The Moneychanger
Weekly Commentary
Friday, 22 July a.d. 2011 Browse the commentary archive
Here's the weekly scorecard:
  15-Jul 18-Jul Change % Change
Silver, cents/oz. 3,906.30 4,011.30 105.00 2.7
Gold, dollars/oz. 1,589.80 1,601.30 11.50 0.7
Gold/silver ratio 40.698 39.920 -0.780 -1.9
Silver/gold ratio 0.0246 0.0251 0.0005 2.0
Dow in Gold Dollars (DIG$) 162.25 163.71 1.45 0.9
Dow in gold ounces 7.85 7.92 0.07 0.9
Dow in Silver ounces 319.44 316.14 -3.30 -1.0
Dow Industrials 12,478.21 12,681.16 202.95 1.6
S&P500 1,315.79 1,345.02 29.23 2.2
US dollar index 75.14 74.22 -0.92 -1.2
Platinum 1,760.30 1,795.40 35.10 2.0
Palladium 782.35 806.95 24.60 3.1

Let numbers speak, not opinions, ratiocinations, & interpretations. Through all the up & down, silver & gold held their ground gained this week. Stocks added a little, while the dollar fell. Platinum gained 2% and palladium with +3.1% was the big gainer for the week.

Now come the opinions, ratiocination, interpretations, & wild guesses.

The intraday Dow high at 12,754 was matched almost exactly by yesterday's 12,751. Either that marked a double top whence the Dow will fall, or it is merely pausing in a new rally.

Favoring a rally is the Dow's position above its 50 & 20 DMAs (12,343 & 12,465). Also the 20 DMA crossed above the 20 a week ago, turning the momentum up. So it can rise further still.

Stocks were confused today. Dow fell 43.25 to 12,681.16 while the S&P500 rose 1.22. Last two days action on the daily chart is rolling over floorward.

I've been over & over stocks in my mind, & I just can't get around the gigantic facts. In inflation adjusted terms, stocks have lost since 2000. In silver & gold terms, they've lost more than 80%, with another 80% to go. I know there must be some reason that people want to own stocks, I simply cannot imagine what it might be.

Stocks remain the Vanishing Crème in the Investment Make-up Cabinet. Rub it in, your capital vanishes.

Sobriety bit today after yesterday's drunken enthusiasm over the Greek bail-out deal -- maybe I ought to call that a "deal-ette", since it ain't much of a deal -- and the US dollar index rose 20.9 basis points to 74.224, up 0.27%. Doesn't help the technical damage dollar did yesterday by falling through the uptrend line from May. Only question now is which previous bottom will catch the dollar, 74.11, 73.50, or 72.70? Yesterday's goose carried the euro only to the downtrend line, not thru, & today it gave a chunk of that back. Closed 1.4372, down 0.37%. Remains barely above 50 & 20 DMAs, which are paralleling each other (1.4301 & 1.4273). Euro remains locked in a downtrend, in spite of all the help the Nice Government Men & Benevolent Central Bankers have given it.

Japanese yen broke out upwards two weeks ago and at yesterday's high of Y78.22/$ (127.85c/Y100) threatens the earthquake high at 128.79. BoJ NGM must be having three hissy fits.

Tuesday, Wednesday, Thursday, & today gold has traced out a giant W on its chart, with a double bottom at roughly $1,580 - $1,585. If anybody still thought he could parse this market, he was handed his head again today. After the European bail out was announced, gold fell to $1,585. Pressure of Greek default removed, bailout arranged ought to have eased demand for gold, right? Wrong. Came roaring back today, up $14.50 to $1,601.30 on Comex and an intraday high at $1,607.

What else can you say but, "Gold will move higher next week." It will break through $1,607 & keep on going, since it refused to break down when the euro deal was announced.

Here's an intriguing tidbit. Soon there will be no gold coins that sell for less than $100. There's the Mexican two pesos (0.0482 oz) for about $78 and the Mex 2-1/2 pesos (0.0603) for $97. If they were available, the old US $1 gold pieces (0.048375) would cost about $78. When that $1.00 gold piece reaches $100, that is, 1/100th of the paper dollar's 1913 value, gold will stand at $2,067.18, a mere 29% above its present value.

