The Moneychanger
Weekly Commentary
Monday, 18 July a.d. 2011 Browse the commentary archive
Here's the weekly scorecard:
  8-Jul 18-Jul Change % Change
Silver, cents/oz. 3,653.60 4,033.30 379.70 10.4
Gold, dollars/oz. 1,541.20 1,602.10 60.90 4.0
Gold/silver ratio 42.183 39.722 -2.460 -5.8
Silver/gold ratio 0.0237 0.0252 0.0015 6.2
Dow in Gold Dollars (DIG$) 169.77 159.81 -9.96 -5.9
Dow in gold ounces 8.21 7.73 -0.48 -5.9
Dow in Silver ounces 346.43 307.07 -39.36 -11.4
Dow Industrials 12,657.20 12,385.16 -272.04 -2.1
S&P500 1,343.80 1,305.44 -38.36 -2.9
US dollar index 75.08 75.38 0.30 0.4
Platinum 1,730.50 1,775.20 44.70 2.6
Palladium 775.05 795.75 20.70 2.7

Every morning I drive down Suck Stem Branch Road & just before I drive into the Green Cathedral there lives a groundhog. I bear no animus to any groundhog, but for some crazed reason, the groundhog sits in the ditch & waits until my car gets within about 35 feet and at that precise moment races across the road in a suicidal game of chicken with my 3,500 lb. Isuzu Trooper. I have observed that rabbits and squirrels, too, will abandon a perfectly secure refuge to rush to their own destruction awaiting in midroad. Yet this suicidal behavior can't hold a candle to human beings. We have central banks.

I missed sending a commentary last Friday, so will sum up last week from Friday a week ago to today, Monday.

Certain numbers will leap out at you from the scoreboard: silver up 10,.4% gold up 4%, Dow in Silver ounces down 11.4%, Dow in Gold Dollars down 5.9%. Not a good week for stocks or dollar denominated assets.

Stocks today reached G$159.81 (7.731 ounces), a new low for this move and a tiny breakdown thru the bottom support line. The DiG$ frequently makes that breakdown without following through, but if it does then look for a speedy plunge to G$145 (7.014 oz). Dow in Silver Ounces is verging on a breakdown through 300 oz. of silver buying the whole Dow.

Stocks spent the last four trading days steadily digging lower & lower. Now that they have reached 12,300, they might catch on that stouter support. On the other hand, they tried to pierce their 20 & 50 day moving averages today (12,346 & 12,359) but didn't close beneath them.

Stocks remain the Typhoid Mary of Investment Healthcare Professionals.

By the way, the new low for the Dow in Gold Dollars whispers that either stocks are about to plunge or gold is about to skyrocket.

The US DOLLAR INDEX rose 14.8 basis points today (0.19%) to its present 75.378. Mark, simply, that the dollar remains in an uptrend from last Wednesday's 74.65 low and from its May 72.70 low: higher highs, lower lows makes an uptrend. As long as the Dollar Index remains above 74.75, the trend remains in force, targetting 78.

Euro struggleth still. Today closed at 1.4110, down 0.34%. Hard to look at this chart, a jagged descent as bad as the face of Mt. Everest, & imagine that it will turn & climb. Close below 1.395 and 1.3913 (200 DMA) kicks the euro into the abyss. Yen has made a classic pennant which in a sane world where central banks & governments don't manipulate markets, points to Y76.27/$ (131.12c/Y100). Don't look for that, however, because the Japanese Nice Government Men will be zeroing in on that rate to make it sink.

Gold today reached 103% of its last high. It's over $1,600, with Comex closing today at $1,602.10, up $12.30. On the weekly chart 'twill hit the upper trading channel boundary about $1,650, but $1,625 remains another ancient target. I noticed Steve Saville commented yesterday that gold had been moving up 9 days straight, an awfully long unbroken stretch. Well, today it made that ten days, yet surely some pause, some correction must strike soon.

SILVER returned to center stage today, gaining 127c to shutter down Comex at 4033.3c, after a high of 4071c. That took the gold/silver ratio down to 39.722. Silver above 4100c means the Dogs of Rally are racing again. Stand not in the path of this juggernaut, but bear always in your mind that it might turn at any time. Clearly silver is following gold, actually, outrunning it, but both are being driven by institutional stupidity, government misfeasance, central bank malfeasance, & the need to feed the banks. Can that last forever?

Ooooo. I should have said that some other way.

