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Wednesday, April 03, 2013

The Gold Price was Slapped Badly Today Swap Gold for Silver

Gold Price Close Today : 1552.80
Change : -22.30 or -1.42%

Silver Price Close Today : 26.773
Change : -0.444 or -1.63%

Gold Silver Ratio Today : 57.999
Change : 0.127 or 0.22%

Silver Gold Ratio Today : 0.01724
Change : -0.000038 or -0.22%

Platinum Price Close Today : 1539.80
Change : -32.00 or -2.04%

Palladium Price Close Today : 754.30
Change : -13.95 or -1.82%

S&P 500 : 1,553.69
Change : -16.56 or -1.05%

Dow In GOLD$ : $193.70
Change : $ 7.50 or 4.03%

Dow in GOLD oz : 9.370
Change : 0.363 or 4.03%

Dow in SILVER oz : 543.47
Change : 4.76 or 0.88%

Dow Industrial : 14,550.35
Change : -111.66 or -0.76%

US Dollar Index : 82.73
Change : -0.152 or -0.18%

The silver and GOLD PRICE were slapped badly again today. Gold lost $22.30 (1.4%) to close Comex at $1,552.80. Silver gave up 44.4 cents (1.6%) and ended at 2677.3c.

Today's fall takes the GOLD PRICE back to the downtrend line from its August 2011 peak. This kissing back to a trend line is common behavior for markets, so today's low is a likely candidate for this fall to stop. If it doesn't stop there, then the last low at $1,526.70 is the next target. Volume is rising, so more downside is likely.

Buy gold. Bottom can come anywhere in the $1,530 - $1,560 range.

If it is turning around, it will prove its intention by closing higher than $1,580.

See a gold chart at GOLD PRICE

Silver had been trading in a channel paralleling the downtrend line form the 4/2011 high, but higher. Today it broke the bottom of that channel. Low came at 2672 cents, and it closed not far above that. Today it's oversold-er than yesterday. Chart's at SILVER PRICE

Price extremes in gold and silver -- highs or lows -- often (I want to say "usually") coincide with highs in the metals themselves, or within a few days. Last cycle was an exception, when the ratio bottomed at 32:1 the day silver hit its high at end-April 2011, but gold, driven by the European crisis, kept on rising into the end of August. However, the ratio warned us clearly that the rally that had begun in fall 2008 was near its end.

The ratio flashes a similar warning at gold and silver lows. That's where it often peaks. Problem with that is, has the Ratio topped? Can't say that yet, because it still needs to confirm by reversing -- that means silver strength against gold. Watch for it.

If you sit and watch a market for two years hit the same support around at 2650c and don't buy when it approaches that support again, why in the world do you keep watching it?

Possible that Stocks topped today for this move, but silver and gold have not yet inarguably proved a bottom. GOLD/SILVER RATIO appears to be topping. US dollar probably has more strength in front of it, but only because the alternatives are so nauseating.

Yesterday I recommended swapping from gold to silver. Today the ratio closed at 58:1 (58 oz. of silver buys one ounce of gold) and acts like it doesn't want to go higher. Even if it does, 60:1 ought to stop it cold, and that's only 3.4% above us. Remember, "Bulls get rich, and bears get rich, but pigs get slaughtered."

I expect the next big move in the ratio will carry it down to 30:1 (thirty ounces of silver buys one ounce of gold). Here's how that trade might look, accounting for some transaction costs.

You swap one ounce of gold today for 55 oz of silver. When the ratio drops to 30:1, you swap silver for gold but only realize a ratio of 32:1.

When you swap your silver back into gold, you get 1.7188 oz of gold (55/32), which by my reckoning is 72% more gold than you began with.

This is the only way I know to take a sterile investment that throws off no dividends or interest (silver and gold) and, while you are waiting for the price to rise, to increase the number of ounces you hold without adding any more capital (except shipping).

These ratio trades do not linger at tops and bottoms, so better act soon.

View the ratio chart at GOLD/SILVER RATIO

How could that ratio trade go wrong? You might swap at 58:1 and watch it go to 84:1. Nothing is risk-free.

I keep getting emails from folks concerned that government(s) are "controlling" all markets. Sure they manipulate markets, but here's why they cannot control them, i.e., drive them permanently up or down when the primary trends runs the other way.

Even creating money out of thin air, they never dare to print so much that they can buy everything. Thus they are constrained to manipulate markets "at the margin." It's like turning the cow on the edge when you want to turn the herd. No way you can force 50 cows to go your way, but the closer you get to that cow at the margin, the more she'll turn in on the other cows, and move them where you will.

So governments manipulate at the margins, and in the most vulnerable and volatile markets. So if they want to force gold down, they hit silver hard. If they want to drive stocks up, they buy S&P500 futures, and let the arbitrageurs see the futures rising while the index itself (the underlying stocks) is flat so they will begin buying the stocks and drive the index up.

But what do I know? I'm only a natural born fool from Tennessee, and them Washington and New York fellers would never tell me what they're doing. But that's how I would do it.

Don't miss the point: whenever the herd turns on the manipulators, it will run clean over them and leave 'em stomped in the mud.

Stocks today did something that looks an awful lot like a key reversal. After breaking into new high territory yesterday, they closed lower today. S&P500 was hit much harder today, down 1.05$ (16.56) to 1,553.69. That closed it below its 20 day moving average (1,555.97). Dow Industrials lost only 0.76% (111.66 points) to close 14,550.35, just above the 20 DMA (14,483.96).

To confirm a reversal both indices should close tolerably lower tomorrow. In both cases the faster moving average of the MACD is below the slower which points momentum down.

US dollar broke 0.2% (15.2 basis points) to 82.729. Dollar gets real carsick around 83, and slows down. At $1.2849 (up 0.24%) the euro remains below its 200 DMA, not a sign to encourage anybody. Yen gained 0.38% today to 107.46 cents/Y100, and closed higher than its 50 dma (107.13).

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

- Franklin Sanders, The Moneychanger
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© 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.