The Moneychanger
Daily Commentary
Thursday, 27 October a.d. 2011 Browse the commentary archive

Y'all take a look around, and fix the sight in your minds, because what you are seeing is AS GOOD AS IT GETS. As good as it gets for stocks & the euro, anyway. Forget not, neither lay aside the proverb, "Buy the rumor, sell the news." Today came the news, about the "fix" for the European sovereign debt crisis. Today, maybe tomorrow, comes your chance to sell stocks and euros. It don't get no better than this.

For all the Dow rose today 2.8%, the Dow in Gold Dollars rose only 1.5% to G$144.65 (6.997 oz). This is a lower high than last Friday's $148.76 (7.196 oz). Unless DiG$ can close above that high, they are fated, yea, doomed to lose value against gold. For stocks, this is as good as it gets.

STOCKS rose like mad today on news that the European sovereign debt crisis (read: "bank solvency crisis") had been solved by a Bucket (bail out fund) worth 250 bn. Euros that will be leveraged 4 or 5 times, producing an equivalent one trillion euros.

Did I just write that? Do this chuckleheads actually believe that they by leverage they will get OUT of the miry swamp that leverage got them INTO?

Ahhhh, it doesn't end there. Where will the money come from to fill up the bucket so the Bucket can buy the bad debts from the banks? Well, they'll have to BORROW it, which means they go into an already sluggish capital market and throw huge new demands on it and crowd out business borrowers & make credit tighter still. Great idea.

Maybe the Chinese will save them? Yeah, that's it, Europe will trick the Chinese into buying their rotten bonds backed by rotten sovereign debt, & the Chinese won't notice that at all, right? Yeah, right, those Chinese are notoriously bad with numbers and business.

This is fun, but I won't prolong it because it's too easy. It's like shooting holes in Swiss cheese -- no challenge. It's enough to make me stop calling myself a natural born fool. These European fools are giving fooldom a bad name.

End result of this deal will be LOTS more Euros born into circulation, which for gold and silver will be like pouring liquid manure on kudzu. Y'all know how to plant kudzu, right? Drop it and run.

This "deal" is nothing but a public relations scarecrow. If it didn't have Sarcophagus & Ferkel holding up its arms and kicking its legs along, it would flop dead on its face. And will, before too long.

STOCKS burst through 11,900 resistance today and raced upward a massive 339.51 points (2.8%) to close at 12,208.55. S&P gained way more, up 542.59 points or 5.26% to 1,284.59.

Any of y'all ever been drunk? Yes, I know that nice folks like y'all don't do that sort of thing, buy maybe y'all had a friend that did that once and told you about it. Anyway, a drunk rides a curve. More you drink, better it gets, until pretty soon you are King Of The World and it just don't get no better.

It sure don't. When gravity resumes control on the downside of that curve, oh, my, you go down very fast, to a very low destination.

So after the drunk of the euro "fix" wears off, in a day or so, stocks will drop as fast as they rose. If I am correct and diamond top has already been posted in stocks, stocks will rally to about 12,500 and fail. Now I could have drawn that diamond wrong, and it could be bigger than that, & the Dow could rally to 12,800. Either way, the outcome will be the same as stocks sink like your car keys out of your shirt pocket over the side of the bass boat, seeking the deep bottom of the lake in a hurry.

Were I a fan of the US DOLLAR & long dollars, I'd be pretty sore today. Dollar lost a massy 120.9 basis points (1.56%) to end at 75.037. That sure enough looks bad, slicing through that 200 day moving average (75.79) like a samurai sword through half-set jello.

Now the dollar might find its feet here in the next or so, or it might fall as far as 74.00 and the bottom boundary of the trading range. Fall thru that, & the dollar has emphatically turned down. Until that happens the dollar's rally remains in limbo.

Y'all ever wonder why I waste my time talking about fiat currency trash like the dollar, yen, & euro? Simply because those weaklings are -- get this -- gold & silver's "competition." At least, for a little longer.

As y'all have guessed, the euro gapped up today, burst through its 200 dma (140.79) like it was wet paper, and ended up 2.09% at 141.93. Look around, cause this is as good as it gets. Euro left a gap at 143.50 when it broke down, so might yet trade that high. Rationally, however, the "fix" has weakened the euro the banking system, and the economy far worse than the only real cure would have done: a complete debt jubilee and write off of all the unpayable debt. A clean start, paid by the culprits, the banks & the folks who took a very poor chance on a government, any government, keeping its word. Those people need to be weeded out of the financial & economic gene pool.