Every time silver approaches its last high, the shorts flee & the bulls take the field, pushing to the next level: 3940c yields, then shoots to 4050c. I'm not opposed to buying here if you have a calm & equitable mind that recognizes the risk of all those institutional players suddenly coming to their senses -- or, more precisely, APPEARING to come to their senses.

In the long run it makes no difference what they do, they cannot, dare not stop inflating, & that will keep driving silver & gold to the stars. I fear, I truly fear, that silver & gold are accelerating into that state that panicked buyers will not looke at charts or even ask prices, they will simply buy, buy, buy in their desperate need to flee fiat currencies.

On 18 July 1969 the car senator Edward Kennedy (D-MA) was driving plunged off a bridge on Chappaquiddick Island. He got out of the car but left behind passenger Mary Jo Kopechne, who had not yet learned to breathe water. Somehow reporting the accident didn't occur to the senator for ten hours. No charges were ever filed, that I remember. I reckon in America we have equal justice under the law, but some people are more equal than others.

On 18 July 1942 the German Me-262, the first jet-propelled aircraft to fly in combat, made its first flight.

On 18 July 1936 began the Spanish Civil War when General Francisco Franco led army troops in Spanish North Africa in an uprising. The war quickly became a battleground between communism and fascism, with all the world's communists fighting for one side and the fascists for the other. It wasn't quite that simple, however, as the communist side was brutally anti-Christian while the nationalist side merely objected to communism. The Nazis sent aid and tried out some new war toys in Spain, but Hitler miscalculated if he thought he had a tool in Franco. During World War II in spite of repeated German attempts to enlist Spain on the Nazi side, Franco wisely remained neutral. Spain had already poured out enough blood.

On 18 July 1789 another murderous revolutionary, Robespierre, a deputy to the National Assembly, decided to back the French Revolution. He became the perfect ideological fool, creating the Terror & feeding Madame Guillotine until finally she ate him, too. The Revolution always devours its children.

Footnote from last week's trip: if y'all are ever in Chattanooga, do not miss eating at the Boathouse restaurant on the Tennessee River. It is superb. The grilled squid with arugula & garlic will make you tongue slap your jaws.

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
18-Jul-11 Price Change % Change
Gold, $/oz 1,602.10 12.30 0.8
Silver, $/oz 40.33 1.27 3.3
Gold/Silver Ratio 39.720 0.293 0.7
Silver/Gold Ratio 0.0252 0.0008 3.2
Platinum 1,775.20 14.90 0.8
Palladium 795.75 12.50 1.6
S&P 500 1,305.44 -10.70 -0.8
Dow 12,385.16 -94.57 -0.8
Dow in GOLD $s 159.81 -2.45 -1.5
Dow in GOLD oz 7.73 -0.12 -1.5
Dow in SILVER oz 307.07 -12.40 -3.9
US Dollar Index 75.38 0.15 0.2
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: 1,605.80      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,638.72 1,652.72 1,652.72
1/2 AE 0.50 818.96 843.05 1,686.09
1/4 AE 0.25 409.48 425.54 1,702.15
1/10 AE 0.10 171.82 178.24 1,782.44
Aust. 100 corona 0.98 1,559.05 1,571.05 1,602.79
British sovereign 0.24 376.12 396.12 1,682.73
French 20 franc 0.19 299.80 304.80 1,632.58
Krugerrand 1.00 1,614.63 1,628.63 1,628.63
Maple Leaf 1.00 1,621.80 1,645.80 1,645.80
1/2 Maple Leaf 0.50 841.04 851.07 1,702.15
1/4 Maple Leaf 0.25 421.52 425.54 1,702.15
1/10 Maple Leaf 0.10 163.79 184.67 1,846.67
Mexican 50 peso 1.21 1,923.37 1,938.37 1,607.67
.9999 bar 1.00 1,611.42 1,622.42 1,622.42
SPOT SILVER: 40.61      
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 28,249.65 28,599.65 40.00
US 40% silver 1/2s 0.30 11,537.45 11,752.45 39.84
100 oz .999 bar 100.00 4,071.00 4,111.00 41.11
10 oz .999 bar 10.00 408.10 412.60 41.26
1 oz .999 round 1.00 40.81 41.86 41.86
Am Eagle, 200 oz Min 1.00 41.86 43.76 43.76
SPOT PLATINUM: 1,775.20      
Plat. Am Eagle 1.00 1,775.20 1,875.20 1,875.20
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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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