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Monday, September 17, 2012

The Long Gold Price Correction Lies in the Past Buy if Metals Break Above $1,825 and $37.50

Gold Price Close Today : 1767.70
Change : (2.10) or -0.12%

Silver Price Close Today : 34.298
Change : (0.305) or -0.88%

Gold Silver Ratio Today : 51.539
Change : 0.394 or 0.77%

Silver Gold Ratio Today : 0.01940
Change : -0.000149 or -0.76%

Platinum Price Close Today : 1671.60
Change : 10.80 or 0.65%

Palladium Price Close Today : 688.60
Change : 0.85 or 0.12%

S&P 500 : 1,461.19
Change : -4.58 or -0.31%

Dow In GOLD$ : $158.49
Change : $ (0.27) or -0.17%

Dow in GOLD oz : 7.667
Change : -0.013 or -0.17%

Dow in SILVER oz : 395.16
Change : 2.32 or 0.59%

Dow Industrial : 13,553.10
Change : -40.27 or -0.30%

US Dollar Index : 79.02
Change : 0.220 or 0.28%

The GOLD PRICE today fell $2.10 to $1,767.70. Silver gave up 30.5c to end at 3429.8c. Remember that my targets for these were $1,740 and 3445c. Having reached those goals, I would expect silver and gold to back off for a correction. However, if the GOLD PRICE shot substantially through $1,800 resistance, say, to $1,825 and above, I would stop waiting for a correction. If that correction comes, it could take gold to $1,640 and silver to 3000c. Markets will make clear this week their plans.

The GOLD PRICE peaked last September at an intraday high of $1,927 and went into a nearly year long correction. After thrice testing support at $1,525, gold began slowly climbing in May, forming an even-sided triangle (blue dashed lines). In August it broke out of that, kissed goodbye and dashed straight up from $1,616 to $1,773.50 (intraday high last week). Climbing that mountain gold crossed its 50, 150, and 200 day moving averages and left them far behind. Then it broke through the downtrend line from September 2011's high.

Ahh, but now the GOLD PRICE hits overhead resistance at $1,800, fierce resistance. That hints that gold will slip back for a final kiss good-bye to that downtrend line before it blasts moonward in earnest. This will NOT last long, and gold should be much higher by year end. I still expect to see gold cost more than $2,300 by next June.

But what do I know, a natural born fool from Tennessee? More'n any central banker, but that ain't saying much.

The SILVER PRICE topped in April 2011. Since then it has built a long declining triangle with a firm bottom at 2615c (thrice tested). Beginning in August silver rocketed through its 200 DMA and, more importantly, its 300 DMA (3248c). That 300 DMA acts as the most reliable gauge of silver recoveries; once it climbs above that, it's out of recovery mode.

To prove that, silver had to break out above the downtrend line from the April 2011 top.

But SILVER is now approaching an area from 3500c to 3750c loaded with hostility. Most likely it will take a break, touch its feet back to 3000c or so, and then take off skyward.

BOTTOM LINE: The long correction in silver and gold lies in the past. Buy if metals break above $1,825 and 3750c, or look sharply for a correction soon and buy that. Put everything you have into that wagon.

I'm rusty from vacation, but I've scoured the office and found my central banker stick, so I'm going to lay on with a will anyway.

Central banking criminals were busy while I was at the beach, but then, evil never sleeps. Both the ECB and the Fed announced the selfsame program: Bail Out The Banks.

European banks are gagging on rotten sovereign debt (bonds), so the Eurocrats are building a Garbage Can (the European Stability Mechanism or ESM) where they can compost all that bad debt when they buy it from the banks.

Germany, France, Italy, and Spain will kick in 77.3% of the 700 billion euro fund. Spain and Italy will contribute about 30% or 209 bn euros, more than Germany's 190 bn euros.

Wait, wait. Aren't Spain and Italy the countries who are so broke they can't sell their own debt without paying rates north of 6%? Right, but they will pitch in to beef up the fund that will bail them out.

