Above are the prices from Friday a week ago until today. That misses the deepest lows for silver & gold which came last Monday ($1,360.96 gold low) and Tuesday (silver low 2255.6 cents). While silver & gold took their worst beating since 1980, maybe nobody noticed stocks rolling over. US dollar remains equivocal, may be turning up.
Will Rogers said, "You can't break a man that don't borrow." That's why I never recommend leverage. If you have bought physical silver or gold and paid for it fully, these declines are painful, but not fatal. While I completely missed anticipating this big break, it would not have changed my recommendations because trading in and out has never been my strategy. In hindsight, of course, the "sell the peaks buy the lows" idea looks pretty obvious, but it never does while unfolding. Thus you sell what you THINK is the peak, only to see the market shoot upward away from you. Or you sell a low expecting it to go lower, and it reverses.
Rather, a strategy that follows the primary uptrend (bull market) buys and holds for the final peak. That one we have targeted for a 16:1 gold/silver ratio and 2 oz or less of gold to buy the Dow.
Big question torturing every gold & silver owner right now: HAS THE BULL MARKET ENDED? No, for several reasons.
1. Manner of decline. Bull markets end in a blow-off top, travelling straight up with ridiculous gains day to day. In 1980, gold gained 265% from 22 January 1979 to the peak on 21 January 1980; 113% in the last two months before the peak, and 74% in the last month. The following two years built no declining flat-bottomed triangle on the chart, but plunged, leaving a dramatic peak behind.
2. Price & Time. Last bull market gold rose 24.3 times its beginning price, silver rose 38-2/3 times. That bull market lasted about 20 years. This one is barely 12 years old, and highest gains so far have been about 6 times. Possible that would fulfill a primary trend, but not likely.
3. Cause unchanged. The cause of a bull market in silver & gold -- inflation -- has not abated. In fact, all the major central banks have embarked on unlimited inflation. Maybe they can tame that, but if they do they will have reversed cause and effect. They believe they are Masters of the Universe; I don't.
All the same, the waterfalls last week deeply wounded morale in silver & gold. They will need a while, maybe a long while, to recover. Gold fell nearly to a 50% correction of its 2008 - 2011 move; silver a little past 61.8%. Bad, but not fatal. Indeed, that could mark the limits of the fall, but there's no sign of that yet.
Does that mean I am ready to leap in and buy with both hands now? Nope, not yet. One last plunge is possible, but not certain -- possible enough to require proof of a reversal.
My mind is still nagging at the why -- why have commodities dropped across the board? Stocks are ailing, too. What are markets pointing at, a repeat of 2008, or something worse? The question hangs in the air, unanswered.
Stocks rose a tad today, but peaked way back on 11 April & have been trending lower every since, lower even than their reversal-tripwire 20 day moving average. S&P500 closed up 0.47% (7.25) today at 1,562.50, Dow rose 0.14% (19.66) to 14,567.17.
Here's what may faze you: the Dow in Gold and Dow in Silver, even through last week's terrible metals' cascade, have topped & kept on falling. Don't take my word for it, look at it here http://bit.ly/13rgbqt and here http://bit.ly/ZL1D15
Wait! I forgot to mention that both were stopped around long term downtrend lines. For now, both are screaming that stocks have topped against silver & gold.
The US dollar index last week hit an internal support line at 81.80 and bounced back up. It has traced a rounding top, but if it crosses above 83.00 will break out upside with a target of 84 or higher. Dollar index closed today at 82.649, down 6.5 basis points (0.08%). Euro gained 0.11% to $1.3066, trending down now for a week and closing today on its 50 DMA. Yen flirteth yet with 100 cents to 100 yen, closing today up 0.24% at 100.74 cents/Y100.
US$1=Y99.26=E0.7653=0.042882 oz Ag=0.000704 oz Au.
Gold today climbed $25.70 to end at $1,421 while silver gained 36.5 cents to end at 2332 cents.
Gold hit $1,423.80 on Friday, & sent the shorts scattering when it gapped up from $1,400 to $1,410. Bears fought back, driving gold down enough to fill that gap, but then today it climbed sharply to $1,421.00.
Gold has been massively, grotesquely oversold but today doesn't even quite recapture 50% of its loss. How far down was it kicked? 20 DMA stands overhead at $1,517.53. Let's see how it behaves on the first reaction from this climb that lasted all but one day of last week (but that day was a killer.) MACD is trying to hook upward.
But get this clear: gold might rally up to $1,500 - $1,525 & still turn and make another, lower bottom.
Silver has been battered much worse than gold. Right now it needs to climb above 2400 cents to regain any credibility.
One trade I continue to recommend is swapping gold for silver. Ratio has now climbed nearly to 61:1, retracing 61.8% of its fall from the 2008 high at 84. With that trade comes the risk it races further to 72 or higher.
Worst face of trading is to control the panic and euphoria in your own breast. Is it bravery or foolhardiness? You have to suck in your breath & close you eyes & sell when its high and buy when its low, all the while trying to fight off the lemming inside that finds safety only with the crowd. Against that courage you have to weigh stubborn stupidity, that dares you to act blindly, or keeps you from facing facts. Maybe y'all can walk through that emotional minefield without any explosions, but I find it taxing.
Bottom line: Long term primary uptrend (bull market) in silver & gold has NOT ended. No telling yet how long metals will need to overcome this blow & exceed old highs. Somewhere here, however, lies a historical buying opportunity -- for the brave.
Y'all enjoy your weekend!
Argentum et aurum comparanda sunt —
Silver and gold must be bought.
— Franklin Sanders, The Moneychanger