Wednesday, March 26, 2014

The Gold Price Has Corrected, Time To Buy

Gold Price Close Today : 1303.40
Change : -8.02 or -0.61%

Silver Price Close Today : 19.759
Change : -0.196 or -0.98%

Gold Silver Ratio Today : 65.965
Change : 0.246 or 0.37%

Silver Gold Ratio Today : 0.01516
Change : -0.000057 or -0.37%

Platinum Price Close Today : 1406.50
Change : -14.40 or -1.01%

Palladium Price Close Today : 781.15
Change : -8.25 or -1.05%

S&P 500 : 1,852.56
Change : -13.06 or -0.70%

Dow In GOLD$ : $258.02
Change : $ 0.02 or 0.01%

Dow in GOLD oz : 12.482
Change : 0.001 or 0.01%

Dow in SILVER oz : 823.37
Change : 3.13 or 0.38%

Dow Industrial : 16,268.99
Change : -98.89 or -0.60%

US Dollar Index : 80.110
Change : 0.030 or 0.04%

Today the GOLD PRICE fell $8.02 (0.6%) to close Comex at $1,303.40. Silver fell 19.6 cents (1%) to 1975.9 cents.

Today's action pretty well fulfills my targets for the correction, i.e., $1,300 and 1950c. Lows came at $1,299.30 and 1968c. Y'all can stand around waiting for perfection, but I'm not. Both metals fell off about noon, but without any more drama than a short waterfall. Little V-bottoms near day's end might mark the lows. Believe it or not I had a customer today who bought 60 cents off the day's lows. Good shooting!

What's the downside risk? With the GOLD PRICE, possible drop to $1,287. the SILVER PRICE could -- but might not, drop as far as 1950 - 1945c. Not much from here, unless some surprise ariseth.

Time to buy silver and gold.

A reader wrote asking, "Many people are predicting a depression which will take down the price of almost everything. You feel that real estate and other tangible assets will also depreciate. Why don't you feel that precious metals and other commodities won't also take a big hit?"

Because silver and gold are not commodities. Silver and gold prices are driven by MONETARY not economic demand as commodities are (copper, lumber, tin). They rise when inflation is eating out the dollar's value. So regardless of economic conditions, inflation will drive silver and gold higher, because people seeing their dollars lose value will seek refuge in silver and gold. Everything of value will NOT tank in the future, only those items whose value depends on economic demand, and that doesn't include silver and gold.

It doesn’t overstate much to say we are already in a depression, and that will over time lower most assets' value. However, the Fed and yankee government have shown that they will respond to every crisis by printing more money, so an inflationary depression will result. The underlying economic condition will be a depression (shrinking economic activity) while the monetary condition will be inflation resulting in rising prices. Although asset prices may rise, they will in fact be losing value or purchasing power, unless they rise faster than the dollar falls.

Purchasing power is all that counts. You can see this in the Dow yesterday at 16,367.88, which appears much higher than its 2000 peak at 11,722. However, corrected for inflation (even using the government's understated and jimmied numbers), that 11,722 in 2000 equals only 15,982 today. Turn that around: 2014's 16,367.88 would equal only 12,005 in 2000. The Dow has not gained (16,367.88/11,722 = 40%, but 12,005/11,722 = 2.4% in purchasing power. Adjusted for real inflation loss, the Dow is lower now than it was in 2000.

If I could teach y'all just one thing, it would be FORGET NOMINAL GAINS and LOOK ONLY AT PURCHASING POWER GAIN OR LOSS.

Y'all remember this, too: inflation does not stimulate the economy, any more than illegal counterfeiting would. Inflation always creates booms that go bust, and disrupts the economy in thousands of other ways. Inflation benefits only those near the source of the inflation, i.e., Wall Street, and the bureaucrats and politicians who produce inflation while it robs all others.

Now that I've hawked that bone out of my throat, let's look at markets.

Stocks see-sawed back the other way today, losing more than they gained yesterday. Dow got near its upper downtrend line and looked like Dracula smelling garlic -- wilted. S&P500 bounced from top of its even-sided triangle to the bottom, and closed there for good measure. Dow lost 98.89 (0.6%) and closed 16,268.99. S&P500 coughed up 13.06 (0.7%) to roost at 1,852.56. Both of them perched below their 20 day moving averages. I have no opinion, triangles can surprise, but all this carries with it the scent of weakness.

Silver is supposed to be strong relative to gold when stocks are strong and vice versa, but it hasn't been following that script lately. Dow in gold dropped slightly today, down 0.15% to 12.46 oz (G$257.57 gold dollars). It stands barely above the 50 DMA (12.39 oz or G$256.12), which might be a splendid place to turn down. But no indication of that yet. I'm anticipating.

Dow in silver rose 0.63% to 824.37 oz (S$1,065.85 silver dollars). Unless stocks break down soon, it's liable to return to that December high at 853.1 oz. It has already fulfilled a 75% correction of the Dec - Feb drop.

Last five days the US dollar index has established a downtrend with lower lows and lower highs. Now it's sort of bunching up, with a small range today, 80.29 - 80.06. Rose a less-than-gigantic three basis points today to 80.11. This sort of "stability" smacks of the strong hand of Nice Government Men.

Euro back appears to have been broken. Closed again today beneath its 20 DMA, and lost another 0.3% to end at $1.3785. This comes after a breakout it could not cash in on. Yen rose 0.24% but that is sound and fury, signifying nothing, even with a close at 98.01 cents/Y100. Gold in euros and in British pounds looks like a buy here.

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

- Franklin Sanders, The Moneychanger

© 2014, 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 or 18 ounces of silver. or 18 ounces of silver. US $ and 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.