What am I, a natural born fool from Tennessee, missing in this wondrous scheme of deep minds? Why, this sound to me like that famous Magic Tub that yankee peddlers used to try to sell in East Tennessee. They said all you had to do was climb in that tub, grab the handles, and pull yourself right up to the sky!

They didn't sell many of those tubs, and I ain't buying this ESM tub. When somebody tries to sell nonsense like this, it offers a measure of their contempt for the public. Fellow mushrooms, they believe we don't know "sic 'em" from "come here."

Bogus Ben surprised some by announcing he will buy up to $40 bn in mortgage backed securities (MBS) monthly until further notice, and until the unemployment figures make him feel warm and fuzzy. MBSs, y'all will no doubt recall, are the rotten securities that US banks are stuffed plumb full of.

Bottom line: both the ECB and the Fed have demonstrated beyond doubt or cavil that THEY WILL INFLATE. They will meet every crisis by INFLATING. They understand nothing, they learn nothing, they will INFLATE.

And since their inflation drives monetary demand for silver and gold, Bogus Ben and Super Mario are the best friends silver and gold have!

How much will inflation help? Well, just the SNIFF of coming inflation since 17 August has boosted silver from 2799.5 cents to 3471.6c (+24%) and gold from $1,616.30 to $1,769.10 (+9.4%) on 13 September.

Enough of this fun. Throw down that central banker stick and get to work. A picture is worth 1,000 words, so I'll give y'all below links to several charts and summarize what they show, and what's happened in the last week.

US DOLLAR INDEX, see http://tinyurl.com/9xggxvt From end-2010 the dollar index has been trading in an uptrending channel. Late in 2011 it climbed into the top half of that channel, and rose to 84. Since that July high, the dollar has fallen off a cliff, and in the past few days has fallen through the mid-line. That alone suggests the dollar will plunge all the way to the channel's bottom at 76.

Since central bankers manipulate currency exchange rates, what you see happening to the dollar, euro, and yen is happening because central banks want it. Oddly enough, the present rates leave the US dollar valued at around 77.5 yen and 77 euro/cents. The balance of those numbers suggests the buck may have reached the central bankers' target, but it might also get loose and plunge if panicky investors dump dollars on their own.

Ben the Bogus is trying to square the circle, on one hand promising to keep interest rates low, on the other hand promising to inflate more (whenever a central bank buys assets, it creates money.) Well, Ben, which is it? Cause I mean if'n you pump out that money then them interest rates are gonna rise, and if'n you want them rates low, you can't be buying composted bank assets.

Dollar index today closed 79.018, up 22 basis points

EURO, see http://tinyurl.com/8sydxul Today the euro closed at $1.3104, down 0.17%. The euro has finally broken out of its year long downtrend by climbing above its 200 dma (128.50) and above the downtrend line. Last Friday it gapped up over that line. Going higher, say, $1.3400. ESM will NOT fix this mess.

YEN fell 0.45% today to 127.01c (78.73). See http://tinyurl.com/9j4cs4p Since it topped with a megaphone or jaws of death formation in 2011, the yen has been dropping. After a February-March cascade from 131.52c to 118.93, it has worked its way back up. Yen is now challenging that downtrend line at 130. Chart suggests it will move higher, but how will the export-driven Japanese stand for that? They won't, not for long.

STOCKS, see http://tinyurl.com/8vtxea9 for the Dow Jones Industrial Average. The Dow last week bumped into overhead resistance stretching back to highs earlier this year. It might reach higher still, but the flag formation it broke out of suggests that it will rest awhile before it does that. S&P500 looks about the same. Dow closed today at 13,553.10, down 40.27 (0.30%). S&P500 lost 4.58 (0.31%) and ended at $1,461.19.

This will end in pain for stock owners, and here's why. This performance would make stocks look pretty zippy if you never looked at the Dow in Gold.

Eeeuuuw. That changes things. After a diamond top formation from January through August, the Dow in Gold fell like your standing with your mama-in-law when you show up for Thanksgiving dinner drunk as Cooter Brown. The Dow in Gold has fallen below its 200 DMA, resuming its bearish relation and leaving lots of air beneath it and the ground several miles below.

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

- Franklin Sanders, The Moneychanger
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© 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.