Gold and Silver Finished a Correction and Began Rebounding This Week

This is one of those weeks that (at least) seem clear. Metals finished a correction & began rebounding, while stocks & the dollar fell again. SILVER finished the week well. On Wednesday it defended lows a second time, this time 1254 cents. Climbing over 1300 today showed strength, since significant resistance challenged silver from 1306 to 1310, and it closed at 1312.

It has now kissed the bottom line of the trading channel without breaking thorough. Above us lurks the 50 day moving average at 1329, where also resistance is nestled. Therefore a close over 1330 will send silver up to challenge 1380 and 1400. On the downside, silver must hold 1287.GOLD behaved much like silver this week. It kissed off the bottom of its channel and defended 636 for the second time. Today's close above 650 only makes me long for one above 667.Metals are still not altogether out of the woods and in the bright sunshine, but they are walking towards it.

The GOLD/SILVER RATIO closed down slightly this week, consistent with rallying metals.Want to give your ulcer some real trouble to chew on? The long term support in gold lies at 525 and in silver at 900 cents. Right -- they could fall to those levels without breaking below their bull market uptrend. I don't expect that, but it gives you an idea how mild the correction just passed really was.STOCKS spent 5 days climbing from 12,063 to 12,318, then gave all 242 points back in a single day. Right now 12,050 has proven to be support. It will probably be tested again next week, and might give. The absolute bottom line support that the Dow must hold is 11,200. Because stocks form such a huge market it takes them a while to roll over. There is probably yet another rally lurking in stocks, to test the last all-time high and post a firm double top. Get ye out while time abides.

The DOW IN GOLD DOLLARS shows quite plainly what happened this week: stocks yielded again to gold. The DiG$ is in a precarious position, and next to come should be a large drop. Swap stocks for silver & gold while you still can.

Evidently the US DOLLAR INDEX intends to knock again on the door of its lows, namely, the December low at 82.35. Today's close was the lowest yet, in a string of lower highs & lower lows, which, in Tennessee at least where we call a hog a hog and a dog a dog, is called a downtrend. The buck could drop as low as 80.50. Thereafter is a rally possible? We'll see, but we have a while to wait.Argentum et aurum comparenda sunt -- -- Gold and silver must be bought.

- Franklin Sanders, The Moneychanger"

Buy Silver and Gold Coins at the Best Prices

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 $1,250.00; silver's primary is up targeting 16:1 gold/silver ratio or $78.13; stocks' primary trend is down, targeting Dow under 2,900 and worth only one ounce of gold; US$ or US$-denominated assets, primary trend down; real estate in a bubble, primary trend way down.

Silver and Gold Look For Lower Prices Tomorrow

Seems pretty clear from today's trading & the lower prices in the aftermarket that SILVER and GOLD look for lower prices tomorrow. If the gold price doesn't stop at 643.60, the last low, then it will drop quickly to 636, or even to the 200 Day Moving Average (DMA) at 622.

The silver price has support at 1250 and the 200 DMA, 1226.Eeek! Eeek! Silver & gold are falling! So? Every market goes up and down, zigs & zags, advances & corrects. Nothing I have seen so far in this silver & gold price correction leads me to believe it is anything other than a normal correction.Also let me warn you that my "targets" are merely targets.

The market might hit those, and might not. You pick a price you can be satisfied with, & buy there. This week is your chance. Watch closely.Five days were needed for the Dow to climb from 12,063.63 to 12,318.62 -- rough the way & dark the night. But in one day alone the Dow lost 242.66 points and slid down to 12,075.96 today.

This level just above 12,000 is the breaking point. If the Nice Government Men on the Pluge Protection Team (Masters ooof theeeee Yoooo-ni-verse! Hear the super-hero music in the background?) cannot staunch the bleeding at 12,000 tomorrow, then it will rise up to the horse's bridles and wash through the streets. No matter today or tomorrow, the blood will flow. Swap stocks for silver & gold -- quickly.

The DOW IN GOLD DOLLARS has now twice failed to clear G$390 (18.87 oz) and resumed its downward flight today.

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

- Franklin Sanders, The Moneychanger

"Buy Silver and Gold Coins at the Best Prices"

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 $1,250.00; silver's primary is up targeting 16:1 gold/silver ratio or $78.13; stocks' primary trend is down, targeting Dow under 2,900 and worth only one ounce of gold; US$ or US$-denominated assets, primary trend down; real estate in a bubble, primary trend way down.

Gold Silver Trade Alerts -BUY / SELL alerts and video to keep you on the right side of the market!

Gold Price Close Below 636.7 Would Tug Gold Toward 625

The gold price did well this week, with a high close of 653. However, next week may bring the real beating. Low close for this correction so far has been 636.70. so watch that number. Any close below that would tug gold toward revisiting its 200 day moving average around 625. If, on the other hand, gold closes above 667, the danger of another fall would be past.

The silver price lagged gold this week, as evidenced by the rise in the GOLD/SILVER RATIO. Unless silver can climb above 1325 cents then it, too, will be a candidate for a ride to the 200 DMA, now about 1232 cents.

Long term nothing has changed for the metals. We are witnessing a correction, which is normal but unpredictable. That correction's appetite should be filled at the 200 DMA. Keep your eyes open for more buying opportunities. Bottoms in this bull market have tended to be very swift, v-shaped affairs.

The Nice Government men on the Plunge Protection Team had their work cut out for them to raise the Dow up off its bed of pain. They hit one good day, and then the down wilted the rest of the week, unable to get its leg over 12,300. Maybe next week. Outlook for stocks is a rally to near the high, then collapse without looking back. If the Dow drops below 11,200, then all bets are off and the free-fall has begun. Take this last opportunity to get out of stocks. The best plan would be to swap them for silver & gold, but even if you don't do anything better than selling stocks for US dollars (which is not a good plan), at least you won't sink with stocks.

