Tuesday, February 19, 2013

The Gold Price Lost $5.20 How Far Will it Fall?

Gold Price Close Today : 1603.60
Change : -5.20 or -0.32%

Silver Price Close Today : 29.413
Change : -0.426 or -1.43%

Gold Silver Ratio Today : 54.520
Change : 0.604 or 1.12%

Silver Gold Ratio Today : 0.01834
Change : -0.000206 or -1.11%

Platinum Price Close Today : 1696.40
Change : 19.80 or 1.18%

Palladium Price Close Today : 763.75
Change : 11.00 or 1.46%

S&P 500 : 1,530.94
Change : 11.15 or 0.73%

Dow In GOLD$ : $180.93
Change : $ 7.50 or 4.32%

Dow in GOLD oz : 8.753
Change : 0.363 or 4.32%

Dow in SILVER oz : 477.19
Change : 8.62 or 1.84%

Dow Industrial : 14,035.67
Change : 53.91 or 0.39%

US Dollar Index : 80.36
Change : -0.157 or -0.19%

The GOLD PRICE gave back $5.30 off Friday's close to end at $1,603.60. Silver lost 42.6 cents today to end at 2941.3c. Okay, Moneychanger, explain why that DOESN'T mean silver and gold are broken.

Lacking a crystal ball, I don't know whether they are broken or not, but I can list the votes for and against and you can weigh them and tote them up yourself.

On a five day chart the GOLD PRICE put in bottoms just above $1,600 on Friday and today. Is that a double bottom marking the end of the decline? Beats me, but there it sits, hollering, and if gold rises from here and doesn't later fall below that level, y'all will look back and say, "Why, shucks, that WAS a double bottom after all."

Gold's low today came at $1,601.61, but it couldn't climb higher than $1,614.47. It's late for me as I write this (nearly 9:00 p.m. against my usual 5:30 p.m.) and the aftermarket has climbed up to Friday's close, $1,603.70.

On a four month chart gold has fallen to the downtrend line from the August 2011 high, which ought to, and better, offer support. More: in the last two days it has traded outside the bottom Bollinger Band. That measures variability, and to punch through that bottom line implies GOLD is very much oversold and due an immediate rebound. Seldom happens that a market breaks that bottom line and continues to fall without a rebound In gold's case, over the last 2-1/2 years it has never pierced the bottom B-band and kept on falling. Rather, it has always rebounded at least a little, most of the time a lot. Only once has it kept on skidding along the bottom line for several weeks.

Gold's waterfall over the last week also brings it to that downtrend line from the 2011 high. After the August breakout through and above that line to $1,800, that completes a correction back to the line for a final kiss good-bye, often seen in breakouts.

Could the GOLD PRICE still drop to $1,525 and shake out all the weak holders, and scare the rest of us to death? Yep, but not without first breaking this $1,600 level. In any event, gut-wrenching and stomach-churning as it is, here is exactly the sort of place where you have to screw up your courage and buy. May prove the wrong move, but if it's right, 'twill be spectacularly right.

Unlike gold silver made a lower low than Friday, falling to 2929c today. After a fast waterfall about 10:30 that low came about 1:15. Rest of the day silver held steady and now is at 2961c.

The SILVER PRICE has reached not its downtrend line from the April 2011 high, but has just about matched its 4 January 2013 low at 2924c. And it has punched through the bottom B-band two days running, a bullish sign. (By the way, those Bollinger bands work just the same in reverse at tops.)

Does any cosmic law state that silver won't return to the 2615c bottoms of last year? Nope.

Worst feature on both silver and gold charts is that both have broken the uptrend line from the May/June lows. A spike through the line is permissible, lingering is not. Both will have to pick up sharply and close above $1,630 and 3100 cents very soon, or drop further.

Nerve wracking as these long corrections may be, they don't gainsay the primary uptrend in silver and gold. What drives that? Central bank inflation. This past weekend the central banks just confirmed again, in case you have been deaf, dumb, blind, and locked in the basement since 2006, that they will continue to inflate. Cause remains, effect will continue.

As I suspected, the G20 meeting issued a verbose statement bleached of all meaning. However, a lot was written between the lines. Whenever they say, "We will refrain from competitive devaluation," it means that behind the scenes there's an eye-gouging, ear-biting, nose-slitting bar-fight behind the scenes over that very thing. What hypocrisy! Every single central bank is depreciating its currency as fast as possible, they simply don't want any other country to leave them behind. "We're all depreciating, but we must depreciate in step." As I suspected, the silver and gold bull market is safe because once again central banks and governments have affirmed that they will continue to supply the one force that drives silver and gold up: inflation.

Why, you may ask, if all that's true, did silver and gold drop today? One mistake people make is to assume that causes have their outworking in markets immediately. Markets are pushed around by fads like any other human undertaking, but sooner or later causes will have effects.

The Japanese escaped the G20 meeting without the whipping they deserved if the G20 really were enforcing a ban on competitive devaluation ("currency war"). Yen may finally have stopped falling after a 105.86c intraday low six days ago. It has gently curved up, and closed today at 106.87c/Y100, but hasn't flashed the first sign of a reversal by crossing above its 20 DMA (108.6).

US Dollar index benefitted not at all from the G20 summit. Trading now at 80.357, about where it ended last Thursday. However, dollar index stands above its 20 and 50 DMAs, and has established a clear if sluggish uptrend. Well, call it a short term uptrend in its crablike range. Needs to climb above 80.90 even to merit suspicion of a rally, and above 81.50 to confirm it.

The euro meanwhile remains in what is either a correction or broken uptrend. Closed today up 0.19% at $1.3387, but won't prove a trend change until it closes below $1.3150 or above $1.3711.

US$1=Y93.57=E0.7470+0.033999 oz Ag=0.000624 oz Au.

Stocks ground out another little rise today. Dow added 53.91 to close above 14,000 at 14,035.67 (up 0.39%0. S&P500 ground side by side, up 11.15 (0.73%) to 1,530.94. Trend remains up.

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

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

© 2013, 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.