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Daily Commentary
Thursday, 4 August a.d. 2011 Browse the commentary archive

Answer to yesterday's question about platinum & palladium is, they dropped when silver rose because they were warning us a day of carnage, chaos, & confusion was coming.

Markets world wide are panicking. The US 10 year treasury note yield has sluiced over the cliff in a waterfall from 29 to 24.58 today. Why is the yield rising? Because the price of the 10 year note is rocketing as people pile into US treasury debt for "safety." How ironic is THAT? No sign of a let up yet. You are watching a classic panic, a "flight to quality" as investors dump everything for what they can get and run for the exits.

Stocks began to plunge in Europe, where the European bank stock index dropped by 4.2% on fears of the banks exposure to sovereign debt of Italy & Spain & Ireland.

European Central Bank head Trichet tried to calm markets by offering banks "unlimited money for six months and extended liquidity measures." Poor feller! In this case his "solution" only confirmed the problem, feeding the panic.

As Apollo and his sunny chariot flew west, they carried contagious fear. US bank stocks plunged like your wife's wedding ring down the kitchen sink drain: Bank of America fell 7.4%, JP Morgan 5%, Citigroup 6.6%.

Trichet's action shows up central banking for the toothless dog it really is. When a panic bites, central banks have only two weapons, and never forget this: LIQUIDITY & BLARNEY. Trichet was firing off both cannons today. They add liquidity to the market by creating more money, and they trot out their "experts" to assure the sheep that those aren't really wolves circling the flock. They will trot out Trichet, Sarcophagus, Merkel, etc., then the Bernancubus, O'Bama, & maybe even Warren "Eat At My" Buffet, if things get really bad. Blarney will cover the floor ankle deep, and ooze out the door.

But in the end, if the sheep don't buy it, they will stampede in panic.

This reminds me a whole lot of August 2008.

Stocks just sank out of sight in their worst fall since the Great Panic of Fall 2008, down 512.76 or 4.31% to 11,383.68. S&P scored even worse, down 60.27 (4.78%) to 1,200.07. Huge falls, huge damage. Look for the Dow at 10,700, maybe lower if Liquidity & Blarney don't take.

Stocks today taught you that they are the investment equivalent of blasting caps and dynamite and why you shouldn't play with them.

Just to rub in how reliable the Dow In Gold Dollars really is, I note that it sank to G$142.09 (6.873 oz). The DiG$ said stocks would fall against gold, and mercy! did they!

US dollar index gained while the euro bled on the ground. Dollar index rose a massive 119.7 basis points or 1.545% to 75.241. Reckon y'all believe me now about the euro & the dollar's coming rally. Meseemeth it hath arrived. Euro dropped a modest 1.61% today to close at 1.4096. Next target is 200 dma at 1.3941, then maybe 1.2000 again.

Nice Government Men in Japan got tired of fooling around with the yen & took a samurai sword to it today. Listen: yen dropped an unheard of 2.60% to Y79/$ (126.43c/Y100). From near its all-time high at 130, dropped clean thru the 20 DMA to the 50 DMA. They mean business. Europe, you keep that panic in your own back yard. No room for refugees in the yen!

Back to Platinum & Palladium for a moment, obscuring for the nonce my negligence in not paying closer attention to them. Platinum peaked 1 May & has been trending down since. Today's fall nearly carried to the previous low at 1,666.20. Momentum now firmly down. Horrible chart. Palladium worse. Dropped in 4 days from 850.20 to 745.50, smashing through 50 dma & 200 dma (759.47) today like throwing rocks thru a schoolhouse window. Yes, it made higher highs after the May 1 high, but it will be a LONG time recovering from this wound. None of that speaks particularly comforting words for silver & gold.

Under today's battering gold help up very well. It was making new highs at 1,681.90 from 10 to 11:00, then about 11:45 the plug was pulled and it fell straight to $1,637.60 by 12:30 before it rallied. Comex closed down only 7.20 at $1,656.20. In the aftermarket it's trading now at 1,648.60, clearly NOT a panic out of gold.

Watch that $1,640 mark. If this befuzzled market intends to whipsaw again, gold won't drop much below that. On the other hand, a stiffer decline will carry gold down to $1,605, the MUST HOLD line.

Looking at the one year chart, today probably marked a significant reversal that may eventually reached the 50 dma (1,558.26). I'm not predicting that, because gold could also catch around $1,620 or even $1,605, but you have to look all the possibilities in the eye or you'll spend all your time surprised and puking in the wastebasket.

Silver's range today from its 4224c high to its 3941.8c low was -- ready? -- 380.5c. [Pained groan] Silver was rocking along just fine above 4160c, until 11:30 when somebody turned on the waterfall, clean down to 3850c by 1:30. Comex staggered up to 3941.8, down a monstrous 232.9c, but the aftermarket shaved off another 50c to 3888.5c. The fall below 3900c support (and thru the 20 dma at 3928c) shouts that lower prices will follow, most likely to the 200 dma at 3359c. Don't forget that must be confirmed tomorrow by a lower close (he mumbled to hedge his forecast).