The Yen rose to another all time high against the US dollar, to 131.67c/Y100 (Y75.95=$1), up 0.31% and straining at the bit to go higher.

Gold & silver have just proven in the last few days that while I might be a metals optimist, I am not a wild-eyed optimist. What? Well, I caught those upside down head & shoulders patterns on their daily charts, but I far, far underestimated how far they would jump. I didn't reckon gold would jump much farther than $1,725 or silver than 3400c.

But just look at today. Gold has risen $134.80 (8.3%) over five straight days, from $1,611.90 to $1,746.70 today (up $24 or 1.4%).

Over the same time silver has risen 482.9c (16%) from 3026 to 3509.5c today (up 180.4c or 5.4%).

Folks, that's as good as it gets.

That doesn't guarantee that metals will fall, but think about it. Gold today worked through its 50 DMA (1740.66) and has just about reached the spot where it broke down in late September. Limit to this is $1,775, maybe $1,800 at most, then some sort of correction will take hold.

Course I'm not dogmatic about my views. If gold passes $1,800 for two days, I'll gladly put on a grin like a jackass eating sawbriers and say I was wrong & it's going up after all. That's the least I could do. And I'm always willing to do the least.

Silver has been ratcheting up stepwise, bursting thru first one and then the next resistance. Today it was stopped just under 3550c with a 3536c high.

Silver has now left in the dust its 300 dma (3251c) & is drawing a bead on its 200 DMA (3628), with the 50 DMA at 3632). It can easily reach that, but about 3825 it will smack its face right into the downtrend line from the August high, & that might just flatten silver's nose.

Okay, I am slap out of metaphors so I'm going to have to wrap this burrito up. Expect a couple of more up days out of silver & gold, but keep an eye peeled for a correction.

On 27 October 1787 the first of the Federalist Papers appeared in the New York Independence. The 85 essays, written by Alexander "Central Bank" Hamilton, James Madison, and John Jay, were published under the pen name "Publius." They offer grand insight into what the drafters of the 1787 constitution intended, but most all of the tyrannies they assured us would never come to pass have, beginning in 1861 & continuing until today.

No institution or constitution ever devised can stop human nature's craving for power over other men. Freedom can never come from such fountains, but only from the hearts of men who are resolved to live free or die.

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
27-Oct-11 Price Change % Change
Gold, $/oz 1,746.70 24.00 1.4
Silver, $/oz 35.10 1.80 5.4
Gold/Silver Ratio 49.770 -1.976 -3.8
Silver/Gold Ratio 0.0201 0.0008 4.0
Platinum 1,637.00 45.30 2.8
Palladium 666.25 20.10 3.1
S&P 500 1,284.59 42.59 3.4
Dow 12,208.55 339.51 2.9
Dow in GOLD $s 144.49 2.08 1.5
Dow in GOLD oz 6.99 0.10 1.5
Dow in SILVER oz 347.86 -8.65 -2.4
US Dollar Index 75.04 -1.21 -1.6
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: 1,744.70      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,786.57 1,802.57 1,802.57
1/2 AE 0.50 895.03 915.97 1,831.94
1/4 AE 0.25 450.35 462.35 1,849.38
1/10 AE 0.10 186.68 193.66 1,936.62
Aust. 100 corona 0.98 1,698.18 1,713.18 1,747.79
British sovereign 0.24 410.70 417.70 1,774.44
French 20 franc 0.19 325.74 332.74 1,782.19
Krugerrand 1.00 1,758.66 1,774.66 1,774.66
Maple Leaf 1.00 1,756.70 1,777.70 1,777.70
1/2 Maple Leaf 0.50 913.79 924.69 1,849.38
1/4 Maple Leaf 0.25 457.98 462.35 1,849.38
1/10 Maple Leaf 0.10 177.96 200.64 2,006.41
Mexican 50 peso 1.21 2,088.69 2,105.69 1,746.44
.9999 bar 1.00 1,750.81 1,761.81 1,761.81
SPOT SILVER: 35.11      
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 24,671.08 25,121.08 35.13
US 40% silver 1/2s 0.30 9,765.98 10,065.98 34.12
100 oz .999 bar 100.00 3,535.50 3,595.50 35.96
10 oz .999 bar 10.00 351.05 357.05 35.71
1 oz .999 round 1.00 35.21 35.96 35.96
Am Eagle, 200 oz Min 1.00 36.86 37.86 37.86
SPOT PLATINUM: 1,637.00      
Plat. Am Eagle 1.00 1,637.00 1,737.00 1,737.00
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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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