The Moneychanger
Weekly Commentary
Friday, 8 July a.d. 2011 Browse the commentary archive
Here's the weekly scorecard:
  1-Jul 8-Jul Change % Change
Silver, cents/oz. 3,369.40 3,653.60 284.20 8.4
Gold, dollars/oz. 1,482.30 1,541.20 58.90 4.0
Gold/silver ratio 43.993 42.183 -1.810 -4.1
Silver/gold ratio 0.0227 0.0237 0.0010 4.3
Dow in Gold Dollars (DIG$) 175.48 169.77 -5.71 -3.3
Dow in gold ounces 8.49 8.21 -0.28 -3.3
Dow in Silver ounces 373.44 346.43 -27.01 -7.2
Dow Industrials 12,582.77 12,657.20 74.43 0.6
S&P500 1,339.67 1,343.80 4.13 0.3
US dollar index 74.30 75.08 0.79 1.1
Platinum 1,719.20 1,730.50 11.30 0.7
Palladium 759.70 775.05 15.35 2.0

Stocks had their brief moment in the sun, then gave most of it back this week. Silver & gold astonished, while platinum & palladium did little. US dollar index proved its uptrend.

Whatever fuel was driving stocks was used up this week. They fell a little short of the high I expected, 12,753 versus 12,875, but they may make that point yet.

Most interesting is that stocks squandered all their strength against gold in one fell spurt, like some kid laying a toothpaste tube down on the counter & hitting it with his fist. Big spurt shoots toward the ceiling, but nothing happens after that (except your mother finds toothpaste on the wall & you have to fetch a switch off the peach tree). The Dow in Gold Dollars shot above its 200 DMA (G$172.61 or 8.35 oz) for one whole day, then fell beneath again, and today approached the 50 DMA down below (G$168.27 or 8.14 Oz). Only a matter of time until stocks begin free-falling against gold.

Stocks -- they are the empty parachute pack in Investment Sky-diving Gear.

US DOLLAR INDEX rose modestly today to 75.082, up 12.5 basis points. Not a big deal, but still a big deal because (1) dollar broke 75 this week without following thru downside, & (2) dollar index double bottomed yesterday & today at 74.85, (3) dollar remains above 75 & so in the uptrend begun off the May 1 bottom.

The euro reeled backward again with news of troubles in the Italian banking system, arrest of a friend of the finance minister, and said minister's nearness to resigning. "Is Italy next to fail?" wonder the fearful. Euro closed down 2/3 of 1% today at 1.4264. The yen jumped today back to the 20 DMA, closing at Y80.61/$ (124.06c/Y100).

SILVER & GOLD probably made their last low last Friday, but remember the difficulties of summer, so they may see more range trading, bounded by $1,560 and $1,490 and 3850c - 3370c -- through most of August. However, as it was plain last week that gold closing above $1,510 would turn gold up, and turn up it did, with a vengeance, gaining 4% in 4 days. Today it added another $11 to reach $1,541.20. Yes, I did say yesterday that a close over $1,540 would take gold at least to $1,560. Look for it next week.

Gold chart in euros looks even more bullish than the dollar gold chart, as my friend Bob the Technical Genius pointed out to me. There it touched its 200 DMA last week, and has climbed nearly to its all-time high.

If gold can pierce $1,560 (closing basis) & $1,575 intraday, it will launch a new leg up. Right now euro-fears are driving it, but just be careful. A market trading in a range is just a rattlesnake weaving back & forth trying to figure out where to bite you. If you're buying for the long term, just look at gold and ask yourself, "Can I buy here and swallow the risk it will drop 5%?" If you can, go ahead and buy it.

SILVER gained 284.2c or 8.4% in four days. Stay out of the way.

What's odd is that today it only added 8/10 of a cent. In the aftermarket its about 20c higher.

The area 3650-3675c is old resistance now, & the 50 day moving average is kicking in its share at 3667c, too. Above the next barrier is 3850c. Silver has turned up dramatically, but is it only for another rally-within-the-range up to 3850c? Will it re-visit 3370c?

Once again, how greedy are you? How much risk can you stand? Buying here you risk a fall of 300c or 8.2%. Want to risk that, or wait until silver either breaks out above 3850c or drops down to 3370c?

Oh, I'm not worried about silver or gold for the next few years, or even after August, but right now we have to deal with this frustrating bottoming process, & you can never be certain you've see than bottom until an upside breakout is confirmed. If you wait until then, you'll pay a lot more. All those clowns & commentators who are pronouncing an end to silver's bull market, let alone gold's, ought to have their microphones & computers confiscated & be locked up in the stocks where people could throw rotten eggs at them. No, the long term bull market is not in any doubt or peril.

