The Moneychanger
Weekly Commentary
Thursday, 13 January a.d. 2011 Browse the commentary archive
Here's the weekly scorecard:
  6-Jan 13-Jan Change % Change
Silver, cents/oz. 2,865.30 2,949.30 84.00 2.9
Gold, dollars/oz. 1,616.10 1,630.60 14.50 0.9
Gold/silver ratio 56.402 55.288 -1.110 -2.0
Silver/gold ratio 0.0177 0.0181 0.0004 2.0
Dow in Gold Dollars (DIG$) 158.10 157.48 -0.62 -0.4
Dow in gold ounces 7.65 7.62 -0.03 -0.4
Dow in Silver ounces 431.37 421.19 -10.17 -2.4
Dow Industrials 12,359.92 12,422.21 62.29 0.5
S&P500 1,277.81 1,289.10 11.29 0.9
US dollar index 81.26 81.53 0.27 0.3
Platinum 1,401.00 1,485.80 84.80 6.1
Palladium 613.20 636.70 23.50 3.8

This week's big gainers were platinum (up 6.1%), palladium (3.8%), and silver (2.9%). Gold gained only modestly (0.9%), as did stocks. US dollar index remained above 81 and gained a little ground: rally intact.

Tomorrow is the 12th anniversary of the 14 January 2000 all time inflation-adjusted high in the Dow: 11,722. That would equal 15,325 today. So in value-terms, although the Dow today stands nominally above that 11,722 close, it's an illusion. In inflation adjusted dollar terms, the Dow since 2000 has lost 19% of its value. Against gold & silver it has lost much more, over 80%.

Today the Dow lost 48.81 (0.4%) to close 12,422.21. S&P500 lost 6.4 (0.5%), ending at 1,289.10. For the week, the Dow tried to penetrate doubled resistance at 12,600 from the long narrow triangle it fell out of last August, failed even to beat 12,500, and has rolled over almost off the bed. Next move will be an Edgar Rice Burroughs special, headed toward The Earth's Core. Will look like a mole with a motor.

(Yesterday I wrote that the Dow had fallen out of a "long narrow equilateral" triangle. One puzzled reader wrote to ask me how a triangle could be both long and narrow AND equilateral. I wore out three try-squares trying to figure a way, but couldn't. So scratch the "equilateral." The triangle was just long and narrow, period.)

Today the US dollar gained a massive 76.1 basis points (0.98%) to close 81.531, while the euro lost 1.11% to close at a new low for the move, 1.2675. What happened?

When talks on cutting Greece's debt looked close to collapsing, the S&P rating agency downgraded government debt of France, Austria, Italy, and Spain by a notch each. From AAA France & Austria fell to AA+, Italy was lowered to BBB+ and Spain twitched from AA- to A. That spooked investors out of euros and into dollars, which may be likened to hiding from a lion in a bear's den.

Folks may pretend that Greece, with less than 2% of the Eurozone's GDP, raises no waves when its boat sinks. However, they can't pretend that France doesn't matter, since portfolios all over Europe are stuffed with France government debt which today became worth much less than yesterday.

The pretence of debt and fiat money is melting like a wax mask too near the fire. What can any investor count on any longer, when what was supposed to be the lowest risk investment -- government debt -- suddenly devalues overnight, or may even be wholesale devalued in banking deals out of control of investors or citizens?

Under these circumstances, I remember those great sentiments of Omar Khayyam, "Ahhh! Take the cash, and let the credit go, nor heed the rumble of a distant drum." You'd better get value in your own hands and in real things, because all the abstracts & illusions are leaving the planet for money heaven.

Silver & gold proved that I had misread the chart yesterday, thinking they had yet one more small leg to rise. However, that euro fall/dollar spurt knocked them back.

Gold lost $16.70, closing Comex at $1,630.60; silver gave back 59.9c to end at 2949.3. How much damage was done?

