The Moneychanger
Weekly Commentary
Friday, 29 July a.d. 2011 Browse the commentary archive
Here's the weekly scorecard:
  22-Jul 29-Jul Change % Change
Silver, cents/oz. 4,011.30 4,009.20 -2.10 -0.1
Gold, dollars/oz. 1,601.30 1,628.30 27.00 1.7
Gold/silver ratio 39.920 40.614 0.690 1.7
Silver/gold ratio 0.0251 0.0246 -0.0004 -1.7
Dow in Gold Dollars (DIG$) 163.71 154.16 -9.54 -5.8
Dow in gold ounces 7.92 7.46 -0.46 -5.8
Dow in Silver ounces 316.14 302.88 -13.25 -4.2
Dow Industrials 12,681.16 12,143.24 -537.92 -4.2
S&P500 1,345.02 1,292.28 -52.74 -3.9
US dollar index 74.22 73.87 -0.36 -0.5
Platinum 1,795.40 1,778.10 -17.30 -1.0
Palladium 806.95 826.10 19.15 2.4

I got home a bit earlier than expected, so have an opportunity to send y'all a commentary.

Behold the scoreboard! Gold moved to new resistance area, silver held on, Stocks down 4.2%, platinum lost a little, palladium jumped 2.4%.

Stocks fainted badly toward end of the week. Dow today closed 12,143.24, down 96.87 or 0.8% & the S&P500 fell below 1,300 to 1,292.28, down 8.39 or .65%. What meaneth this fall? It crashed through 12,300 support, which was also below the last low and nears 12,000 support. Momentum headed earthward as Dow stands below 20 dma (12,512) & 50 DMA (12,321). Looking sick, & if 12,000 holdeth not, greet 11,875, then 11 555.00

Stocks: the broken tooth in your Inventory of Investment Dental Health.

By the way, NEVER forget this: the Keynesian notion that government spending & borrowing can bring prosperity, & that government can or should run the economy, is the most pernicious political idea in the modern world. Until that doctrine, which the Federal Reserve & yankee government follow mindlessly, is destroyed, there is no economic hope for the United States.

USA TODAY, which is the richest source of outright stupidity and perverse misinformation in our corner of the Milky Way Galaxy, and is written at a 4th grade level as well, PERFECTLY encapsulated in one meager paragraph all the wrong thinking that is killing the American economy today. It's really not often that stupidity reaches the Olympian level, but here it is:

"All things being equal, lower [government]spending translates into slower economic growth, since it means cuts in payments to contractors, layoffs of government employees, and smaller entitlement checks. Already in 2011, softer government spending has sapped growth."

Get this straight: all government spending curbs economic growth. All of it. Government produces nothing, therefore must take all its money from producers by taxation or inflation. Government spending misdirects resources, so is worse than merely setting a match to the bills. It actively MALinvests resources & wastes them. Third, government spending starves genuine entrepreneurs & producers for capital. I have another 874 points here, but that will do for starters.

With that bone out of my throat, I will continue.

US DOLLAR INDEX fell 35.4 basis points today, after climbing above 74 yesterday. Now treading at 73.868, down but not hurting. How dare I say that? the 5 day chart shows a sudden drop and bottom on Tuesday & Wednesday, like a spike or island reversal (but not exactly). Of that bottom the buck launched from 73.4 to 74.4, & remember that 74.5 was the last low and so support. Dollar bottoms slowly, & that's what this looks like. Close next week above 20 DMA (74.75) & 50 DMA (74.81) argues dollar is headed for higher latitudes.

Euro spiked up this week, but failed after a one day gap-up rally. Now fidgeting around with its 50 & 20 DMAs. Has failed to break thru resistance.

Yen today reached a higher high than the earthquake brought on in March, 130.17c/Y100 (Y76.82/$) today against 128.79 (77.64) then. Expect the Nice Government Men who work for treasury & Bank of Japan to counterattack next week to drive the yen down. Japanese export-driven economy (in their Keynesian thinking) can't afford a high yen.

GOLD today reached a new intraday high as well as a new closing high. When New York opened today gold was wallowing at $1,615, then launched like a rocket clean thru $1,625 resistance to $1,632.45. My $1,625 target has now been reached -- let's see if gold can reach $1,670, too. Comex closed up $14.90 at $1,628.30.

