The Moneychanger
Daily Commentary
Tuesday, 18 October a.d. 2011 Browse the commentary archive

Whoa! Thanks very much to all who volunteered to test the Solari & Moneychanger SilverAndGoldAreMoney app for Android. I deeply appreciate it, but we have enough volunteers now.

And thanks to y'all who recommended hardware suppliers to me.

Stocks knee-jerked higher today on a report of a $2 trillion fix of the European sovereign debt crisis. Later it turned out the report didn't report that at all, only that Euro-crats had worked out a deal to make sure this doesn't happen again (count on THAT) by banning short sales of Credit Default Swaps and maybe bank stocks, & who knows, maybe striped stockings, too.

Let us never forget, as we listen to the parrots on TV & Radio & the actors in politics & central banks, that there is NO sovereign debt crisis in Greece or Europe, just as there was NO mortgage debt crisis in the US. There is a BANK SOLVENCY CRISIS, & all this circles around saving the banks, not countries or homeowners. homeowners. The greedy banks - abetted by lap-dog governments - dug themselves into a hole, and now by means of their bought-&-paid-for politicians, they want to hand a shovel to taxpayers so they can fill it up. Debt crisis, my eye! It's a BANK crisis, of, by, and for the banks, Euro & US.

Anyhow, Sarcophagus in France is whining and moaning about Europe breaking up, theatrics in preparation for this weekend's Euro-summit. He has to give Ferkel some cover for her selling the Germans down the river, since the German voter has not yet been successfully enlightened to the glory of bailing out banks or other countries, shameful troglodyte he is.

At the bottom line, the Euro-crats have no deal yet, but they are barking for one strongly. Ain't y'all impressed?

Lo, stocks opened the day dragging their itty feet, but about 10:30 picked up and surged toward's day's end. This handsome performance brings them up to only about 75 points below Friday & about 125 points below that death-dealing, I'll-raise-a-punk-knot-on-top-of-yore-head 11,700 resistance.

Dow rose 179.82 points today, 1.58%, to 11,576.82. S&P500 also climbed 24.45, up 2.04%, to 1,225.31.

Not clear yet that stocks can continue to rally, or for that matter have even started rallying, but they might. Need a close above 200 day moving average (now 11,967) to prove it, otherwise they're just pikers shaking dice & trying to rope you into their game. My rule is, never shoot craps with any man who pulls his own dice out of his pocket.

Here late in the day the US dollar index, which had traded as high as 77.52 then taken a beating down to 76.80, is now trading 77.084, down a negligible 6.2 basis points (0.08%). Looks to me like the dollar made a double bottom Friday & Monday around 76.50, but who listens to me? I'm just a natural born fool from Tennessee, & no match for them Wall Street jeen-youses.

For all the alleged good news perking out of Europe, the Franken-currency still rose only 0.18% to 137.66, trading back to fill the last gap it left. Probably will rise higher, although there is no reason in the world it ought to, other than moirchandizing.

The Yen took the sidling path, losing 0.05% to 130.13c/Y100 (Y76.85/$1). No change, still range bound & flying heavy like an old hawk with a fat rabbit.

Today that gold opened down over $40, bottomed about 10:00 a.m. at $1,626.75, then stubbornly climbed the rest of the day to recover half that loss. Comex found it down only $23.80 at $1,651.70.

I just want to point out to y'all that you can do worse than what the engineers do, namely, just deal with the facts. It removes most of the guesswork. Call it what it is: gold reached $1,695 on Monday, then hit $1,626.75 today, and closed beneath $1,655 support. That's a down trend, often beaten in the neighborhood of $1,680.

Here's where it gets tricky: does it really mean what it says? If you were building a bridge, it would, but markets have that human tendency to blow hot and cold out of both sides of their mouth. Sometimes they break down or up, but only for one day, then reverse the next & break out and follow thru the opposite direction! Gold had been building a flat-topped rising triangle. Usually that breaks out upwards, but gold fell down out of it today. Did gold turn down? MACD is losing its enthusiasm. Probably did, & 'twill make a trip home to the 150 dma ($1,599) soon, but closing tomorrow above $1,695 would gainsay that course.

