The Moneychanger
Weekly Commentary
Friday, 14 October a.d. 2011 Browse the commentary archive
Here's the weekly scorecard:
  7-Oct 14-Aug Change % Change
Silver, cents/oz. 3,095.80 3,214.00 118.20 3.8
Gold, dollars/oz. 1,634.50 1,685.10 50.60 3.1
Gold/silver ratio 52.797 52.430 -0.370 -0.7
Silver/gold ratio 0.0189 0.0191 0.0001 0.7
Dow in Gold Dollars (DIG$) 140.42 142.85 2.42 1.7
Dow in gold ounces 6.79 6.91 0.12 1.7
Dow in Silver ounces 358.65 362.31 3.65 1.0
Dow Industrials 11,103.12 11,644.49 541.37 4.9
S&P500 1,155.46 1,224.58 69.12 6.0
US dollar index 78.79 76.61 -2.19 -2.8
Platinum 1,496.60 1,555.00 58.40 3.9
Palladium 590.70 626.00 35.30 6.0

Turns out I was completely wrong last week when I expected silver & gold to drop. Dollar dropped instead, while silver, gold, & stocks all rose. Palladium was the week's biggest gainer, up 6%. Stocks are marching along to retirement nirvana, hurrah, hurrah.

Stocks are cooking, reached their highest close today since late August. Dow rose 166.36 (1.45%) to 11,644.59 accompanied by the S&P500 up 1.95% (13.64) to 1,224.58.

Before you call your brother-in-law and rub it in how smart you are for staying in stocks, observe that stocks, although above their 20 day moving average (11,144) and 50 DMA (11,201), have not quite yet topped their August intraday high at 11,716.84. An optimist might look at the Dow's chart and say, "It's about to break through 11,700 resistance!" A realist might look at it and say, "Let the rejoicing await a close above 11,716 & the previous low at 11,863. Let the Dow prove this is not merely a consolidation, but really a rally. And don't forget that Dow Theory down turn signal a few weeks ago. Wait! And what about that MACD that's drawing so close to overbought?"

Let's wait till Monday & see how well the Dow handles this 11,600- 11,700 level.

Stocks -- they put the Boo! in boomerang.

US DOLLAR INDEX keeps ratcheting down, giving back the gains from the September rally. Today ended at 76.607, down 0.5% or 38.9 basis points. Before its correction ends, it might touch the 200 DMA at 75.94. Strange as it sounds coming from me, I still expect further rallying from the dollar.

Space aliens landed in Brussels today and pledged to bail out the European banks. On the strength of that promise the euro rose to 1.3877, up 0.73%, & has nearly reached its 50 DMA (1.3936 -- 20 dma at 1.3548). Could rally clean up to 1.42, where its sorrows commenced. But I wouldn't buy euros until I see the color of those space aliens' money.

(Don't bother telling me I'm not being serious. Mercy, I'm as serious as all those goofs out there buying euros when the banking system is as broke as the Ten Commandments. What are they counting on to bail them out if not space aliens or something equally likely?)

Japanese Yen closed today at 129.54c/Y100 (Y77.2/$1). Yen is sliding down the descending top boundary line of a triangle, but not enough that you could call it anything more than a trading range.

Gold bewilders me. Look at the weekly chart, and it has done no more than sketch out a range bounded by $1655 and $1685. Nothing plain about the longer term chart, either. Might be a flat topped rising triangle, which is bullish, but then again, might be a rising wedge, which is bearish. Add another complication: the bigg pattern from mid-August thru September forms a falling wedge, which is bullish.

Although gold is rallying, I expect it to hit the bottom of that peaking area from $1,725 to $1,800 and knock itself out. The two year weekly chart screams that gold will drop further.

But when gold hits the 150 dma again (now $1,596) I reckon I'll have to buy some. Waiting is making me awfully nervous.

SILVER, O, silver! The weekly chart looks like a head and shoulders top. Monday's left shoulder topped at 3250c, Wednesday's head at 3300c, and today's right shoulder at 3250c. Neckline holds it all up at 3130c. Y'all don't start throwing rocks at me, I'm just reporting what I see. On the other hand, the long term (10 year) weekly chart teaches me that the decline was caught by the uptrend line from the 2008 bottom. How much lower, then, can you expect it to fall? Maybe not much.

Top of the range is 3300c, bottom 3130c. Break either way should run like a scalded dog. I will buy on any break below 3100c.

