GoldMoney Alert - 1 October 2007

More Records Are Ready to Fall

Gold ended the week and closed the month of September at $742.80. For the second week in a row, gold closed at the highest level since January 21st, 1980, which is the day it closed at the all-time record of $825.50. The closing price for September is a new record month-end high, as we can see on the following chart.

Looking at the other side of the coin, the US Dollar Index collapsed, ending the week and the month at a record low.

The above chart of the US Dollar Index is probably as ugly-looking as they come. In other words, the prospects for the dollar look horrific. Anything of course is possible when it comes to markets. And who knows what tricks central bankers may have up their sleeve to postpone the dollar's inevitable day of reckoning? But this chart indicates that the downside momentum for the dollar is building.

The Dollar Index has never been this low. Wheat has never before been above $9 per bushel. Crude oil has never before been above $80. Sometimes the hardest thing to do when it comes to markets is to believe what we are seeing. So it is understandable that from time to time we ask ourselves, can the dollar really collapse? But then we look at the above chart and realize that the dollar has been collapsing for months. So can the dollar keep falling? Will it collapse? The answer is - as I explain above - that anything is possible when it comes to markets.

Silver also had a good week. It is finally outperforming gold, gaining 2.4% on the week compared to gold's 1.6% jump. But silver is still well below its record monthly close, as we can see on the following chart.

This chart indicates that silver still has a lot of catching up to do. I expect silver will do that over time, meaning the gold/silver ratio will continue to fall. This ratio is presently at 53.8, so at the moment it takes 53.8 grams of silver to buy one gram of gold. The historical average of this ratio is closer to 16, so there is plenty of opportunity for silver to outperform as this bull market in the precious metals continues.

Published by GoldMoney
Copyright © 2007. All rights reserved.
Edited by James Turk

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