The Moneychanger
Daily Commentary
Wednesday, 20 July a.d. 2011 Browse the commentary archive

I promise to be a good boy and just grin like a natural born fool from Tennessee today & not say anything about the gawkingly incredible stupidities of central banks, the federal government, or the Twin Bees, Bernard & Ben, or other central banks and governments.

Unless, of course, I am provoked.

Whatever rocket fuel stocks were using yesterday played plumb out today. Stocks painted a raggedy, up & down chart but never managed to hold on to any gains & finished the day in the red. Dow lost 15.51 (0.12%) to close 12,571.91 and the S&P500 lost 0.86 (0.07%) to close at 1,325.84.

Stepping back from the 14 month chart a gagging impulse o'ertakes me screaming, "Broadening top!" This killer formation will drag every hopeful bull into the bear's lair & keep him their to be mauled at the bear's leisure. That doesn't mean that it will drop off right away like your car keys falling out of your shirt pocket into the lake when you lean over the side of the bass boat. Naww, it can linger on for some time, travelling up and down, then suddenly sink out of sight, leaving you staring down at the bottom of a well wondering how deep it might be.

Stocks -- they are the Arm Garter Factory in the Inventory of Modern Investment Choices.

US Dollar Index was beaten down as low as 74.755 today but that 74.80 support caught and held. Even though it dropped 38.4 basis points from yesterday (0.49%) it held on where it had to. Now if it keeps falling thru 74.80, then the dollar's frustrating uptrend will be broken. Euro rose a little today to 1.4230, up 0.52%. Yen rose about the same to Y78.76/$ (126.96c/Y100).

I reckon every market is holding its breath now, waiting for word from the EU summit over the sovereign debt crisis, and for word from Wimbledon -- no, no, make that Washington, I get confused about locations when we talk about playing games -- about raising the debt ceiling. That summit takes place tomorrow, but the fix may apply only to Greece. If that's all they accomplish, market won't move much in the aftermath and the euro will probably resume dropping, gold rising, stocks fainting. Remember, the big banks must be bailed out at all costs, if every Greek in the world has to slave for them forever. (I was provoked.)

Gold today bounced back from a firm bottom above $1,581, leaving behind a double bottom with yesterday. Gold reached 1602 but not until after Comex had closed up $4.20 a $1,596.70. Trading now around that $1,602.

If I were a big trader, I would want a flat position before that EU summit announcement, and wait to see how that played out before I went long or short. Governments are famous for surprise parties that wreck trading plans.

Nothing has changed, of course, or will change, so maybe we missed a buying opportunity yesterday. If gold does drop again, buy all the way down to to $1,560. Something over $1,625 lies in the near future.

Silver, too, appears to have made a quick bottom yesterday, although it reached a lower low today at 3814c. I wouldn't swing over Grand Canyon using this for a rope, but my guess is that silver will rise tomorrow, announcement or not. Blocking silver's trajectory is 4000c, then 4075c. Underneath is support at 3800 & 3850c.

I'm going to be interested to observe how silver acts at 4200c, about the only resistance between here & 4982c.

Gold/Silver ratio rose today to 40.376. The only chart I look at that gives me any expectation of lower silver & gold prices -- think one more big down leg to complete the correction from end-April highs -- is that gold/silver ratio chart. BICBW.

Y'all who did swaps from silver to gold at the lowest levels, say, below a spot ratio of 35, need to think about swapping back. To figure roughly your profit in ounces, divide today's ratio by the ratio the day you swapped. If today's ratio is 40.376 and you swapped at 32, then you could gain 40.376/32 = 1.26 or 26% in silver ounces swapping today. Better think about that, & don't get carried away by greed.

On 20 July 1944 Adolf Hitler was wounded in an assassination attempt led by Col. Count Klaus von Stauffenberg. Most of the conspirators were arrested & executed by hanging with piano wire from meat hooks. Once again, we see that the definitions of "patriot" and "traitor & terrorist" depend on one's viewpoint.

On 20 July 1714 (New Style, 1 August old style) took effect in England the Riot Act. The act enabled local officials to order any group of more than 12 to disperse who were "unlawfully, riotously, & tumultuously assembled together" by reading a proclamation, hence our phrase that to put an end to someone's bad behaviour is to "read them the Riot Act." Those not dispersed within one hour were guilty of felony without benefit of clergy punishable by death. Benefit of clergy was a privilege whereby first time offenders could get lesser sentences for felonies. For violating the Riot Act, no such mitigation was allowed, so once you heard it read, you either ran or hanged.

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

— Franklin Sanders, The Moneychanger

Your source for gold and silver. Read our latest reviews and testimonials.
Market Snapshot See more charts and market data
20-Jul-11 Price Change % Change
Gold, $/oz 1,596.70 -4.20 -0.3
Silver, $/oz 39.55 -0.67 -1.7
Gold/Silver Ratio 40.380 0.563 1.4
Silver/Gold Ratio 0.0248 -0.0004 -1.4
Platinum 1,774.80 7.00 0.4
Palladium 793.80 6.55 0.8
S&P 500 1,325.84 -0.89 -0.1
Dow 12,571.91 -15.51 -0.1
Dow in GOLD $s 162.76 0.24 0.1
Dow in GOLD oz 7.87 0.01 0.1
Dow in SILVER oz 317.91 4.87 1.6
US Dollar Index 74.84 -0.38 -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: 1,596.00      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,635.10 1,649.10 1,649.10
1/2 AE 0.50 813.96 837.90 1,675.80
1/4 AE 0.25 406.98 422.94 1,691.76
1/10 AE 0.10 170.77 177.16 1,771.56
Aust. 100 corona 0.98 1,549.54 1,561.54 1,593.08
British sovereign 0.24 373.82 393.82 1,672.98
French 20 franc 0.19 297.97 302.97 1,622.78
Krugerrand 1.00 1,603.18 1,617.18 1,617.18
Maple Leaf 1.00 1,612.00 1,636.00 1,636.00
1/2 Maple Leaf 0.50 835.91 845.88 1,691.76
1/4 Maple Leaf 0.25 418.95 422.94 1,691.76
1/10 Maple Leaf 0.10 162.79 183.54 1,835.40
Mexican 50 peso 1.21 1,911.63 1,926.63 1,597.94
.9999 bar 1.00 1,601.59 1,612.59 1,612.59
SPOT SILVER: 39.75      
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 27,595.43 27,945.43 39.08
US 40% silver 1/2s 0.30 11,282.28 11,497.28 38.97
100 oz .999 bar 100.00 3,984.50 4,024.50 40.25
10 oz .999 bar 10.00 399.45 403.95 40.40
1 oz .999 round 1.00 39.95 41.00 41.00
Am Eagle, 200 oz Min 1.00 41.00 42.90 42.90
SPOT PLATINUM: 1,774.80      
PLATINUM Fine Tr.Oz. BID ASK $/oz
Plat. Am Eagle 1.00 1,774.80 1,874.80 1,874.80
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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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