The Moneychanger
Daily Commentary
Tuesday, 16 August a.d. 2011 Browse the commentary archive

Nicholas Sarcophagus of France & Angela Ferkel -- no, no, Merkel -- of Germany are top contenders for the Foolscap Crown of Dimwit of the week. In press releases from their summit they advocated a transactions tax on equities, derivatives, & currencies, which promptly tanked European equity markets.

Wait! That's not all. It gets dumber & meaner. They also want "common governance" -- read, "top-down centralized control -- in the Eurozone, forcing member nations to adopt a deficit limiting rule into their constitutions. Good-bye fiscal independence for member nations, & with it all other independence. As Patrick Henry trenchantly observed, there are only two powers worth having, the power of the purse & the power of the sword. Give up one and you won't hang on to the other.

Apparently suspicion, fear, & panic continue to drive silver & gold, which refuse to collapse & crawl into a cave. More below.,

STOCKS today backed off 76.97 points (0.67%) to 11,405.93. S&P lost 11.73 (0.97%) to 1,192.76. Nothing in nowhere-land. Stocks are trying to climb up off the floor of 10,600 & reach for their 200 day moving average at 11,994.95. Actually, they've fallen so far so fast the 20 dma (11,827) now stands below the 200 DMA, a sign confirming momentum now points downward. This won't end well for stocks.

Stocks -- the Maginot Line in the 2011 Inventory of Investment Defensive Fortifications.

US DOLLAR INDEX gained 16.2 stubborn basis points to end at 73.998, not quite 74. Weighty here is the dollar's refusal to drop below 73.80. Wants to move higher. Euro gave up some of yesterdays gains to close 1.4404, down 0.28% & destined for lesser things. Japanese nice government men have a problem on their hands, a yen that refuses to close below 130c/Y100 (Y76.92/$). Closed today 130.23, up 0.8%.

After gold's fall four days ago we had a right to expect lower prices today, but forget the follow-thru. Gold added $26.90 for a new all-time high Comex close at $1,782. This is nice, but high was $1,786.40, not $1,815. Any close above that takes gold higher. Any close below that leaves gold accused with reason of intending to move lower. $1,720 remains the must-hold point.

Now delving into opinion instead of fact, it seems to me that gold proved awfully strong today. Of course, that could be nothing more than typical B-wave strength that can fool almost anybody. Reactions usually trace out in an A-down, B-up, and C-down, and B-up is notoriously strong & seductive. You can only tell the difference when the break the boundary upside or downside, but the weight of experience leaves this move suspect.

A close over $1,800 gainsays that and means gold will keep on rallying.

SILVER worked manfully all day to climb & even reached 4013c, but at Comex close fell back to close up only 52.3c (1.33%). Good progress, yes, but not a victory over 4000c resistance, & above that lies 4100c with even stronger resistance.

All this leaves me nervous because a financial panic can overwhelm all reason & experience & take markets wherever it listeth. Still, I have to follow the main chance & expected outcome.

Silver & gold remain in a long term bull market. That will last another three to 10 years. Gold might finish the year above $2,000, silver who knows where. Be patient, be calm, hang on.

Zut alors! On 16 August 1777 France declared bankruptcy. Within 15 years, the former government had been annihilated and Madame Guillotine was ruling France.

My friend Michael wrote to castigate me for misleading y'all.  Ahh, I receive the rebuke gladly, because he is right, I did mislead y'all.

On 5 August I gave y'all a list of several ways to protect yourselves from the ongoing currency destruction and depression.  I left out the most important thing.  Over the years I have watched many, many people pile up stuff and silver & gold, believing they could protect themselves from every threat, only to spend their days in wretched fear and worry still.  In the end, you cannot protect yourself.   You cannot think carefully enough, or long enough, or stay awake enough hours to protect yourself.  Too many bad surprises lurk in the world.  The only safety lies in these words from Psalm 56, "The Lord is for me, I will not fear what man can do to me."  The only peace lies in the peace of Christ.