Once again, I turn to the consolations of Tennessee Philosophy. What doth it matter if a man for the sake of 8.2% risk misseth buying a bull market position? We aren't working for 8.2% or 10%, or even 20%, but the triple or quadruple the bull market will bring from here.

That's what I like about Tennessee Philosophy: it brings perspective, even to a natural born fool.

Y'all are watching a correction in a bull market. Don't get hung up on buying at the perfect price, just beware you buy all you can stand.

On 8 July 1993 Charles Keating, chief of Lincoln Savings & Loan Associate, was sentenced to prison. At last, the government had found a sacrificial goat for the Savings & Loan Crisis. It was all HIS fault.

On 8 July 1919 President Woodrow Wilson returned form the Versailles Peace Conference in France. He had laid the foundation for World War II. There's just no limit to the harm a well-meaning fool can do.

On 8 July 1896 at the Democratic Party convention in Chicago William Jennings Bryan lambasted the eastern money powers for abandoning silver & bimetallism in favour of a deflationary monometallic gold standard which was both impractical & unconstitutional, but meant gigantic money to the banks. Bryan had long belonged to the popular movement for free coinage of silver and resumption of bimetallism. Then as now the Republicans were the party of big business & the money power (as are the Democrats today, too) and Bryan closed with this wondrous phrase:

"Having behind us the producing masses of this nation and the world, supported by the commercial interests, the labouring interests and the toilers everywhere, we will answer their demand for a gold standard by saying to them: You shall not press down upon the brow of labour this crown of thorns, you shall not crucify mankind upon a cross of gold."

Bryan stretched out his arms for five seconds & the crowd remained silent. Then they all shrieked at once and rushed the stage with wild enthusiasm.

Bryan fought hard, but lost. In 1900 the monometallic gold standard was enacted into law, the first step to panics artificial & natural that paved the way for the Federal Reserve act of 1913. We have not even the dignity of a cross of gold. Our cross is made of paper.

Y'all enjoy your weekend.

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
8-Jul-11 Price Change % Change
Gold, $/oz 1,541.20 11.00 0.7
Silver, $/oz 36.54 0.01 0.0
Gold/Silver Ratio 42.180 0.301 0.7
Silver/Gold Ratio 0.0237 0.0000 0.0
Platinum 1,730.50 -15.60 -0.9
Palladium 775.05 -12.60 -1.6
S&P 500 1,343.80 -9.42 -0.7
Dow 12,657.20 -62.29 -0.5
Dow in GOLD $s 169.77 -2.04 -1.2
Dow in GOLD oz 8.21 -0.10 -1.2
Dow in SILVER oz 346.43 -1.78 -0.5
US Dollar Index 75.08 0.13 0.2
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SPOT GOLD: 1,543.70      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,587.70 1,601.70 1,601.70
1/2 AE 0.50 787.29 810.44 1,620.89
1/4 AE 0.25 393.64 409.08 1,636.32
1/10 AE 0.10 165.18 171.35 1,713.51
Aust. 100 corona 0.98 1,498.76 1,510.76 1,541.28
British sovereign 0.24 361.57 381.57 1,620.94
French 20 franc 0.19 288.21 293.21 1,570.48
Krugerrand 1.00 1,555.28 1,569.28 1,569.28
Maple Leaf 1.00 1,559.70 1,583.70 1,583.70
1/2 Maple Leaf 0.50 808.51 818.16 1,636.32
1/4 Maple Leaf 0.25 405.22 409.08 1,636.32
1/10 Maple Leaf 0.10 157.46 177.53 1,775.26
Mexican 50 peso 1.21 1,848.99 1,863.99 1,545.98
.9999 bar 1.00 1,549.10 1,560.10 1,560.10
SPOT SILVER: 36.73      
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 25,700.68 26,000.68 36.36
US 40% silver 1/2s 0.30 10,391.38 10,606.38 35.95
100 oz .999 bar 100.00 3,682.50 3,722.50 37.23
10 oz .999 bar 10.00 369.25 373.75 37.38
1 oz .999 round 1.00 36.93 37.98 37.98
Am Eagle, 200 oz Min 1.00 37.98 39.88 39.88
SPOT PLATINUM: 1,730.50      
Plat. Am Eagle 1.00 1,730.50 1,830.50 1,830.50
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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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