I remember a few days ago when silver closed up one cent & gold dropped several dollars, then jumped up next day. Well, here we go again, but which way? Silver shuttered Comex at 3180.1c, up one cent. During the day it dropped as low at 3046c, but defended that level and rose again out of the mirey pit to close well above 3100c at 3180.1c.

Facts: silver must climb above, & remain above, 3250c to change the diagnosis from downtrend to uptrend. Silver, too fell out of its rising flat-topped triangle today, but remains in the range of 2843c to 3310c that has held it captive since September. Unless silver & gold showed false breakouts today, they will follow through tomorrow with lower prices.

All this back & forth betrays great bewilderment & confusion in silver & gold. Blame lies largely with the European crisis & the Eurocrats dawdling & diddling & pitty-patting at the problem. Markets hate indecision.

Tomorrow, Wednesday, 19 October, I will be finishing my monthly Moneychanger for paid subscribers, & will not publish a commentary. Also, I will be away 3 November thru 8 November attending a timber-framing course with my son at Camp McDowell in Alabama, & won't publish any commentaries then, either.

On 18 October 1685 French King Louis XIV revoked the 1598 Edict of Nantes. By that edict Henry IV had granted French Protestants, the Huguenots, substantial religious toleration. The revocation occasioned a Huguenot exodus from France to Holland, Germany, Virginia, South Carolina, & South Africa where they became pillars of the middle class.

On 18 October 1767 the boundaary betgween Maryland & Pennsylvania was surveyed by Mason & Dixon. That became the dividing line between North & South. By that criterion, some of you folks in Southern Indiana, Ohio, & Illinois may be surprised you have really been Southerners all the time, and I'm not just whistling "Dixie."

On 18 October 1961 the painting "Le Bateau" by French painter Henri Matisse went on display in New York's Museum of Modern Art. Seems it was too modern even for the museum, as it hung there 47 days and over 100,000 people came to see it before anybody realized it was hanging upside down.

Y'all think I'm joking, don't you?

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
18-Oct-11 Price Change % Change
Gold, $/oz 1,651.70 -23.80 -1.4
Silver, $/oz 31.80 0.01 0.0
Gold/Silver Ratio 51.940 -0.765 -1.5
Silver/Gold Ratio 0.0193 0.0003 1.5
Platinum 1,539.50 -16.00 -1.0
Palladium 624.15 6.85 1.1
S&P 500 1,225.31 24.45 2.0
Dow 11,576.82 179.82 1.6
Dow in GOLD $s 144.89 4.29 3.1
Dow in GOLD oz 7.01 0.21 3.1
Dow in SILVER oz 364.04 5.54 1.5
US Dollar Index 77.00 -0.06 -0.1
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: 1,663.00      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,701.00 1,723.00 1,723.00
1/2 AE 0.50 853.12 873.08 1,746.15
1/4 AE 0.25 429.26 440.70 1,762.78
1/10 AE 0.10 177.94 184.59 1,845.93
Aust. 100 corona 0.98 1,618.66 1,633.66 1,666.66
British sovereign 0.24 391.47 398.47 1,692.74
French 20 franc 0.19 310.48 317.48 1,700.49
Krugerrand 1.00 1,673.00 1,696.00 1,696.00
Maple Leaf 1.00 1,678.00 1,696.00 1,696.00
1/2 Maple Leaf 0.50 871.00 881.39 1,762.78
1/4 Maple Leaf 0.25 436.54 440.70 1,762.78
1/10 Maple Leaf 0.10 169.63 191.25 1,912.45
Mexican 50 peso 1.21 1,990.88 2,007.88 1,665.32
.9999 bar 1.00 1,668.82 1,679.82 1,679.82
SPOT SILVER: 32.27      
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 22,751.30 23,151.30 32.38
US 40% silver 1/2s 0.30 8,929.65 9,229.65 31.29
100 oz .999 bar 100.00 3,252.00 3,302.00 33.02
10 oz .999 bar 10.00 322.70 328.70 32.87
1 oz .999 round 1.00 32.37 33.27 33.27
Am Eagle, 200 oz Min 1.00 34.02 34.92 34.92
SPOT PLATINUM: 1,539.50      
Plat. Am Eagle 1.00 1,539.50 1,639.50 1,639.50
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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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