The Moneychanger
Daily Commentary
Wednesday, 6 July a.d. 2011 Browse the commentary archive

On Friday the Dow in Gold dollars shot above the 200 DMA to G$175.48 (8.489 oz). The last two days the DiG$ has filled that gap up and collapsed nearly to the 50 DMA G$168.268 (8.14), closing today at G$170.59 (8.252).

What does all that mean? That stocks have shot their bolt against gold.

Today the Dow & S&P500 contradicted each other. Dow rose 45.41 (0.36%) to 12,615.28 in ragged trading but the SYP500, likewise ragged, closed 1,337.56, down 0.32.

Dow remains broken out above the downtrend line, so you have to count the trend still in force as long as it hasn't been contradicted. Nonetheless, I have no more desire to own stocks than I have to contract elephantiasis. Oh, what mourning, weeping, & gnashing of teeth await stock investors!

US DOLLAR INDEX keeps on ratcheting up, step by step. Today it crossed through 7470 & jumped over 75, and not tradeth at 75.025, up 33.9 basis points (0.44%). Some horizontal resistance awaits at 75.75 - 76, but inertia favours the dollar. It is trading above its 20 & 50 DMAs. May make slow progress, but will keep on progressing upward.

Euro & yen showed no cards today. All the euro's recent rallying only traced out a confirmation of the downtrend. Euro closed today 1.4317, down 0.74%. Yen closed Y80.95/$ (123.54c/Y100). All quiet there.

With silver & gold we stand in great peril of misunderstanding either way: discounting a real rally, or crediting a spurious one.

GOLD bettered yesterday's performance by rising $16.40 to $1,528.70, not quite closing thru that definitive $1,530 mark, but clearing $1,525. Sometimes those resistance/support areas don't lie exactly where you think. On gold's side for a breakout, it has traded clean through the 20 & 50 DMAs ($1,522.17 & $1,520.28). It did push as high as $1,533.60, and defended $1,510 handily at $1,509.90.

Chances are, today exhausted for the nonce gold's upward energy. Unless it punches thru $1,533.60 tomorrow, expect it to rest between $1,518 & $1,530 a day or two. Proof the past two days were merely an anomalous short-covering rally comes with any close below $1,500.

Otherwise we are faced with the conclusion that gold has already finally bottomed on Tuesday at $1,482.30.

SILVER gobbled up another 50.9c and ran as high as 3625c but couldn't hold those heights. Comex closed at 3591.1c. Close, but no cigar, and in my mind that 3600c mark carries lots of weight. Silver remains above its 20 DMA (3541c).

This is the part of this job I dislike, not because I dislike making decisions but merely because they seem so momentous at the time, but are in truth minute. Do we buy silver at 3600c or 3300c, an 8.3% difference? Will that little difference really engage your attention at all when silver trades at US$106.50? Right, if 3304c was the low, then a reasonable target is 10650c. Yes, the 8.3% is important, but in the long run it won't be the difference between blood plasma and Gatorade, just between one teaspoon of sugar in your tea and one and a quarter.

Right now silver only needs to hold above 3550c, and can drop at most to 3360c.

Buy all you can on any retreat. I'm tired of waiting. I haven't totally shaken the hope we will see the 200 DMA (not 3186c) but that hope grows as dim as one of those blamed fluorescent light bulbs the government is now stuffing down our throats.

Silver & gold remain in a long term bull market. Forget the fluctuations, the only strategy in a bull market is to buy, and then buy more, never looking back.

On this day in 1535 Sir Thomas More was executed in England for treason. Everybody felt really sorry about it, but with Henry VIII on the throne, they still executed him and many others no matter how sorry they felt. It didn't take much for Henry to get your number, too.

On this day in 1967 the Biafran War erupted. The great Ibo (also spelled "Igbo") nation seceded from Nigeria to form their own country. The Nigerian central government obliged them with a genocide that killed about 600,000 people. Funny, nobody in the West got too upset about it.

On this day in 1962 died Mississippian William Faulkner, one of the greatest Southern novelists. Hard to read for his pages long sentences, he repays the effort with his magnificent stories and insight. Who can forget the execrable Snopes? Who, indeed, as they have taken over the South and America.

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
6-Jul-11 Price Change % Change
Gold, $/oz 1,528.70 16.40 1.1
Silver, $/oz 35.91 0.51 1.4
Gold/Silver Ratio 42.570 -0.149 -0.3
Silver/Gold Ratio 0.0235 0.0001 0.3
Platinum 1,727.20 -14.00 -0.8
Palladium 766.55 -8.90 -1.1
S&P 500 1,337.56 -0.32 -0.0
Dow 12,615.28 45.41 0.4
Dow in GOLD $s 170.59 -1.21 -0.7
Dow in GOLD oz 8.25 -0.06 -0.7
Dow in SILVER oz 351.29 -3.77 -1.1
US Dollar Index 75.03 0.34 0.5
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: 1,528.60      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,570.64 1,584.64 1,584.64
1/2 AE 0.50 779.59 802.52 1,605.03
1/4 AE 0.25 389.79 405.08 1,620.32
1/10 AE 0.10 163.56 169.67 1,696.75
Aust. 100 corona 0.98 1,484.10 1,496.10 1,526.32
British sovereign 0.24 358.03 378.03 1,605.92
French 20 franc 0.19 285.39 290.39 1,555.38
Krugerrand 1.00 1,541.59 1,555.59 1,555.59
Maple Leaf 1.00 1,544.60 1,568.60 1,568.60
1/2 Maple Leaf 0.50 800.60 810.16 1,620.32
1/4 Maple Leaf 0.25 401.26 405.08 1,620.32
1/10 Maple Leaf 0.10 155.92 175.79 1,757.89
Mexican 50 peso 1.21 1,830.90 1,845.90 1,530.98
.9999 bar 1.00 1,533.95 1,544.95 1,544.95
SPOT SILVER: 35.89      
SILVER Fine Tr.Oz. BID ASK $/oz
VG+ Morgan $B4 1905 0.77 31,000.00 34,000.00 44.44
VG+ Peace dollar 0.77 31,000.00 34,000.00 44.44
90% silver coin bags 0.72 24,960.65 25,260.65 35.33
US 40% silver 1/2s 0.30 10,145.05 10,360.05 35.12
100 oz .999 bar 100.00 3,599.00 3,639.00 36.39
10 oz .999 bar 10.00 360.90 365.40 36.54
1 oz .999 round 1.00 36.09 37.14 37.14
Am Eagle, 200 oz Min 1.00 37.14 39.04 39.04
SPOT PLATINUM: 1,727.20      
Plat. Am Eagle 1.00 1,727.20 1,827.20 1,827.20
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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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