The modern world's worst crime is that it tries to rob us of faith, yet only faith can make sense out of a restless, unpredictable world.  Raw reason and false religion is powerless in the presence of evil and pain -- only God is not.  

For those who want to scoff at me, have at it.  As an adult God grabbed me like a child by the collar, shook me into my senses, then has walked with me, NO, carried me, alive and unhurt, through fifteen years of attack by the most powerful and vengeful enemy against whom we are all disarmed, the federal government. He raised up defenders and helpers for me, brought me through jail where death awaits every moment, and from all those fires I emerged  without even the smell of smoke on me.  He gave me a wife and children before I knew to thank him, and then brought me out into this broad place, a land and life flowing with milk and honey -- not because I deserved it, but because his lovingkindness is so great.  And like Polycarp I say, even if you burn me alive, I will still bless his name.

So Michael was right, my list was misleading because I left out the first and most important item:  make peace with God through Jesus Christ.  Without that peace, all your other preparations will be worth less than nothing, and will fail you.  

 Before the great theologian Augustine became a Christian, he was deeply depressed.  His false religion had failed him, friends and lovers had failed, his life had failed him.  He sat in a garden mourning, and over the wall he heard children calling in a game, "Tolle, lege!"  Pick it up and read!  Pick it up and read!  He did, and his life and the world was changed.  I can offer no better advice or preparation: Take God's book, pick it up and read!  He will show you what is true, and everything will change. You will find safety beneath his wing.

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
16-Aug-11 Price Change % Change
Gold, $/oz 1,782.00 26.90 1.5
Silver, $/oz 39.82 0.52 1.3
Gold/Silver Ratio 44.750 0.089 0.2
Silver/Gold Ratio 0.0223 -0.0000 -0.2
Platinum 1,821.00 8.00 0.4
Palladium 760.00 16.00 2.2
S&P 500 1,192.76 -11.73 -1.0
Dow 11,405.93 -76.97 -0.7
Dow in GOLD $s 132.31 -2.92 -2.2
Dow in GOLD oz 6.40 -0.14 -2.2
Dow in SILVER oz 286.43 -5.77 -2.0
US Dollar Index 74.00 0.16 0.2
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GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,841.02 1,857.02 1,857.02
1/2 AE 0.50 916.94 938.39 1,876.77
1/4 AE 0.25 461.37 473.66 1,894.64
1/10 AE 0.10 191.25 198.40 1,984.01
Aust. 100 corona 0.98 1,739.75 1,753.75 1,789.17
British sovereign 0.24 418.65 423.65 1,799.70
French 20 franc 0.19 332.04 337.04 1,805.24
Krugerrand 1.00 1,809.74 1,825.74 1,825.74
Maple Leaf 1.00 1,802.40 1,820.40 1,820.40
1/2 Maple Leaf 0.50 936.15 947.32 1,894.64
1/4 Maple Leaf 0.25 469.19 473.66 1,894.64
1/10 Maple Leaf 0.10 182.31 205.55 2,055.51
Mexican 50 peso 1.21 2,137.65 2,154.65 1,787.05
.9999 bar 1.00 1,793.66 1,804.66 1,804.66
SPOT SILVER: 40.04      
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 27,985.10 28,335.10 39.63
US 40% silver 1/2s 0.30 11,339.80 11,564.80 39.20
100 oz .999 bar 100.00 3,979.00 4,024.00 40.24
10 oz .999 bar 10.00 400.40 407.90 40.79
1 oz .999 round 1.00 40.14 40.94 40.94
Am Eagle, 200 oz Min 1.00 41.79 42.69 42.69
SPOT PLATINUM: 1,821.00      
PLATINUM Fine Tr.Oz. BID ASK $/oz
Plat. Am Eagle 1.00 1,821.00 1,921.00 1,921.00
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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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