The Moneychanger
Daily Commentary
Tuesday, 9 August a.d. 2011 Browse the commentary archive

Today's markets simply couldn't be traded. Too volatile, offering the opportunity to lose money both downside & upside. Look at these ranges:

Stocks, 11,124.01 to 10,604.07 -- 519.94 points or 4.8%

Gold, 1,776.95 to $1,720.85 -- $56.10 or 3.3%

Silver, 3953.7c to 3697c -- 256.7c or 6.9%

Yassir, yassir, that there central bank the Federal Reserve sure enough stabilizes the economy, don't it?

The commissars of the Federal Open Market Committee met today & it seems the utterly unwonted honesty of their statement put heart into stock buyers. The statement admits that the economy is pretty bad, and promises to keep the federal funds rate low at least through mid-2013 [sic]. The stock market, which apparently attracts only brain dead investors , rose on this news, although it guarantees the following:

1. The Fed has learned nothing from its failures so far, since, say, 2006 or 1913, whichever starting point you prefer, & will keep on hitting the economy in the head with a ball peen hammer.

2. The Fed will not allow the economy to clear itself of bad investments induced by its previous inflation, so there will be no purging & therefore no recovery. The bankrupt will be kept alive & the price lowering that would clear the market will be stymied. Therefore instead of a one year panic and two year recession, we will get a 20 year Depression.

3. The Fed will continue to keep interest rates artificially low, thus misdirecting more capital into more bad investments.

4. The Fed will continue to inflate the money supply, & so continue to boost silver & gold.

5. The Fed commissars call rising prices "inflation," proving inconclusively that they are so abysmally ignorant that they cannot tell cause ("inflation" or increasing the money supply which only they can do) from effect ("higher prices," caused by inflating).

FOLKS, THE FUTURE HAS NEVER BEEN MORE SECURE FOR SILVER & GOLD, THE OUTLOOK NEVER BRIGHTER. Morons are flying the 747 Jumbo Jet of the US economy straight into the Rocky Mountains. Fasten your seat belts.

And to that list of emergency measures I published a few days ago, add this:

"Reduce all cash balances in banks to an absolute minimum, the amount you need for not more than a couple of months' expenses, & pull out the rest and hold in physical green currency in your own hot hands or in silver or gold."

I don't necessarily recommend this swap, but if you ever intend to swap gold for platinum, the time to do it is when the ratio of platinum/gold is 1:1. It's there now. Don't put more than 10% of your precious metals portfolio into platinum. Again, platinum supply & demand is too quirky & too much determined by industrial demand for me to buy it, but some people want it.

Anent the gold/silver swap, listen carefully. Read this twice, please. Today the gold/silver closing ratio rose 5.8% to 45.938. That is a new post-May 1 correction high, above the last high at 44.84. MOST LIKELY that means the ratio will move much higher, moreso since it has climbed above the 200 day moving average at 43.85. IF and only IF you swapped silver for gold at a REALIZED ratio of 35 or lower, you ought to be thinking hard about swapping back into silver, because you have a 30%+ profit in ounces. Might want to wait a few days, just to see if it will hit 50. but then again, a bird in the hand is worth two in the shadowy future.

IF you swapped gold for silver at a realized ratio ABOVE 35:1, don't swap yet.

Figure your approximate profit in ounces by dividing your REALIZED ratio by today's spot ratio. If it equals 1.20, then a swap would net you roughly 20% in ounces.

I am not in a hurry to swap because I'm not convinced the crisis/panic has ended yet. However, I remember the proverb, "Bears get rich, and bulls get rich, but pigs get slaughtered." If a 20% or 30% profit in ounces satisfies you, you can swap back into silver now.

US DOLLAR INDEX lost a whopping 86.5 basis points (1.11%) driving it all the way back to 73.926, below psychological support at 74 and near the last low (July) at 73.42. Surely, surely the Fed struck the dollar a wicked blow with a stout cudgel, but their blow broke it not. Rally still brews on.

The euro rose to 1.4341, up 1.19%. I wouldn't buy euros with your money. Yen, like Frankenstein, has risen from the dead, shaken off the samurai thrusts of the Japanese NGM, and risen nearly clean back to its all time high. Closed today at Y77.05/$ (129.78c/Y100). What's this world coming to, when everybody refuses to believe the Nice Government Men?

Stocks were trying to rise today, but about 2:30 lost wind & sank underwater, only to rise 300 points in less than an hour. But before it did it hit my 10,700 Dow target & then some, falling to 10,604.07.