The DOW IN GOLD DOLLARS is fiddling around the G$390 (18.87 oz)level where it fell off. It may reach through that to rally to more powerful resistance at G$400 (19.35 oz). Gold weakness next week might make that possible, but the trend is firmly down and the fall, once it starts, will be spectacular.

The US DOLLAR INDEX poked its head above 84 this week, & likely will climb to 84.5 before it completes its reaction. A close above that level would signal a possible rise to 87.5, but before anything like that happens I expect to see the buck lower once again.

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

- Franklin Sanders, The Moneychanger"

Buy Silver and Gold Coins at the Best Prices

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 $1,250.00; silver's primary is up targeting 16:1 gold/silver ratio or $78.13; stocks' primary trend is down, targeting Dow under 2,900 and worth only one ounce of gold; US$ or US$-denominated assets, primary trend down; real estate in a bubble, primary trend way down.

Money, Markets, and Metals

During gold’s recent rise the US dollar has remained strong, which implies gold’s rise shows not just dollar weakness, but gold strength. This aspect of gold’s action in the past two weeks ought to encourage gold investors, but we shouldn’t overlook the deeper meaning.

Dennis Wheeler writes a thoughtful newsletter, Gold Stock Report. I always enjoy reading it, but sometimes Dennis really hits a home run. This month (2/02) he reached back to something John Exter used to talk about, the upside-down debt pyramid. (In 1991 interviewed Mr. Exter, a former Federal Reserve vice president, head of New York Fed gold operations in the early 1950s, and former Citibank executive. Again in October 1998 I reprinted that interview. You will also find it posted on our website, and I strongly recommend that you read it now.)

Dennis dwelt on Mr. Exter’s point that the present financial system resembles an upside down pyramid, with increasingly risky instruments and debts piled higher and broader over a tiny point of gold. In an economic collapse, investors and money flee down the pyramid away from riskier and toward safer instruments, finally landing on cash and gold. This “flight to quality” materializes in every financial panic. Dennis Wheeler comments,
“[S]o investors move farther down the pyramid until they come to cash, which is where they are now. Interest rates have fallen dramatically, as the price of cash instruments --- 90-day T-bills – have soared. But these investments, even though they pay virtually nothing at present, are much safer than the dot.com stocks were a few years ago. So T-bills find a good market as people seek safety.

“This explains why the dollar is rising. As the system collapses and investors seek safety, they are more concerned to assure themselves the return of capital rather than a return on capital.
“But, according to Exter, the cash, too, would fail in time. Then investors would move to the apex of the pyramid, the point of the highest quality of all – GOLD.

“This, too, is happening and that’s why we’re seeing gold and the dollar rise together against other investment vehicles, such as stocks and foreign currencies. Gold will be the only one standing at the end and those who have purchased early will have been able to buy a lot more for their dollars than those who come in later. Of course, the dollar price of gold will have risen substantially before the floodgates break and the global public comes rushing in [as the Japanese are now doing].” (end Wheeler quotation]

Here in this article I have illustrated John Exter’s upside down pyramid, but I have added something. Since I interviewed Mr. Exter over eleven years ago, derivatives of all types have ballooned into the largest and riskiest class of speculations. The Bank for International settlements estimates their notional value at $100 trillion world wide, over twelve times the US Gross Domestic Product.

The flight to quality is only beginning. No one has yet heard how far Enron’s tentacles had spread into the derivatives market, although before the bankruptcy it had transmogrified into one gigantic hedge fund. I have even heard that Enron’s sudden departure from electricity futures, for example, has sent that market tumbling. I don’t know whether that’s true, but in principle when any very big player dominates a market, removing him removes his bias from the market. Ahh, that makes me think of JP Morgan Chase, that now holds (by a margin of two-thirds) most of the positions in gold and interest rate derivatives. What a mess if they were forced to unwind that position! Or perhaps, the gold market is already offering us a peek at that unwinding.
-- F. Sanders The Moneychanger

A Short Correction back to 645 for Gold and 1280 for Silver

Some people may have been pleased with today's SILVER and GOLD trading, but I wasn't one of them. Sure, both closed higher, but not much. Both look logy & tired & draggy. Tomorrow would be a good time -- when all the New York traders are closing out profitable positions for the week & thinking about the suburban martini waiting for them -- for metals to stumble. After what they've suffered in the last 10 days, they still want to find firm footing. A short correction back to 645 for gold and 1280 or 1250 for silver would provide that.

By the way, premiums are rising on US 90% silver coin, which hints at dealers becoming more reluctant to turn loose of them. That implies good things -- higher prices -- lie in silver's future.

The US DOLLAR INDEX today climbed back above 84. We are impressed. Might reach 50 day moving average at 84.5 before it resumes dropping like your car keys out of a bass boat to the bottom of the lake.

STOCKS challenged Dow 12,300 today -- and failed. Perhaps tomorrow. This rise toward the last high & rollover downward will take a while. Meanwhile the DOW IN GOLD DOLLARS has turned down again, having touched back to the 200 DMA about G$390. The DOW IN SILVER OUNCES has behaved much the same, except it didn't even reach its 200 DMA before it turned down again. What message does all this send? Swap stocks for silver & gold.

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

- Franklin Sanders, The Moneychanger

"Buy Silver and Gold Coins at the Best Prices"

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 $1,250.00; silver's primary is up targeting 16:1 gold/silver ratio or $78.13; stocks' primary trend is down, targeting Dow under 2,900 and worth only one ounce of gold; US$ or US$-denominated assets, primary trend down; real estate in a bubble, primary trend way down.