Silver's spike bottom on Wednesday marked the beginning of another uptrend, or at least yesterday's and today's lows were higher than Wednesday. Silver was stymied by 4025c today, but refused to sink lower than 3889c. Comex gained a staggering 117.6c to close Comex at 4011.3c, over 4000c again.

Standing in the way is resistance just under 4100c. Once silver crosses that, y'all must bear in mind, virtually no resistance appears before the last high at 4982c. Meanwhile the 20 DMA (3682c) crossed above the 50 DMA (3633c) & other momentum indicators have turned up. I have to conclude silver will move higher next week.

Yes, I know it's all out of season & unexpected, but even against the tide of "good" news out of Europe, silver & gold are determined to rise. Don't stand in their way, they'll bruise you.

O, black day! On 22 July 1944 the Bretton Woods (New Hampshire) Conference created the International Monetary Fund & the post war monetary arrangements with the dollar only fixed to gold and every other currency fixed to the dollar. For the US economy it was a one way ticket to hell, because it guaranteed that US manufacturers were subjected to rising costs and lower prices thru domestic inflation, while their international competitors exporting to America had falling costs and rising prices by receiving gold-convertible dollars. Great idea, Nice Government Geniuses. Any wonder American industry dwindled over the next 30 years?

Footnote: For perverse reasons hidden to me, I always get the date of the First Battle of Manassas wrong. Correct is 21 July 1861. Also, I mentioned that First Manassas gave Thomas Jonathan Jackson his nickname, Stonewall. I should have mentioned also that Jackson cannot be understood without understanding the depth & sincerity of his faith, but the same can be said of most Southern commanders. Dabney's contemporaneous biography of Jackson is available from Sprinkle Publications in Harrisonburg, Virginia, and I strongly recommend it. However, James Robertson's Stonewall Jackson: The Man, the Soldier, the Legend (about 1996) is the very best and most human depiction of Jackson, a wonderfully engaging book.

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
22-Jul-11 Price Change % Change
Gold, $/oz 1,601.30 14.50 0.9
Silver, $/oz 40.11 1.18 3.0
Gold/Silver Ratio 39.920 0.350 0.9
Silver/Gold Ratio 0.0251 0.0007 3.0
Platinum 1,795.40 11.30 0.6
Palladium 806.95 0.45 0.1
S&P 500 1,345.02 1.22 0.1
Dow 12,681.16 -0.94 -0.0
Dow in GOLD $s 163.71 -1.49 -0.9
Dow in GOLD oz 7.92 -0.07 -0.9
Dow in SILVER oz 316.14 -9.57 -2.9
US Dollar Index 74.22 0.21 0.3
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: 1,602.40      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,646.47 1,660.47 1,660.47
1/2 AE 0.50 817.22 841.26 1,682.52
1/4 AE 0.25 408.61 424.64 1,698.54
1/10 AE 0.10 171.46 177.87 1,778.66
Aust. 100 corona 0.98 1,555.75 1,567.75 1,599.42
British sovereign 0.24 375.32 395.32 1,679.35
French 20 franc 0.19 299.17 304.17 1,629.18
Krugerrand 1.00 1,614.42 1,628.42 1,628.42
Maple Leaf 1.00 1,618.40 1,642.40 1,642.40
1/2 Maple Leaf 0.50 839.26 849.27 1,698.54
1/4 Maple Leaf 0.25 420.63 424.64 1,698.54
1/10 Maple Leaf 0.10 163.44 184.28 1,842.76
Mexican 50 peso 1.21 1,919.30 1,934.30 1,604.29
.9999 bar 1.00 1,608.01 1,619.01 1,619.01
SPOT SILVER: 40.12      
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 27,827.80 28,177.80 39.41
US 40% silver 1/2s 0.30 11,392.90 11,607.90 39.35
100 oz .999 bar 100.00 4,022.00 4,062.00 40.62
10 oz .999 bar 10.00 403.20 407.70 40.77
1 oz .999 round 1.00 40.32 41.37 41.37
Am Eagle, 200 oz Min 1.00 41.37 43.27 43.27
SPOT PLATINUM: 1,795.40      
Plat. Am Eagle 1.00 1,795.40 1,895.40 1,895.40
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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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