Dow closed up 429.92 (3.98%) at 11,239.77. S&P500 gained 4.74% or 53.07 points to close 1,172.53. Friends, these are bizarre markets. Generally one only sees such extreme volatility at big market tops and bottoms, but the Fed seems to be causing this one. Fear not, Bears! The fall will resume, as suddenly as the rally began.

Stocks -- they are the Stanley Steamer in the line-up of Investment Automotive Choices.

GOLD tried thrice to push thru $1,780 today and failed thrice. Support underneath lies at $1,740, stronger at $1,720, stronger still at $1,680. Do NOT count gold out yet. It might yet pierce $1,780 and run clean to $2,000. Might even do that after a couple days' retracement. As long as gold remains above $1,720, anything can happen. Point & Figure chart is still calling for $2,090.

You don't see markets like today once in 20 years.

SILVER laboreth beneath that cloud of a breakout in the gold/silver ratio to a new high, portending lower silver value against gold. For the past two days silver has traded down from 4000c, and hit a new low today at 3697c. If it breaches 3700c, then will probably hit the 200 dma at 3381c or go lower.

Y'all keep asking me why gold is out-performing silver, & I say again, silver tends to trend against gold in the same direction as stocks. In financial panics, such as what we have now, money flees to gold rather than silver. Later, silver will regain its losses against gold and then some. Silver is offering you a "golden" opportunity to buy at lower prices. You are virtually shooting fish in a barrel when you buy silver, as it will OVER THE LONG TERM rise faster than gold, if not day by day.

BOTTOM LINE: Gold may have topped for this leg today, stocks may have bottomed for the move, silver has further to drop, but will probably rise tomorrow. Dollar still trying to bottom & rally. Play defense! Anything can happen. Panic not past.

Y'all have mercy on me. Yesterday was brutal, I wrote the commentary, then got distracted doing something else & forgot to upload it. Sorry.

MILESTONES OF AMERICAN CULTURE: On 9 August 1930 Betty Boop debuted in the cartoon "Dizzy Dishes."

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
8-Aug-11 Price Change % Change
Gold, $/oz 1,710.20 61.40 3.7
Silver, $/oz 39.37 1.18 3.1
Gold/Silver Ratio 43.430 0.269 0.6
Silver/Gold Ratio 0.0230 -0.0001 -0.6
Platinum 1,716.00 0.00 0.0
Palladium 719.20 0.00 0.0
S&P 500 1,119.46 -79.92 -6.7
Dow 10,809.85 -634.76 -5.5
Dow in GOLD $s 130.66 -12.81 -8.9
Dow in GOLD oz 6.32 -0.62 -8.9
Dow in SILVER oz 274.54 -25.08 -8.4
US Dollar Index 74.86 0.46 0.6
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: 1,720.45      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,765.18 1,779.18 1,779.18
1/2 AE 0.50 882.59 903.24 1,806.47
1/4 AE 0.25 444.09 455.92 1,823.68
1/10 AE 0.10 184.09 190.97 1,909.70
Aust. 100 corona 0.98 1,674.58 1,687.58 1,721.67
British sovereign 0.24 402.97 407.97 1,733.09
French 20 franc 0.19 319.60 324.60 1,738.63
Krugerrand 1.00 1,734.21 1,748.21 1,748.21
Maple Leaf 1.00 1,735.45 1,753.45 1,753.45
1/2 Maple Leaf 0.50 901.09 911.84 1,823.68
1/4 Maple Leaf 0.25 451.62 455.92 1,823.68
1/10 Maple Leaf 0.10 175.49 197.85 1,978.52
Mexican 50 peso 1.21 2,057.58 2,072.58 1,718.99
.9999 bar 1.00 1,726.47 1,737.47 1,737.47
SPOT SILVER: 39.42      
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 27,506.05 27,831.05 38.92
US 40% silver 1/2s 0.30 11,156.90 11,381.90 38.58
100 oz .999 bar 100.00 3,917.00 3,962.00 39.62
10 oz .999 bar 10.00 394.20 401.70 40.17
1 oz .999 round 1.00 39.52 40.32 40.32
Am Eagle, 200 oz Min 1.00 41.17 42.07 42.07
SPOT PLATINUM: 1,716.00      
PLATINUM Fine Tr.Oz. BID ASK $/oz
Plat. Am Eagle 1.00 1,716.00 1,816.00 1,816.00
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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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