The Moneychanger
Daily Commentary
Monday, 15 August a.d. 2011 Browse the commentary archive

In an example of near-perfect government stupidity, France, Spain, Italy, and Belgium have banned short selling of financial (read "bank") stocks. Of course, determined investors will find other creative ways to short the sector, maybe even by shorting the euro, but statistics from earlier bans show that they are hopelessly ineffective to stop price slides. Worse yet, bans add uncertainty to the market and cripple the market's ability to discover an accurate price based on true value.

As usual, the world's bank-controlled puppet governments act to cripple markets and prop up the banks. Were I a depositor in French, Spanish, Italian, or Belgian bank I'd pull out my money so fast the suction would rip the paper off their walls. The ban virtually guarantees that the banks are so rotten they cannot withstand the action of a free market. Otherwise, why protect them?

If governments subsidized air, we'd all be suffocating in ten days. I'm only a natural born fool from Tennessee, and even I know that.

STOCKS had a big day, cavorting like goats in August up 213.88, up 1.9% on the Dow to 11,482.90. S&P cavorted, too, up 25.68 or 3.03% to 1,204.49.

Did this surprise y'all? After a waterfall the size of Victoria Falls, there'll come some kind of bounce. But I will warn y'all that the waterfall has not reached its bottom pool, but is only bouncing off the rocks. Reaction may reach 11,860, maybe even the 200 dma 11,993.51, maybe even 12,000, but gravity has stocks firmly in hand now, and will work his will.

I bet a lot of y'all don't know about goats in August, do you?

Stocks -- they are the pool of cool alkaline water in the Investment Desert.

The US DOLLAR INDEX tumbled 65.7 basis points today (0.85%) to 73.864. That fits the Nice Government Men's need to contain the dollar's rise & the euro's fall & the yen's rise. However, it doesn't change the dollar chart. Last low was 73.82, one before that was 73.42, & wanting a close below that, the dollar remains in an embryonic uptrend.

The euro, the currency with the electrical connections in its neck like the Frankenstein monster, found an outlet today, plugged in, and jumped 1.35% to 1.4442.

Japanese Yen today dropped a tee-tiny bit, to 130.17c/Y100 (Y73.82/$). Still near all time highs.

GOLD today simply refused to take a back seat. Friday it made a low at $1,724, but today the low came at $1,732.20. After closing Comex at $1,755.50, up $15.30, it relentlessly elevated in the aftermarket to $1,766.10, the high for the day.

Let's talk about maximum downside. Chart shows a gap at $1,675, so that might be a target. Before that, $1,720 is stubborn support. Further down, $1,625 will catch gold, then below that lies the 50 DMA at $1,587.54.

However, I am not yet willing to count the panic past and gold defeated. Any close over $1,800 turns gold's face skyward. A close below $1,725 turns it down decisively.

SILVER on Comex closed at 3929.8c, up 19.7c, but that tells only a short part of the tale. After Comex closed silver kept on bulling ahead, nearly 60 more cents to 3991, well above the 20 day moving average at 3965c. I remind y'all the 20 DMA serves as the trip wire for POSSIBLE upmoves. Possible because the crossover must be confirmed by higher closes.

Silver keeps on refusing to roll over & play dead. I understand that this sort of range trading frustrates intensely, but we merely have to endure it.

Y'all ought to be accumulating both silver & gold. Forget about corrections -- they will come and go, 5%, 10%, or 30%, yet we don't look at those, but at the unseen goal, the triple, quadruple, or quintuple. Ride the primary trend, forget about the rest.

On 15 August 1971 President Tricky Dick Nixon imposed a 90 day wage & price freeze, a 10% import surcharge, and closed the gold window ending the convertibility of dollars into gold for foreign nations under the Bretton Woods Agreement. Bretton Woods was worse than a three-legged mule, expensive to feed with no real benefit, but it was an agreement, a word-giving. Nixon launched the nations of the world of floating exchange rates and wholly irredeemable fiat money. Si monumentum quaeris, circumspice.

Big mistake on Friday. The FIRST Battle of Mohacs was the one I was thinking of, and that happened on 29 August 1526. The SECOND Battle of Mohacs was fought on 12 August 1687, with a very different outcome. Also, the first battle was fought under confused and divided circumstances. Francis the 1st of France had been beaten by the Hapsburgs at the Battle of Pavia, & had entered into an alliance with the Ottoman Suleiman the Magnificent, an alliance that scandalized Europe and lasted 300 years. The Hungarians at First Mohacs were divided by a weak king & self-interested nobility & bad leadership. King Lagos II died fleeing from the battle, many Hungarians were killed, & Suleiman massacred 2000 prisoners. It was the destruction of Hungary as a world power, but Mohacs did stop the Ottoman empire from conquering Europe. A third of the poor Hungarians fell under Ottoman rule, another third were under Ottoman hegemony in semi-independent Transylvania, & a third fell under the Hapsburgs, who eventually took over the entire country. To my way of thinking, it was a toss up between who was worse, the Ottomans or the Hapsburgs.

The 12 August 1687 Battle of Mohacs was the San Jacinto of Hungarian history when they punished the Ottomans for the First Mohacs with an utter rout, 600 Hungarian casualties against 10,000 Ottoman casualties. Remember the Alamo! I don't know how to say that in Hungarian, but they sure did.

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
15-Aug-11 Price Change % Change
Gold, $/oz 1,755.50 15.30 0.9
Silver, $/oz 39.30 0.20 0.5
Gold/Silver Ratio 44.670 0.166 0.4
Silver/Gold Ratio 0.0224 -0.0001 -0.4
Platinum 1,813.00 17.00 0.9
Palladium 744.00 0.00 0.0
S&P 500 1,204.49 25.68 2.2
Dow 11,482.90 213.88 1.9
Dow in GOLD $s 135.22 1.37 1.0
Dow in GOLD oz 6.54 0.07 1.0
Dow in SILVER oz 292.20 4.00 1.4
US Dollar Index 73.86 -0.66 -0.9
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: 1,766.10      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,819.08 1,835.08 1,835.08
1/2 AE 0.50 906.01 927.20 1,854.41
1/4 AE 0.25 455.87 468.02 1,872.07
1/10 AE 0.10 188.97 196.04 1,960.37
Aust. 100 corona 0.98 1,719.01 1,733.01 1,768.02
British sovereign 0.24 413.66 418.66 1,778.51
French 20 franc 0.19 328.08 333.08 1,784.05
Krugerrand 1.00 1,788.18 1,804.18 1,804.18
Maple Leaf 1.00 1,781.10 1,799.10 1,799.10
1/2 Maple Leaf 0.50 924.99 936.03 1,872.07
1/4 Maple Leaf 0.25 463.60 468.02 1,872.07
1/10 Maple Leaf 0.10 180.14 203.10 2,031.02
Mexican 50 peso 1.21 2,112.18 2,129.18 1,765.93
.9999 bar 1.00 1,772.28 1,783.28 1,783.28
SPOT SILVER: 39.91      
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 27,892.15 28,242.15 39.50
US 40% silver 1/2s 0.30 11,301.45 11,526.45 39.07
100 oz .999 bar 100.00 3,966.00 4,011.00 40.11
10 oz .999 bar 10.00 399.10 406.60 40.66
1 oz .999 round 1.00 40.01 40.81 40.81
Am Eagle, 200 oz Min 1.00 41.66 42.56 42.56
SPOT PLATINUM: 1,813.00      
Plat. Am Eagle 1.00 1,813.00 1,913.00 1,913.00
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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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