There's always a danger that you will "talk your position" & convince yourself you're right, all the while ignoring the reasons you're wrong. The 57.5 gold silver ratio, which is my target fro swapping back into silver from gold, lies about at the 62% correction of the fall that began in February 2010. I think we can get it. I hope I haven't missed it already.

Here are a few Peace of Mind Steps y'all can take in the face of today's insane uncertainties.

** Get three months' living expenses out of the bank, in cash, smallish bills, and store them in a safe place with 24 hour access. Don't bother calling me crazy, I've been maligned by professionals, so it doesn't bother me. Banks & your government are the most lethal & ruthless combination runni9ng loose today. Remember 1985 when banks & S&Ls closed in Maryland & Ohio? Government simply closed 'em, no warning, & if your kids went hunger, tough luck. They will do anything -- including shoot their mothers in front of a cop -- to save their system. Close banks, limit withdrawals ("Oh, sorry you can't live on $300 a week. Eat dirt."), anything. Just give yourself enough cushion to protect your family.

** You and your wife ask yourself: If the place we are living suddenly became Beirut, or Sirte, or Baghdad, where would we go? Remember, a refugee is somebody who is trudging someplace else to die.

** Ask yourselves, "If I couldn't shop at the grocery for a week, what would we eat?" Pick up a couple of 25 lb. bags of rice and dried beans. Ask also what water you would drink -- clean water.

** Inquire of the mirror, How would we defend ourselves if there were no police? If you've never taken a pistol combat course,do that. And buy some ammunition -- it seldom goes stale. Remember, a man with a full magazine sleeps more soundly.

MILESTONES OF AMERICAN CULTURE: On 14 October 1930 the song "I Got Rhythm" sung by Ethel Merman was a show-stopper in "Girl Crazy" on Broadway. It was Merman's debut, but she stayed around for years causing people to wonder what exactly her talent was. Far as I know it was never revealed.

Y'all enjoy your weekend!

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
14-Oct-11 Price Change % Change
Gold, $/oz 1,681.80 14.50 0.9
Silver, $/oz 0.32 0.50 -280.0
Gold/Silver Ratio 5,232.730 -36.864 -0.7
Silver/Gold Ratio 0.0002 0.0003 -279.9
Platinum 1,555.00 15.00 1.0
Palladium 626.00 29.00 4.9
S&P 500 1,224.58 13.64 1.1
Dow 11,644.49 166.36 1.4
Dow in GOLD $s 143.13 0.83 0.6
Dow in GOLD oz 6.92 0.04 0.6
Dow in SILVER oz 36,230.52 100,497.79 -156.4
US Dollar Index 76.61 -0.39 -0.5
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: 1,681.20      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,719.20 1,741.20 1,741.20
1/2 AE 0.50 862.46 882.63 1,765.26
1/4 AE 0.25 433.96 445.52 1,782.07
1/10 AE 0.10 179.89 186.61 1,866.13
Aust. 100 corona 0.98 1,636.38 1,651.38 1,684.73
British sovereign 0.24 395.75 402.75 1,710.94
French 20 franc 0.19 313.88 320.88 1,718.69
Krugerrand 1.00 1,691.20 1,714.20 1,714.20
Maple Leaf 1.00 1,696.20 1,714.20 1,714.20
1/2 Maple Leaf 0.50 880.53 891.04 1,782.07
1/4 Maple Leaf 0.25 441.32 445.52 1,782.07
1/10 Maple Leaf 0.10 171.48 193.34 1,933.38
Mexican 50 peso 1.21 2,012.67 2,029.67 1,683.39
.9999 bar 1.00 1,687.08 1,698.08 1,698.08
SPOT SILVER: 32.18      
SILVER Fine Tr.Oz. BID ASK $/oz
VG+ Morgan $B4 1905 0.77 33,000.00 34,500.00 45.10
VG+ Peace dollar 0.77 31,500.00 33,000.00 43.14
90% silver coin bags 0.72 22,436.70 23,366.20 32.68
US 40% silver 1/2s 0.30 8,903.10 9,203.10 31.20
100 oz .999 bar 100.00 3,243.00 3,293.00 32.93
10 oz .999 bar 10.00 321.80 327.80 32.78
1 oz .999 round 1.00 32.28 33.18 33.18
Am Eagle, 200 oz Min 1.00 33.93 34.83 34.83
SPOT PLATINUM: 1,555.00      
PLATINUM Fine Tr.Oz. BID ASK $/oz
Plat. Am Eagle 1.00 1,555.00 1,655.00 1,655.00
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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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