The Moneychanger
Weekly Commentary
Friday, 5 August a.d. 2011 Browse the commentary archive
Here's the weekly scorecard:
  29-Jul 5-Aug Change % Change
Silver, cents/oz. 4,009.20 3,819.70 -189.50 -4.7
Gold, dollars/oz. 1,628.30 1,648.80 20.50 1.3
Gold/silver ratio 40.614 43.166 2.550 6.3
Silver/gold ratio 0.0246 0.0232 -0.0015 -5.9
Dow in Gold Dollars (DIG$) 154.16 143.65 -10.51 -6.8
Dow in gold ounces 7.46 6.95 -0.51 -6.8
Dow in Silver ounces 302.88 299.97 -2.91 -1.0
Dow Industrials 12,143.24 11,457.93 -685.31 -5.6
S&P500 1,292.28 1,201.16 -91.12 -7.1
US dollar index 73.87 74.49 0.62 0.8
Platinum 1,778.10 1,719.00 -59.10 -3.3
Palladium 826.10 740.10 -86.00 -10.4

Despite the turmoil this week, gold managed to gain $20.50, while silver took a bad whupping with a barbed wire whip, but nothing compared to stocks. Platinum tanked and palladium busted. Leave them alone.

Can you picture how the phone lines are heating up from central bank to central bank around the world? Hot enough to fry peppers. Poor Nice Government Men, trying to prop up the euro & stop that money from flying into their own currency. Japanese were brash enough to come out and announce it.

US Dollar Index today lost 63.5 basis points to 74.489, down 0.82%. Gave back half of what it gained yesterday. THIS is how NGM "stabilize" markets.

Despite all, Dollar Index has certainly not broken down and is still grinding out a bottom from which to stage a rally. Remember than in 2008 dollar rallied from 76.15 in late September to 88.19 in November. Panic does that.

Euro mysteriously rose today to close 1.4291, up 1.35%. A great Potemkin currency. Look for 120.

Yen regained some of yesterday's huge loss, closing Y78.43/$ (127.51c/Y100). Still below 20 day moving average and still with that samurai sword hanging over it.

I was just curious what the measured targets of those head and shoulders formations in the S&P500 & Dow might be, so I calculated them: 10,904 for the Dow & 1,140 for the S&P500. Now I know the problem with watching markets is that we grow too pessimistic when the market's dropping and too optimistic when it's rising. You might see a sudden rally back up to 12,000. Might. But 10,904 isn't far from here, either.

Dow rose 0.65% or 74.25 points today to close at 11,457.93. Muse a moment. January 2000 [sic] high was 11,722. Ten years later, stocks are still where they were. Merely to have stayed even with inflation the Dow would have to be 15,365. That's nearly a 25% purchasing power loss. In the same time they've lost over 80% against gold and silver.

Stocks -- like sending out for the barber to bleed you when you have pneumonia.

GOLD couldn't quite make up its mind today, ranging from 1670 to 1647.75, but closed near the day's low on Comex at $1,648.80, down $7.40. Then in the aftermarket it kept climbing to $1,663.

Don't get too excited about that. It can well be explained as shorts covering before the weekend in what may be a world wide panic. Anyway, it didn't take gold high enough to do anything more than establish a downtrend with a lower high. Gold has drawn its line in the sand at $1,640. Strong support lurks at $1,605. If gold closes above $1,680, that will tell us it has decided to RISE during this financial crisis instead of falling.

Look for lower gold.

If I contented myself with saying silver had lost 189.5c from Friday to Friday, I would be calling King Kong a "fair-sized monkey." From the week's high close at 4174.7c silver lost 355c to close Comex today at 3819.7c. It lost 122.1c today.

Gold/Silver ratio closed at 43.166, up a full ounce from yesterday.

Silver had a huge 230c range today from 3981 to 3749. After yesterday's huge waterfall silver's bounce was tiny, and regained nothing. Climbed in the aftermarket a little, but clearing books for the looming weekend explains that.

Silver will move lower. First target is the 200 day moving average, now at 3366c. Any close above 4175c gainsays that.

The mess in Europe is not fixable. The banks might be cobbled together again, but not without swift, decisive measures. Of all the EU government & EC responses, none have been swift and decisive. Since they have only two weapons, Liquidity & Blarney, they have only one choice: PRINT MORE MONEY. Caught in the deadly contagion of crisis & panic in the interwebbed world of Globalism they themselves have woven, US authorities will respond with the same weapon: PRINT MORE MONEY.

