they must INFLATE OR DIE. That is the system's nature, and that is why silver and gold offer such promise. They will keep inflating, and inflating drives silver and gold up.

Fifth, no market runs up or down forever. At some point silver and gold will peak and you must sell them. Speaking of that, the yield on US treasury debt is now about lower than it was in the Great Depression. That can't persist forever, although I can't foretell when it will turn. Probably not too long, and when that yield starts rising (and bonds start dropping), silver and gold will become the last safe haven standing, and profit accordingly.

Today the US Dollar Index, in danger of rallying away toward 90, was whacked on the head by an invisible hand holding an invisible ball peen hammer. Generally speaking, in today's world the invisible hand is always Nice Government Men acting in your benefit. What?! You don't want them acting in your benefit? You think it's to your detriment instead? Hoi polloi! Peasant! What do you know about really big stuff?

Whoops, got carried away. Anyhow, the Dollar index fell 0.33% or 25.4 basis points to 83.094. While 83 is the looming mile marker, that was a bad tumble technically, bouncing off the top boundary of a trading channel (kick 'em while they're down, is the NGM's motto), which suggests a fall to the bottom boundary about 79.50. Crossing the last low at 81.52 would put that target in gear.

Today's dollar weakness boosted the euro 0.22% to $1.2276. At least that gets it up off Friday's $1.2163 low, lowest prices since June 2010. NGM may slow, but will not stop, the euro's shrinking to $1.2000 or lower.

Proving the utter looneydom of currency markets, the yen today, scabbiest, most scrofulous, and weakest of all fiat currencies, mounted 0.4% to 126.83c/Y100 (Y78.85/US$1). That pokes its head above the 200 day moving average (126.74) and promises to rally to the downtrend line at 128. Go figure.

Stocks today never even crawled as high as unchanged. After Friday's 1.6%+ rises, indices rolled over today. Dow paid back 49.88 (0.4%) to 12,727.21 and the S&P500 coughed up 3.14 (0.23%) top 1,353.64.

From here the S&P500 could rally to 1,380 and Dow to 13,000 and the moves would mean nothing. At those levels the necklines of completed head and shoulders formations linger above, waiting to knock stock indices flat every time they draw near.

Let me make this clear about stocks. They represent a diverse cosmos of undertakings, and even when the economy languishes in depression, somebody will be making money. However, the indices average the performance of many stocks. As the economy prospers or sickens, those indices wax or wane. Those indices, along with the economy, entered a WANING phase in 2000, a primary downtrend, a long term bear market lasting 15 to 20 years. Therefore if you stick with the conventional diversification wisdom and buy broad mutual funds or index funds, you will lose your shirt, your belt, and your underwear. Either pick individual stocks in waxing industries (gold mining, for example, or oil exploration) or stay away from stocks altogether. And since most folks have neither patience, temperament, nor skill to pick individual stocks, best for most to stay away.

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.