Not clear to me, after last week's performance, that gold is being driven by the US debt ceiling farce or not. Certainly, that is contributing to gold's ebullience, but last week when the Euros "solved" Greece's crisis with a bailout, gold fell the first day & completely recovered the next. More than fear is driving gold, but more what?

Debt ceiling limit day falls on 2 August, so it will be interesting to see what happens. That is hanging over the gold market like a cloud, & when it is removed gold will react one way or the other. Everybody expects it to drop, so maybe gold will oblige by rising. No sure thing here, EXCEPT that over the next 3 - 10 years gold will move higher.

Silver gained nothing this week, but that doesn't quite tell the whole story. It performed well up until Wednesday & Thursday, when it staged a usual correction. Today it regained most of that loss, but 4100c remains as solid resistance. Comex silver closed at 4009.2, up 31.3c.

Are we watching silver assume more monetary allure? Rather than falling away from gold as it responds to financial crisis, it has been rising. That shift has been taking place throughout the precious metals bull market, but is it speeding up?

Anyone with two brain cells left to rub together would be anxious about recommending silver & gold here, staring at a financial crisis deadline in four days, because all their recent strength MAY have arisen out of that fear. Possible certainly they will make another plunge downward before launching a lasting rally. STILL & ALL, silver is proving itself more resilient. If gold is higher or steady the second day after a debt ceiling is announced, it will extend its rally MUCH further before stopping, & take silver thru 5000c.

On this day in 1950 Disney's movie of Robert Louis Stevenson's "Treasure Island" was released. If you didn't like that movie, you weren't paying attention.

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
29-Jul-11 Price Change % Change
Gold, $/oz 1,628.30 14.90 0.9
Silver, $/oz 40.09 0.31 0.8
Gold/Silver Ratio 40.610 0.369 0.9
Silver/Gold Ratio 0.0246 0.0002 0.8
Platinum 1,778.10 -10.90 -0.6
Palladium 826.10 -2.40 -0.3
S&P 500 1,292.28 -8.39 -0.6
Dow 12,143.24 -96.87 -0.8
Dow in GOLD $s 154.16 -2.65 -1.7
Dow in GOLD oz 7.46 -0.13 -1.7
Dow in SILVER oz 302.88 -4.82 -1.6
US Dollar Index 73.87 0.35 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: 1,624.40      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,666.63 1,680.63 1,680.63
1/2 AE 0.50 833.32 852.81 1,705.62
1/4 AE 0.25 419.30 430.47 1,721.86
1/10 AE 0.10 173.81 180.31 1,803.08
Aust. 100 corona 0.98 1,581.09 1,594.09 1,626.29
British sovereign 0.24 380.47 385.47 1,637.52
French 20 franc 0.19 301.76 306.76 1,643.06
Krugerrand 1.00 1,637.40 1,651.40 1,651.40
Maple Leaf 1.00 1,639.40 1,657.40 1,657.40
1/2 Maple Leaf 0.50 850.78 860.93 1,721.86
1/4 Maple Leaf 0.25 426.41 430.47 1,721.86
1/10 Maple Leaf 0.10 165.69 186.81 1,868.06
Mexican 50 peso 1.21 1,942.71 1,957.71 1,623.71
.9999 bar 1.00 1,630.09 1,641.09 1,641.09
SPOT SILVER: 40.00      
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 27,702.68 28,027.68 39.20
US 40% silver 1/2s 0.30 11,326.53 11,551.53 39.16
100 oz .999 bar 100.00 3,974.50 4,019.50 40.20
10 oz .999 bar 10.00 399.95 407.45 40.75
1 oz .999 round 1.00 40.10 40.90 40.90
Am Eagle, 200 oz Min 1.00 41.75 42.65 42.65
SPOT PLATINUM: 1,778.10      
Plat. Am Eagle 1.00 1,778.10 1,878.10 1,878.10
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© 2015 Little Mountain Corporation, d.b.a. The Moneychanger. All rights reserved. May not be republished in any form, including electronically, without our express permission.

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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