This will worsen all the economic problems, perhaps even ushering in a hyperinflationary depression. In the immediate future there's better than a 50/50 chance Europe will drag the US into crisis. Here are my suggestions for self-protection:

1. Get liquid. Pay down debt as much as you can. Sell non-performing investments, like stocks, or investments that will suffer from depression or inflation.

2. Close out leveraged positions. Markets are way too volatile for that.

3. Hold on to silver & gold.

4. Hang on to cash anticipating great bargains in a crisis. Remember gold went to $700 & silver to 880c. Gold/silver ratio went to 84, offering a great gold to silver swap. Not expecting those numbers again, but we might see the analogs.

5. Fill up propane tanks, home gasoline or diesel tanks.

6. Stock up on food -- long term storage food, not smoked oysters & tomato soup. Rice, for instance. Dehydrated food. MREs.

7. Stock up on ammo.

8. Get out of the city, or at least have a country place waiting to receive you.

Don't wait, and don't misunderstand. The numbers above are NOT my targets for silver & gold. As yet I am not even sure gold will act as it did the last time, plummeting while the dollar rocketed. Maybe gold will drain off some of that flight to quality from the dollar.

Don't be fooled by my calm words, either. Y'all are reading the equivalent of an air raid siren, and y'all had better run for cover.

MILK NAZIS STRIKE AGAIN! Government guardians of the public health are at it again, arresting the owners of Rawesome Foods in Los Angeles & even the head of the local Weston A. Price Foundation chapter. What called forth the SWAT team? Milk. Deadly raw milk. You see, in Los Angeles the murder rate is so low, and drug traffic so rare, the authorities have time to focus on the real criminals who dare to sell raw milk, which, after all, has not yet been proven safe in the 6,500 years mankind has been guzzling it. If the government didn't stop this insolent crime why, health might break out all over, & what would we do then? Who would drink the High Fructose Corn Syrup soft drinks? Who would take all Big Pharma's drugs? It would be a national catastrophe.

The purpose of all regulation is to stifle competition. Milk is the most consumed food in the US. Who subsidizes the milk industry that produces all that dead and deadly pasteurized milk? Whoops -- the US government.

My dear friend Catherine Austin Fitts published an article today analyzing the effect of stifling competition. Y'all will want to go read it at Don't miss it.

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
5-Aug-11 Price Change % Change
Gold, $/oz 1,648.80 -7.40 -0.4
Silver, $/oz 38.20 -1.22 -3.1
Gold/Silver Ratio 43.170 -0.180 -0.4
Silver/Gold Ratio 0.0232 -0.0007 -3.1
Platinum 1,719.00 -62.80 -3.5
Palladium 740.10 -5.40 -0.7
S&P 500 1,201.16 1.09 0.1
Dow 11,457.93 74.25 0.7
Dow in GOLD $s 143.65 1.58 1.1
Dow in GOLD oz 6.95 0.08 1.1
Dow in SILVER oz 299.97 11.18 3.9
US Dollar Index 74.49 -0.64 -0.8
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: 1,663.30      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,706.55 1,720.55 1,720.55
1/2 AE 0.50 853.27 873.23 1,746.47
1/4 AE 0.25 429.34 440.77 1,763.10
1/10 AE 0.10 177.97 184.63 1,846.26
Aust. 100 corona 0.98 1,618.95 1,631.95 1,664.92
British sovereign 0.24 389.58 394.58 1,676.22
French 20 franc 0.19 308.99 313.99 1,681.76
Krugerrand 1.00 1,674.94 1,688.94 1,688.94
Maple Leaf 1.00 1,678.30 1,696.30 1,696.30
1/2 Maple Leaf 0.50 871.15 881.55 1,763.10
1/4 Maple Leaf 0.25 436.62 440.77 1,763.10
1/10 Maple Leaf 0.10 169.66 191.28 1,912.80
Mexican 50 peso 1.21 1,989.23 2,004.23 1,662.30
.9999 bar 1.00 1,669.12 1,680.12 1,680.12
SPOT SILVER: 38.27      
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 26,612.30 26,937.30 37.67
US 40% silver 1/2s 0.30 10,817.65 11,042.65 37.43
100 oz .999 bar 100.00 3,802.00 3,847.00 38.47
10 oz .999 bar 10.00 382.70 390.20 39.02
1 oz .999 round 1.00 38.37 39.17 39.17
Am Eagle, 200 oz Min 1.00 40.02 40.92 40.92
SPOT PLATINUM: 1,719.00      
Plat. Am Eagle 1.00 1,719.00 1,819.00 1,819.00
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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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