The Moneychanger
Daily Commentary
Wednesday, 31 August a.d. 2011 Browse the commentary archive

Had to run up to Nashville today, but got y'all's poison ivy & chigger remedies, thanks. One was vinegar, which worked after I used it last night, then covered it with an MSM crème rich in lavender & other essential oils. Looks like leprosy, but doesn't itch. I'm guessing now that it was poison sumac. INSTANT itching & reaction. Didn't even have enough time to get back & wash it off.

Glanced over at Platinum & Palladium to see how they're doing. Palladium has been very strong & looks something like silver. Now above all moving averages & inertia is higher. Platinum looks more like gold in the past two weeks (only), & is blocked by $1,850 resistance. If it can clear that, 'twill jump.

The mighty US DOLLAR index on its shaky legs managed to creep through 74 today and closed up 21.5 basis points (0.28%). It remains in the same old trading range of 73.40 - 75.50, and hasn't even conquered its 20 dma (74.23) yet, but it strengthens morale for it to climb above 74. Eventually, in the next few months, the dollar will rally -- given it falleth not below 72.70.

The euro (I strive not to gloat) after gapping down yesterday closed lower today, down 0.48% to 1.4377 and nearly on its 20 dma (1.4352). In spite of all the Nice Government Men and all the genius central bankers huffing, puffing, & blowing together with all their itty-might, the euro will do well not to fall to the center of the earth. Unless it can clear 1.4550 followed quickly by 1.4700, it will visit 1.2000.

With the yen the Japanese NGM must feel like they are trying to hold a basketball underwater. Rose again today to 130.54c/Y100 (Y76.60/$). Surely they must act soon to bring it down.

Stocks rose again today. Dow clumb 53.58 (0.46%) to 11,613.53 while the S&P500 paced alongside, up 5.97 (0.49%) at 1,218.89. Stocks have now risen for the last four days after Key Reversing last Friday.

We are not amused, impressed, or tempted to buy stocks. We wonder also why the yield is rising on the US 10 year Treasury note & the 30 year bond. The Fed's interest rate manipulations, after all, are applied to the Federal Funds rate, the overnight rate it charges banks for borrowing. But the Fed setteth not interest rates; in the final analysis, the MARKET setteth those rates. And when the market decides that US debt paper is too expensive,they pay less & the interest rate rises. Last I heard, rising interest rates are popularly (but wrongly) perceived as death to the stock market. BWDIK -- But What Do I Know?

Stocks -- they are the strains of the Charleston wafting through the Museum of Investment Music.

Let me refine what I said yesterday: Gold is pounding on the $1,840 ceiling, not $1,850. For the day it rose $1.80 to $1,828.50 on Comex, but the 5 day chart pictures a market stalled at $1,840, floating & bumping against the ceiling like a kid's helium balloon. Today's low touched $1,811.35, adding more strength to $1,810 support.

So gold has a range of $1,810 - $1,840, more narrowly $1,820 - $1,840. Market has gone indecisive here, perhaps in the lead-up to the Labor Day holiday. My wholesalers tell me retail dealers yesterday were on balance selling gold to them, which is a bit negative. Normally you would accord great weight to what market insiders -- like retail dealers -- do, but an awful lot of retail gold dealers are scared money, & don't do as well as the public.

The premium on SILVER US 90% silver coin, on the other hand, usually offers a reliable hint about silver's direction. When that premium is dropping slightly, it's neutral or negative. When the premium climbs suddenly, silver is about to turn up. Right now the "premium" is actually a discount to the silver value, and a historically large discount at 125c an ounce.

Yet the silver 5 day chart shows silver in an uptrend since last Friday. Today it rose another 30.1c to close Comex at 4169.9c, battering on the 4200c gate. Silver still must confirm its rise by closing successively higher, first over 4200c then 4400c.

From a longer view, silver has been trending upward from an intraday low of 3230c on 14 May. Look at it: that's what the chart shows. See "$silver" on www.stockcharts.com.