Very little. Gold remained above $1,630 support/resistance. Not bad after a week working through two resistance levels ($1,607 & $1,625). However, if gold closes BELOW $1,630, there's no safety net above $1,607, and a fall through $1,607 - $1,600 would evoke painful defections from gold's newly won fair weather friends.

Yet this, too, is valuable. Extent of this fall will tell us how healthy gold is, and whether it has bottomed in truth. Even if it fell to $1,550 (don't I wish!), that would merely confirm the previous (29 December) low as a bottom. Only violating that bottom ($1,523.90) would imperil gold with new low prices.

If I had to say, & I never can seem to resist saying, it appears that gold has moved stoutly off its bottom and will make one further leg up toward $1,680 before it is dragged back into another correction. If so, Monday or Tuesday surely will see gold rise through $1,650 resistance, perhaps as high as $1,705 before it relents.

After all's said and done, Silver gained 2.9% this week, passing several milestones along the way. First, it crossed above the 20 day moving average (2908c). Next, it punched thru the downtrend line from the September highs, and for four days has abided above that line. From a close to the ground viewpoint, silver broke out then went back to the trend line today to plant a final kiss good-bye on its forehead.

All this makes it all the more important that silver hold 2950c support, lest the newly boarded rats jump ship. Above silver must clear 3050c resistance.

A break of 2950c support would not necessarily take silver below 2850c again, but it would lean it that way sharply. Monday will reveal silver's mind for the week. My money is on higher silver next week.

IN SUM, gold has most likely bottomed, although silver might have one more drop in mind, not necessarily to a new low. Time to start buying.

Doing a little thinking the last few days has led to some gold targets I am almost loath to share with y'all, they sound so high. By end of 2012 or January 2013, gold ought to cost $2,660 an ounce. Top of this next wave that just began stands somewhere ABOVE $4,500. Yes, yes, I know it sounds crazy, but I'm just the reporter, not the creator. At $4,500 gold a 30:1 ratio puts silver at $150.

Crazy, but y'all will behold it, and with your own eyes.

Low on energy? Here's a little tip that helped me. sells a Vitamin B complex called "Ultra B Stress Formula." It's formulated almost identically to their other B complex, but doesn't work the same way. It will have you dancing on the roof tree. I take three of them throughout the day, but don't take my advice. I'm only a natural born fool from Tennessee. I only know what works for me. Might make your nose fall off.

On 13 January 1695 Jonathan Swift was ordained an Anglican priest in Ireland, & began to discover the dangers of actually practicing Christianity. He vented his indignation over the injustices around him in satires like Gulliver's Travels. Later he took up the cause of the oppressed Irish, writing in "A Modest Proposal" that eating Irish children ought to be encouraged, because in that way at least they would have some purpose and value.

On 13 January 1863 the man responsible for thousands of souvenir bedspreads, William Canter, patented the Chenille manufacturing machine.

Argentum et aurum comparanda sunt —
Silver and gold must be bought.

