The Moneychanger
Daily Commentary
Wednesday, 27 July a.d. 2011 Browse the commentary archive

Tomorrow & Friday I will be travelling so will not post any commentaries. However, I will return on Monday, God willing.

Sometimes it's not the BIG things that bother you, but the concatenation of little things. Like working outside and noticing more and more flies, then a little whiff of corruption on the air. Buzzards cruising overhead. Next thing you know, you discover a body.

So today. Here is the pile of stuff insignificant in each item perhaps, but together adding a strange smell to the air:

...wholesale discount on US 90% coin jumped yesterday a nickel and today another nickel, from minus 120 cents to minus 130c in a day. That premium is VERY sensitive to the mood in the silver market. When the discount lessens, the market is looking up. When the discount grows, trouble may be brewing.

...Yesterday platinum and palladium made great leaps ($24.30 & $31.70) but today disgorged much of those gains (-15 & -12.60). Not helpful.

. . . Gold & silver have both stalled. May be only a routine 2-3 day correction, or . . .

. . . Debt ceiling expiry looms, so that's getting closer & closer to resolution, and when 'tis resolved, will rob the metals of that driver.

. . . US dollar bounded up of the trampoline of a new low yesterday (73.527, down 0.537) to recapture all of that loss & then some, gaining 59.3 basis points to 74.067. Chart looks like a sort of spike bottom. Whether a feint or not, if dollar can stay above 74, it's fall has ended.

Euro disappointed all its cheerleaders today by falling back to fill yesterday's gap up and nearing its 50 dma (1.4315). Unless the euro can better yesterday's 1.4526 high, 'tis safe to assume it met the downtrend line's resistance & failed. Yen remains near earthquake highs, closing today at 128.23c per Y100 (Y77.98/$).

As I am blind to the charms of ballet, so I am blind to the seduction of stocks. What do they have that other people see? Today the Dow obliged all its fans by falling 198.75 points (1.59%) to 12,302.55, once again at critical 12,300 support. It's below its 20 dma (12,527) and now its 50dma (12,334). The MACD & RSI have turned firmly down. Dear friends, none of this points upward.

As the Sirens were to Ulysses, so are stocks to today's investors, but unhappily they have not stopped their ears or lashed themselves to the mast.

Gold today hit a new intraday high of $1,628.55 (I told y'all you'd see $1,625) but fell off of that to $1,609.78. Closed Comex at $1,615.10, down $1.70. Technically I recognize that gold made the first half of a key reversal today (new high with lower close), but that must be completed with a lower close again tomorrow.

Gold must remain above $1,605 or turn down. In spite of all the flies buzzing around my head, I believe this is no more than a short correction & that the uptrend will gain yet more before 2 August when the world ends. Well, when all the Chicken Littles who believe we can't feed ourselves or blow our noses without Government Intervention expect the world to end. I don't, & even if it does, I'm old enough and mean enough to buy me a tin bill & make a living pecking with the chickens.

SILVER is in that same boat with gold, posting first half of a key reversal today, new high at 4142c but lower close, down 13.8c at 4055.3c. No omen unless silver closes lower than 4055.3c tomorrow. 4100c proving tougher to penetrate than I expected. Remember that if silver does hold on here, virtually no resistance lies between 4100c & 4980.

I'm holding my breath, but expecting higher silver tomorrow. If silver faints, 3900c is critical must hold line.

On 27 July 1694 the Bank of England received its royal charter and began drinking the nation's blood. Within two years a run on the bank had developed. In 50 years or so the bank owned a public debt in the amount (as I remember) of nearly 50 million pounds sterling, about 11.8 million ounces of gold. Understand that debt as an advance claim on the nation's production -- FOREVER. And of course, our own Federal Reserve keeps up the healthful tradition of the Old Lady of Threadneedle street.

On 27 July 1586 Sir Walter Raleigh returned from Virginia to England with the first tobacco seen there -- bless his heart!

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
27-Jul-11 Price Change % Change
Gold, $/oz 1,615.10 -1.70 -0.1
Silver, $/oz 40.55 -0.14 -0.3
Gold/Silver Ratio 39.830 0.093 0.2
Silver/Gold Ratio 0.0251 -0.0001 -0.2
Platinum 1,789.50 -15.00 -0.8
Palladium 826.05 -12.60 -1.5
S&P 500 1,331.94 -5.49 -0.4
Dow 12,501.30 -91.50 -0.7
Dow in GOLD $s 160.01 -0.99 -0.6
Dow in GOLD oz 7.74 -0.05 -0.6
Dow in SILVER oz 308.27 -1.20 -0.4
US Dollar Index 73.53 -0.54 -0.7
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: 1,614.30      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,657.08 1,671.08 1,671.08
1/2 AE 0.50 828.14 847.51 1,695.02
1/4 AE 0.25 416.69 427.79 1,711.16
1/10 AE 0.10 172.73 179.19 1,791.87
Aust. 100 corona 0.98 1,571.26 1,584.26 1,616.26
British sovereign 0.24 378.11 383.11 1,627.47
French 20 franc 0.19 299.88 304.88 1,633.01
Krugerrand 1.00 1,623.18 1,637.18 1,637.18
Maple Leaf 1.00 1,629.30 1,647.30 1,647.30
1/2 Maple Leaf 0.50 845.49 855.58 1,711.16
1/4 Maple Leaf 0.25 423.75 427.79 1,711.16
1/10 Maple Leaf 0.10 164.66 185.64 1,856.45
Mexican 50 peso 1.21 1,930.63 1,945.63 1,613.69
.9999 bar 1.00 1,619.95 1,630.95 1,630.95
SPOT SILVER: 40.24      
SILVER Fine Tr.Oz. BID ASK $/oz
VG+ Morgan $B4 1905 0.77 31,000.00 33,000.00 43.14
VG+ Peace dollar 0.77 30,000.00 32,000.00 41.83
90% silver coin bags 0.72 27,838.53 28,163.53 39.39
US 40% silver 1/2s 0.30 11,397.33 11,622.33 39.40
100 oz .999 bar 100.00 3,998.50 4,043.50 40.44
10 oz .999 bar 10.00 402.35 409.85 40.99
1 oz .999 round 1.00 40.34 41.14 41.14
Am Eagle, 200 oz Min 1.00 41.99 42.89 42.89
SPOT PLATINUM: 1,789.50      
Plat. Am Eagle 1.00 1,789.50 1,889.50 1,889.50
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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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