The Moneychanger
Daily Commentary
Wednesday, 17 August a.d. 2011 Browse the commentary archive

You wonder how people can go on believing in myths like "the efficiency of markets" when so many people stay on the wrong side of the market by clinging to their own myths & misconceptions. Still, they do. But that's no surprise. There are also lots of people who believe you can get justice in US courts.

Stock investors are being punished soundly for their faith. Dow today dropped 15.36 (0.13%) to 11,390.57 and the S&P500 dropped 0.94 (0.08%) to 1,191.82. People stay in stocks although that chart is the worst since 1987's crash. No, it's worse, topped by a huge head & shoulders or Megaphone of Death, but whichever you choose will kill both optimism & hope. Fiddling around this 11,450 - 11,400 level harkens back to resistance from November 2011. The Death Cross where the 50 dma (now 12,074.83) drops below the 200 dma (11,996.38) is fast approaching. That will point momentum down beyond all quibble.

STOCKS -- the Fokker Tri-plane of Investing Aeronautic Design.

US Dollar index dropped to the lower limit before it breaks down, 73.753, down 25.7 basis points or 0.33%. Previous low was 72.82. If so, low before that was 73.42, & that probably would stop it. With all the fear scourging the world, hard to believe the US dollar is dropping. Whoa! What's that sulfur smell in the air? Could that be the Nice Government Men at work, holding down the dollar to help their beleaguered fellow-crooks in Europe? Good bet.

The euro, beset by traitors, speculators, & the justly-distrustful, managed to gain 0.12% today & close at top of its range, 1.4427. As Queen Victoria, that noted wit, might quip, "We are not enthused." All of it reeks of sulfur. Euro needs to cross 1.4700 to get my attention, and best 1.4900 to engage my belief. This is all a show, staged by the mushroom farmers for us mushrooms.

That buoyant Nipponese Yen just can't be kept down. Today closed at what looks like a new all time high, 130.61c/Y100 (Y76.56 buys one US$). Funny thing is, nobody official wants it higher, but there it floats.

Let us delve first into platinum & palladium before we come to the adult precious metals. Platinum today reached its July peak ($1,823), which MIGHT be the first warning of a new rally. MIGHT because in June it peaked at $1,849.40 & at end-April $1,889.50. Contradicting higher prices is the 50 dma crossing under the 200 dma four days ago. Not hopeful, but since they are cruising along flatly together, maybe not fatal.

Palladium's chart looks a lot the NASDAQ or the Dow. Hit a new high for the move at 850.20 on 1 August, then waterfalled like Niagara with ne'er a pause to 706. Today at 776, only $11 below the 200 dma (764.63). This market has more obstacles to overcome than a one-legged pole-vaulter.

Bottom line is that as a harbinger of higher gold & silver prices, palladium is terrifying & platinum is ambiguous. Confused? Don't feel lonely.

GOLD made a second close above its previous close, and a 2-day close at a new high is a fairly safe signal of a breakout. I'd like to see it close above $1,800 tomorrow to confirm that, however. Gold has now done everything needful to breaking out in a new rally, EXCEPT posting a new intraday high. Today's intraday high was $1,794.55 while Comex closed nearly that high, up $8.80 to $1,791.20.

Mercy! Gold looks overextended, the MACD is high enough to give Arnold the Giant a haircut, and the RSI is way overbought. Still, as recent history has shown us, gold can remain overbought for a long time.

I covered some little shorts (against inventory) in silver today. Just couldn't stand a breakout over 4000c, and Comex closed up 52.9c to 4035c. Ratio dropped a tee-tiny bit from 44.750 to 44.391.

Really big hurdle for silver is 4100c, then 4200c. Silver now stands above its 200 dma (3428c), 50 dma (3765c), and even its 20 dma (3970c). Momentum plainly points up, and other indicators are nothing near overbought. Plenty of room for silver to jump for the ceiling. Only caution is a little rising wedge building on the chart since 8 August, which might break out downside. However, in BULL markets these rising wedges sometimes break out upside, as the stock market painfully taught me in the last 1990s.

BOTTOM LINE: silver & gold headed higher. Closes below $1,720 & 3900c would gainsay that.

On 17 August 1786 was born David Crockett in East Tennessee, then in the State of Franklin. He was either a grand hero or a grand liar, but either way, he was ours, so y'all better not say anything bad about him. There's a monument to him in Lawrence County, county next to the one I live in, about 25 minutes from where I am sitting. There he was elected a colonel in the militia there, and was elected to the Tennessee legislature. In 1826 he was elected to the US House of Representatives, where he opposed President Andrew Jackson's policies, among them the Indian Removal Act. Later he moved to West Tennessee, where, according to his autobiography, he killed so many bears that it's a wonder any are left in North America. I went right along believing him until he started talking about climbing up poplars and sliding down again to stay warm in the winter. Anyhow, when the Jackson machine finally turned him out of office, he told a meeting that they could "all go to hell, and I'm going to Texas." He arrived there in time to die at the Alamo when it was overwhelmed by Santa Anna's troops. Whatever y'all do, do NOT watch the silly existential movie about the Alamo with Billy Bob "Slingblade" Thornton playing Davy Crockett & apologizing to Texicans & Mexicans alike for dying at the Alamo. Even dead drunk & covered with bear fat, Davy Crocket was NEVER that sorry.

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
17-Aug-11 Price Change % Change
Gold, $/oz 1,791.20 8.80 0.5
Silver, $/oz 40.35 0.53 1.3
Gold/Silver Ratio 44.390 -0.369 -0.8
Silver/Gold Ratio 0.0225 0.0002 0.8
Platinum 1,847.00 26.00 1.4
Palladium 776.00 16.00 2.1
S&P 500 1,191.82 -0.94 -0.1
Dow 11,390.57 -15.36 -0.1
Dow in GOLD $s 131.46 -0.81 -0.6
Dow in GOLD oz 6.36 -0.04 -0.6
Dow in SILVER oz 282.29 -4.14 -1.4
US Dollar Index 73.75 -0.26 -0.3
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: 1,790.05      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,843.75 1,859.75 1,859.75
1/2 AE 0.50 918.30 939.78 1,879.55
1/4 AE 0.25 462.06 474.36 1,897.45
1/10 AE 0.10 191.54 198.70 1,986.96
Aust. 100 corona 0.98 1,742.32 1,756.32 1,791.80
British sovereign 0.24 419.27 424.27 1,802.34
French 20 franc 0.19 332.53 337.53 1,807.88
Krugerrand 1.00 1,812.43 1,828.43 1,828.43
Maple Leaf 1.00 1,805.05 1,823.05 1,823.05
1/2 Maple Leaf 0.50 937.54 948.73 1,897.45
1/4 Maple Leaf 0.25 469.89 474.36 1,897.45
1/10 Maple Leaf 0.10 182.59 205.86 2,058.56
Mexican 50 peso 1.21 2,140.82 2,157.82 1,789.68
.9999 bar 1.00 1,796.32 1,807.32 1,807.32
SPOT SILVER: 40.32      
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 28,185.30 28,535.30 39.91
US 40% silver 1/2s 0.30 11,422.40 11,647.40 39.48
100 oz .999 bar 100.00 4,007.00 4,052.00 40.52
10 oz .999 bar 10.00 403.20 410.70 41.07
1 oz .999 round 1.00 40.42 41.22 41.22
Am Eagle, 200 oz Min 1.00 42.07 42.97 42.97
SPOT PLATINUM: 1,847.00      
Plat. Am Eagle 1.00 1,847.00 1,947.00 1,947.00
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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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