— Franklin Sanders, The Moneychanger

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Market Snapshot See more charts and market data
13-Jan-12 Price Change % Change
Gold, $/oz 1,630.60 -16.70 -1.0
Silver, $/oz 29.49 -0.60 -2.0
Gold/Silver Ratio 55.290 -0.555 -1.0
Silver/Gold Ratio 0.0181 -0.0004 -2.0
Platinum 1,485.80 -11.10 -0.7
Palladium 636.70 2.45 0.4
S&P 500 1,289.10 -6.40 -0.5
Dow 12,422.21 -48.80 -0.4
Dow in GOLD $s 157.48 1.00 0.6
Dow in GOLD oz 7.62 0.05 0.6
Dow in SILVER oz 421.19 6.76 1.6
US Dollar Index 81.53 0.76 0.9
IMPORTANT NOTE: The following are wholesale, not retail, prices. To figure our retail selling price, multiply the "ask" price by 1.035. To figure our retail buying price, multiple the "bid" price by 0.97. Lower commissions apply to larger orders, higher commissions to very small orders.
SPOT GOLD: 1,635.10      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,679.25 1,694.25 1,694.25
1/2 AE 0.50 825.73 858.43 1,716.86
1/4 AE 0.25 416.95 433.30 1,733.21
1/10 AE 0.10 173.32 181.50 1,814.96
Aust. 100 corona 0.98 1,585.10 1,599.10 1,631.40
British sovereign 0.24 384.90 391.90 1,664.84
French 20 franc 0.19 305.27 312.27 1,672.59
Krugerrand 1.00 1,651.45 1,666.45 1,666.45
Maple Leaf 1.00 1,647.10 1,668.10 1,668.10
1/2 Maple Leaf 0.50 809.37 850.25 1,700.50
1/4 Maple Leaf 0.25 404.69 433.30 1,733.21
1/10 Maple Leaf 0.10 161.87 176.59 1,765.91
Mexican 50 peso 1.21 1,957.48 1,973.48 1,636.79
.9999 bar 1.00 1,640.82 1,651.82 1,651.82
SPOT SILVER: 29.52      
SILVER Fine Tr.Oz. BID ASK $/oz
VG+ Morgan $B4 1905 0.77 23,826.90 27,500.00 35.95
VG+ Peace dollar 0.77 23,326.90 27,000.00 35.29
90% silver coin bags 0.72 20,817.23 21,142.23 29.57
US 40% silver 1/2s 0.30 8,116.93 8,416.93 28.53
100 oz .999 bar 100.00 2,976.50 3,016.50 30.17
10 oz .999 bar 10.00 295.15 315.15 31.52
1 oz .999 round 1.00 29.62 30.37 30.37
Am Eagle, 200 oz Min 1.00 31.27 31.77 31.77
SPOT PLATINUM: 1,485.80      
Plat. Am Eagle 1.00 1,485.80 1,585.80 1,585.80
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Warnings and Disclaimers

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 trend is up, targeting 16:1 gold/silver ratio or $195.66; stock's primary trend is down, targeting Dow under 2,900 and worth only one ounce of gold or 16 ounces of silver. US$ and US$-denominated assets, primary trend down; real estate bubble has burst, primary trend down.

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 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. For additional information, please see our Ten Commandments for Buying Gold and Silver.
  • One final warning: NEVER insert a 747 Jumbo Jet up your nose.

Explanation of Terms

The US DOLLAR INDEX is the average exchange rate for the US dollar against the Euro, Yen, Pound sterling, Canadian Dollar, Swiss Franc, and Swedish Krona, weighted for each country's trade with the US. It gives a general measure of the US dollar's performance against all other currencies.

The DOW IN GOLD DOLLARS measures the Dow Jones Industrial Average in gold dollars (0.048375 troy oz. by law). The DiG$ depicts the Primary (20 year) Trend of stocks against gold. When the DiG$ is dropping, gold is gaining value against stocks in a trend that should last 15-20 years. The DiG$'s chart is identical to the Dow in ounces of gold, but gives us one unvarying measure all the way back to 1896. Because it shows the primary trend ("tide") of gold against stocks, for investors it is the single most important financial chart in the world today. Since its August 1999 high at G$925.42 (44.8 ounces), the DiG$ has trended down, targeting a G$80-G$20 (4-1 oz. of gold will buy the whole Dow).

The DOW IN SILVER OUNCES shows how many ounces of silver are needed to buy the entire Dow. The DiSoz is trending down with a target of under 36 ounces.

The GOLD/SILVER RATIO is the gold price divided by the silver price, and shows how many ounces of silver it takes to buy one ounce of gold. The Ratio shows us the Primary (20 year) Trend of gold's value against silver. When the Ratio's trend is dropping, silver is gaining value against gold. This trend targets a gold/silver ratio of 16 ounces of silver to one of gold within the next 5-10 years. That implies that silver will massively, vastly outperform gold before this bull market ends. When both metals are rallying, the ratio often (but not always) drops, confirming the rally.

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