With the last two days' progress, silver must now guard support at 4100c. A close below that casts doubt on silver's intentions.

Markets will probably move sideways until after Monday. Then silver & gold could really jump.

Martin Armstrong made an interesting comment in his last newsletter that made a sort of kink in my mind. From the yankee government's Greenback Act of 1862 forward, the banking cartel was allowed to count US government bonds as reserves. But bonds are -- debt! And how can debt be a reserve against cash that you owe depositors, in the same class with gold coin? Just never had seen it quite this way before. This was an earlier form of pyramiding, where they borrowed money into existence with government debt, then pyramided on that by making it the backing for more bank credit issues. Wow. It's like sitting in a tub, then pulling yourself up into the sky by tugging on the handles. Ain't banking great?

On 31 August 1521 Cortes captured the city of Tenochtitlan, the Aztec capital, and burned it. I understand that a multitude of bleeding hearts today condemn Cortes, without ever bothering to ask how a couple of thousand Spaniards could overthrow a military empire of eleven million. Simple: they had native allies. The nations subject to the Aztecs fought with the Spanish to throw off their yoke. The yoke consisted of having to furnish thousands of human sacrifices yearly for the Aztec temples. At one temple a Spaniard counted over 100,000 skulls in a skull rack. The Aztec priests threw the victim onto an altar face up, sliced open the chest with an obsidian knife then cut out the still beating heart. Bodies were kicked down the pyramid and beheaded. Often the victims were skinned and the priests wore the skins and ate the victims.

Now me, if I had been one of those subject peoples, I would have joined with the Spaniards or anybody else short of the devil himself to get rid of the Aztecs, & I wouldn't have mourned 'em when they were gone.

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
31-Aug-11 Price Change % Change
Gold, $/oz 1,828.50 1.80 0.1
Silver, $/oz 41.70 0.30 0.7
Gold/Silver Ratio 43.850 -0.275 -0.6
Silver/Gold Ratio 0.0228 0.0001 0.6
Platinum 1,847.40 -8.10 -0.4
Palladium 782.90 0.00 0.0
S&P 500 1,218.89 5.97 0.5
Dow 11,613.53 53.58 0.5
Dow in GOLD $s 131.30 0.49 0.4
Dow in GOLD oz 6.35 0.02 0.4
Dow in SILVER oz 278.51 -0.73 -0.3
US Dollar Index 73.98 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: 1,823.00      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,857.64 1,873.64 1,873.64
1/2 AE 0.50 935.20 957.08 1,914.15
1/4 AE 0.25 470.56 483.10 1,932.38
1/10 AE 0.10 195.06 202.35 2,023.53
Aust. 100 corona 0.98 1,774.40 1,788.40 1,824.52
British sovereign 0.24 429.13 436.13 1,852.74
French 20 franc 0.19 340.35 347.35 1,860.49
Krugerrand 1.00 1,837.58 1,853.58 1,853.58
Maple Leaf 1.00 1,838.00 1,856.00 1,856.00
1/2 Maple Leaf 0.50 954.80 966.19 1,932.38
1/4 Maple Leaf 0.25 478.54 483.10 1,932.38
1/10 Maple Leaf 0.10 185.95 209.65 2,096.45
Mexican 50 peso 1.21 2,180.23 2,197.23 1,822.37
.9999 bar 1.00 1,829.38 1,840.38 1,840.38
SPOT SILVER: 41.53      
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 28,800.20 29,150.20 40.77
US 40% silver 1/2s 0.30 11,779.35 12,004.35 40.69
100 oz .999 bar 100.00 4,143.00 4,193.00 41.93
10 oz .999 bar 10.00 415.30 421.30 42.13
1 oz .999 round 1.00 41.63 42.43 42.43
Am Eagle, 200 oz Min 1.00 43.28 44.18 44.18
SPOT PLATINUM: 1,847.40      
PLATINUM Fine Tr.Oz. BID ASK $/oz
Plat. Am Eagle 1.00 1,847.40 1,947.40 1,947.40
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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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