Wednesday, May 28, 2014

Gold Price Acts Like a Market that Has Run Out of Downside Momentum

28-May-14PriceChange% Change
Gold Price, $/oz1,259.30-6.20-0.49%
Silver Price, $/oz19.040.000.02%
Gold/Silver Ratio66.157-0.340-0.51%
Silver/Gold Ratio0.01510.00010.51%
Platinum Price1,465.100.400.03%
Palladium Price830.659.201.12%
S&P 5001,909.78-2.13-0.11%
Dow in GOLD $s268.110.620.23%
Dow in GOLD oz12.970.030.23%
Dow in SILVER oz858.06-2.40-0.28%
US Dollar Index80.600.180.22%

The GOLD PRICE chiseled off $6.20 (0.5%) to $1,259.30. Silver lost 4/10 of one cent to 1903.5c.

The SILVER PRICE ranged a huge 19 cents today, from 1897c to 1916c, then closed 4/10 cent higher? Dead. No new sellers coming in. That argues it won't go lower, or not by much. Then there's that falling GOLD/SILVER RATIO, down from 66.624 on 23 May to 66.157 today. (By the way, don't let me forget to remind y'all to swap gold for silver. That high ratio will not last forever.) Volume dropped today too, right sharp.

Y'all think about the GOLD PRICE a minute. Since last June's low it has traded in a range from $1,180 to $1,434, more narrowly $1,180 - $1,360. It double bottomed in December, and has spent most of the last year above $1,250. There's no big change here, and it acts like a market that has run out of downside momentum.

Wouldn't everyone be amazed if silver turned around and blasted through 1950c in a day or two? Watch for it. As long as silver doesn't fall through 1868c, it's possible.

Sometimes I don't keep my mind on what I'm doing and so overlook things. I read an article today by James Turk pointing out that yesterday was options expiration date for Comex options and Thursday expiration for OTC options.

The 20 watt bulb in my dim brain flickered to life. Of course. If the black-shirts on the Comex floor can run silver and gold prices down, they'll have to pay off on futures options. This happens monthly -- how could I have forgotten? You don't have to postulate a global government/bank conspiracy for this one, just the same old thieves running things answers nicely. It's a variant of another game floor traders play called "run the stops" where they run the price down or up enough to hit the nested stops, then run the price back the other way to clear their position.

If the options expiration scam was the force operating in yesterday's decline, then it was meaningless even to the short term trend. You'll know after Thursday. Market ought to come back Friday if that analysis is valid.

For the nonce, at least, stocks have yet again disappointed. Too early to say for sure, thought. Dow fell back 42.32 (0.25%) to 16,633.18. S&P500 did not make another new high, yea, fell back 2.13 (0.11%) to 1,909.78.

Friends, I may look silly, but it's nigh impossible to parse a topping market. S&P500 might shoot up to 2000, or it might crumple here. Either way it's riding on dandelion fluff and moonbeams.

A close above the last high at 16,715.44 is needed to take the Dow higher, and I don't mean two points above that, I mean 2% or above 17,050. That would clearly state stocks are moving higher.

Dow in gold barely moved today, up 0.13% from 13.20 oz yesterday to 13.22 oz (G$273.28 gold dollars), but it clean broke out of that flat topped triangle yesterday. Here's a chart, Dow in silver nicked down, 0.1% to 874.74 oz (S$1,130.98 silver dollars). Here's the chart,

In the currency markets everybody is betting the ECB will soon "ease," or, in plain English, crank up the presses and create a tanker load of new money. This sent the Euro down again today 0.3% to $1.3594 even though the 10 year US treasury note yield dropped 3.18% today. Since currency exchange rates are largely determined by interest rate differentials (yes, and inflation expectations) the dollar ought to have weakened against the euro. Instead, it rose 18 basis points (0.22%) to 80.60. Y'all ought also bear in mind that just as a rising market attracts buyers, so a falling market attracts sellers, as rotten meat draws flies. Thus the euro's fall is feeding on itself and the news (that really is no news), and today fell past another milestone, the 200 day moving average ($1.3630). Probably several months more of falling euro lies before us.

Yen doesn't know sic 'em from come here. Touched its 200 DMA above but fell away and now is vibrating around its 20 DMA.

Aurum et argentum 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.