Most insistent indicator of lower silver prices is the gold/silver ratio jumping 5.4% today to 42.016. Ratio high so far (since May 1) has been about 44.8. Break above that should bring the opportunity we have longed for to swap gold for silver.

See, every dark cloud has a silver lining.

LONG TERM -- Step back from the day's panic and lift your eyes to yon horizon. NOTHING HAS CHANGED. All of the inflationary structure driving silver & gold remains in place, and is in fact kicking into high gear -- witness Trichet's clich├ęs today. Today only proves once again what I have long warned: you must take up your positions in good time, BEFORE panic seizes the herd. That's another reason to buy silver & gold in an ever-changing world.

On 4 August 2011 a New York jury acquitted John Peter Zenger of seditious libel for reporting the truth about the royal New York governor in his New York Weekly Journal. This is widely touted as the beginning of "freedom of the press," but today we know that the press is not free if you don't own one, and if you do, you can lie all you want. More than a victory for freedom of the press, it was a victory for the rights of juries. In the teeth of the law & politics, the jury refused to convict on grounds that the truth cannot be libelous, regardless what the law says. Now if you are ever picked for jury duty, SHAME on you if you dodge it, for you may be forsaking some poor innocent soul who needs your help.

Not for naught is the jury called "the palladium of liberty," for far more than some ghostly freedom of the press, the jury is the most powerful body in American law. One single juryman dissenting means NO CONVICTION, and that juryman cannot be held accountable for his vote (barring malfeasance such as bribing). A single brave juryman can end government oppression, stop it cold!

People blather about the constitution and our 3-branched government without understanding how suspicious our founders were of governments and their readiness to abuse power. HOGWASH. They knew better than to trust their liberty to elected officials & their truckling hirelings. They established a FIVE branched government, with two last ramparts OF THE PEOPLE against oppression. There's the grand jury, which can refuse to indict although it has today been usurped by tyrannical prosecutors to be the government's tart. Yet even if the grand jury is highjacked, the founders left you the shield of liberty, the trial jury, who are regardless what any lying judge tells you to the contrary, the absolute judge of both facts AND LAW.

Thank God for the brave John Peter Zenger, but thank him more zealously for the brave jury that acquitted him!

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
4-Aug-11 Price Change % Change
Gold, $/oz 1,656.20 -7.20 -0.4
Silver, $/oz 39.42 -2.33 -5.6
Gold/Silver Ratio 42.020 2.172 5.5
Silver/Gold Ratio 0.0238 -0.0013 -5.2
Platinum 1,721.90 -59.90 -3.4
Palladium 745.50 -50.00 -6.3
S&P 500 1,200.07 -60.27 -4.8
Dow 11,383.68 -512.76 -4.3
Dow in GOLD $s 142.09 -5.74 -3.9
Dow in GOLD oz 6.87 -0.28 -3.9
Dow in SILVER oz 288.79 3.83 1.3
US Dollar Index 75.24 1.20 1.6
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: 1,648.60      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,686.52 1,700.52 1,700.52
1/2 AE 0.50 845.73 865.52 1,731.03
1/4 AE 0.25 425.54 436.88 1,747.52
1/10 AE 0.10 176.40 182.99 1,829.95
Aust. 100 corona 0.98 1,604.65 1,617.65 1,650.32
British sovereign 0.24 386.14 391.14 1,661.60
French 20 franc 0.19 306.25 311.25 1,667.14
Krugerrand 1.00 1,661.79 1,675.79 1,675.79
Maple Leaf 1.00 1,663.60 1,681.60 1,681.60
1/2 Maple Leaf 0.50 863.45 873.76 1,747.52
1/4 Maple Leaf 0.25 432.76 436.88 1,747.52
1/10 Maple Leaf 0.10 168.16 189.59 1,895.89
Mexican 50 peso 1.21 1,971.65 1,986.65 1,647.72
.9999 bar 1.00 1,654.37 1,665.37 1,665.37
SPOT SILVER: 38.89      
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 27,052.03 27,377.03 38.29
US 40% silver 1/2s 0.30 10,999.08 11,224.08 38.05
100 oz .999 bar 100.00 3,863.50 3,908.50 39.09
10 oz .999 bar 10.00 388.85 396.35 39.64
1 oz .999 round 1.00 38.99 39.79 39.79
Am Eagle, 200 oz Min 1.00 40.64 41.54 41.54
SPOT PLATINUM: 1,721.90      
PLATINUM Fine Tr.Oz. BID ASK $/oz
Plat. Am Eagle 1.00 1,721.90 1,821.90 1,821.90
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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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