The Moneychanger
Daily Commentary
Monday, 24 October a.d. 2011 Browse the commentary archive

Pssst! Don't tell anybody, but things are not going well in Euro-land. Sarcophagus and Ferkel are not getting along. At one point this weekend folks down the hall could hear them yelling at each other, and Sarcophagus was making snide remarks remarks about Ferkel eating cheese when she was supposed to be on a diet.

The meeting decided on only one thing for certain: to hold another meeting in four days. Meanwhile all sorts of financial gymnastics are being suggested so that Greece doesn't have to use the D-word. Banks want their haircut limited to 40%, while autocrats say they'll have to take a 60% loss.

Just to put all this into perspective against the Grand-Canyon-ness of the sovereign debt mess, the 440 million euros already in the European Stabilization Fund would not suffice to pay off Greece's debt by itself, let alone any of the other bankrupts.

The crisis has not ended, the public is simply refusing to register it. Witness US stocks today, playing on the slopes of a smoking, steaming Mt. Vesuvius in Europe. Dow rose 104.83 (0.89%) to 11,913.62 while the S&P500 outpaced the Dow, rising 15.94 (1.29%).

Not because I am a spoilsport only, but out of curiosity I ask in passing, "If European banks are trashed, can US banks escape unscathed? The US economy?" I fell like the fellow in the movie, "They Live", who finds the special sunglasses that enable him to see that aliens are walking around running the earth. Am I the only one who can see these things? Surely not, but then, I don't work for any government or central bank. I'm just a natural born fool from Tennessee, not smart like them fellers.

US DOLLAR INDEX dropped today to 76.04, losing 47.4 basis points or 0.61%. That carries the $ index down past its 50 day moving average (DMA, now 76.41) & almost to its 200 DMA (now 75.84). If my expectation is correct, the dollar index ought to catch and hold here, and soon begin turning up.

Euro rose 0.26% to 139.29, and is not exactly burning up the boards, blocked at 1.395, and not benefiting from the insane euphoria over this past weekend's non-event. True, the euro did cross above its 50 DMA (138.82) so mayhap this will be the last push up that carries the Euro to its 200 DMA (140.65) & the end of its rally.

The yen keeps on refusing to behave. After last Friday's new all time high, it closed higher than Friday's close at 131.43c/Y100 (Y76.07/$1), up 0.24%. Nice Government Men in Tokyo better catch it soon or they may have to deal with a financial earthquake.

That upside down head and shoulders that appears on gold's five day chart confirmed itself again today. Bottom of the head last Thursday came at $1,605, neckline stands about $1,660, so that gives a target of $1,715. Any trading below $1,635 would gainsay that outlook and send gold down. However, I believe we will see higher prices for a few days. Comex closed gold today at $1,651.50, up $16.40 (0.4%)

Silver is riding the same train with gold. 3200c is now silver's barrier above. Comex closed today at 3162c, up 44.7c (1.4%). Silver must hold 3125c or destroy its optimistic pattern. Target is about 3400c.

Y'all need to read Michael Lewis' book, Boomerang: Travels in the New Third World, not because he draws the right conclusions but because he shows the vastness of the insane booms in Iceland, Ireland, Greece, German banks, & US state and municipal governments. With an obtuseness that stretches credulity, he concludes that our evolutionary "lizard core" is to blame. To reach that gem, he had to ignore (1) that without banks there can be no credit-fed boom, because they create the credit, & (2) without governments offering them, there would be no cushy government jobs & pensions for folks to grab at. You build a system driven by greed, then are SURPRISED that it brings out greed in people? Well, there's a lizard in there somewhere, I reckon, but I can't find him. Maybe he's hiding behind banks & governments.

Y'all read the book anyway. 218 pages on a big, fat leading, so it'll take about 4 hours to read.

On 24 October 1648 the Peace of Westphalia brought an end to the 30 Years War. What began as a war of religion between Catholics & Protestants degenerated into a war of all against all. Large regions of Europe were utterly denuded by armies. That, with famine and disease ate away the population of Germany, Bohemia, the Low Countries and Italy and the war bankrupted most of the combatants.

Wars in those days were fought largely with mercenaries, who were paid by allowing them to loot or extort civilian populations. Some areas of Germany lost 90% of their populations, & still had not recovered 100 years later.

On 24 October 1929 Black Thursday hit Wall Street in the fist day of the stock market crash that kicked off the Great Depression.

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
24-Oct-11 Price Change % Change
Gold, $/oz 1,651.50 16.40 1.0
Silver, $/oz 31.62 0.45 1.4
Gold/Silver Ratio 52.230 -0.223 -0.4
Silver/Gold Ratio 0.0191 0.0001 0.4
Platinum 1,543.20 27.20 1.8
Palladium 640.00 23.00 3.7
S&P 500 1,254.19 15.94 1.3
Dow 11,913.62 104.83 0.9
Dow in GOLD $s 149.12 -0.15 -0.1
Dow in GOLD oz 7.21 -0.01 -0.1
Dow in SILVER oz 376.77 -2.04 -0.5
US Dollar Index 76.04 -0.47 -0.6
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: 1,654.60      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,697.62 1,713.62 1,713.62
1/2 AE 0.50 848.81 868.67 1,737.33
1/4 AE 0.25 427.09 438.47 1,753.88
1/10 AE 0.10 177.04 183.66 1,836.61
Aust. 100 corona 0.98 1,610.49 1,625.49 1,658.32
British sovereign 0.24 389.49 396.49 1,684.34
French 20 franc 0.19 308.91 315.91 1,692.09
Krugerrand 1.00 1,669.49 1,685.49 1,685.49
Maple Leaf 1.00 1,666.60 1,687.60 1,687.60
1/2 Maple Leaf 0.50 866.60 876.94 1,753.88
1/4 Maple Leaf 0.25 434.33 438.47 1,753.88
1/10 Maple Leaf 0.10 168.77 190.28 1,902.79
Mexican 50 peso 1.21 1,980.82 1,997.82 1,656.98
.9999 bar 1.00 1,660.39 1,671.39 1,671.39
SPOT SILVER: 31.67      
SILVER Fine Tr.Oz. BID ASK $/oz
VG+ Morgan $B4 1905 0.77 25,500.00 28,000.00 36.60
VG+ Peace dollar 0.77 25,000.00 27,000.00 35.29
90% silver coin bags 0.72 22,390.23 22,840.23 31.94
US 40% silver 1/2s 0.30 8,751.18 9,051.18 30.68
100 oz .999 bar 100.00 3,191.50 3,251.50 32.52
10 oz .999 bar 10.00 316.65 322.65 32.27
1 oz .999 round 1.00 31.77 32.52 32.52
Am Eagle, 200 oz Min 1.00 33.42 34.42 34.42
SPOT PLATINUM: 1,543.20      
Plat. Am Eagle 1.00 1,543.20 1,643.20 1,643.20
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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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