The Moneychanger
Daily Commentary
Thursday, 5 January a.d. 2012 Browse the commentary archive

Today the US dollar index cashed that check it wrote yesterday. Rose 78.2 basis points (1.01%, giant move) to $80.911, nearly reaching yesterday's 81.10 target. High struck 81.016. Once the buck worms its way past that 81.00 turnstile, it will run fast for 81.50.

What the dollar won, the euro lost. It fell 1.22% to close at 1.2787, face still firmly set on 1.2000 or less.

How can I be so sure? Yesterday the euro gapped down, then today gapped down again, closing way below the last low. Down, down, down.

Somebody slapped the yen today, knocking it below the lower channel boundary established August thru October. Fell 0.51% to 129.69c/Y100 (Y77.10/$1). Hope of higher yen died today.

Stocks were a mess today. Nasdaq & Nasdaq-100 rose slightly, as did the S&P500, but the Dow & other sank, evidencing great confusion & faltering confidence. Today's Dow chart pictures precisely running out of gas (see chart at www.nasdaq.com) & sputtering to a halt. Dow fell 2.72 (0.02%) to 12,415.70, while the S&P500 rose 0.29% (3.76) to 1,281.06.

Today the Dow sank as low as 12,283, crossing the perilous & deadly 12,300 line. Last three days (as well as today's chart) look like and empty jet fuel tank at 20,000 feet. Dow must breach 12,500 or drop into free fall.

Gold & silver both rose today, but with much subdued enthusiasm. Gold closed Comex $7.50 higher at $1,619.40. Silver added 20.2c to 2926.5c. No significant advance here, just hanging on.

Gold's five day chart has widened out its swings and today posted what might be a double top at $1,625. Now the way of life is that you either advance or fall back, grow or die, unless you are a lichen or a rock under a lichen. If gold cannot pierce $1,625, then 'twill fall back to prove at $1,600 exactly how strong it is.

Today gold nearly hit its 200 day moving average ($1,627) which would be a usual place to limit an upmove in a not-yet-completed downward correction.

Y'all are probably scratching your heads & wondering why in the world a fellow who is so sure silver & gold will be higher this time next year & three to five or more times higher in the next 3 - 10 years would croak so about tomorrow's outlook? Well, 'cause that's what the chart shows, & arguing with a chart is like arguing with a road sign: makes you feel good, but doesn't get you anywhere you want to go.

Interpretation is crucial here, because it will tell us whether we see a low lower than $1,524, or whether gold has now put all that trifling behind its back & turned its face to the sun.

Silver appears more tired than gold. It has been beating its head against a solid wall of resistance above 2960c, without success. Today silver dropped as low as 2874.5, a little lower than yesterday, which was a little lower than Tuesday. Highs also have been successively lower. And I have just described what? Sounds like a downtrend. To gainsay that outlook silver must beat its way through 2960c & close higher.

Patience, patience. I'd rather exercise a little patience here and maybe buy a little higher than buy and watch it sink to a final bottom.

'Tis often strange, even incomprehensible, what some ages find admirable. Today is celebration of St. Simeon Stylites, whose last name comes from the Greek word for "column." His age was given to austerity & asceticism, but Simeon was so rough on himself that his monastery asked him to leave. He went to live as a hermit in the desert, but crowds of pilgrims came to visit & ask his counsel & prayers, so he adopted a new way of life.

He found a pillar in some ruins, about 12 feet high, and built a small platform atop it, resolving to spend the rest of his life there. Little boys from a nearby village climbed up the pillar to pass him food. Supporters eventually built him a pillar about 45 feet high, with a platform about 40 inches square at the top. Simeon lived on the top of a pillar for 37 years, and inspired a movement of pillar-dwellers. or Stylites.

Today it's almost impossible for us to conceive such a desire for asceticism as a way to God, & yet in his age Simeon was most highly respected. To our "Go for all the gusto" age Simeon Stylites remains a mystery. Either he was very wrong, or we are.

On 5 January 1815 New England federalists met at the Hartford Convention to voice their anger over the War of 1812, and threatened to secede if their demands weren't met. I only tell that story so that y'all will know that the first folks to mention seceding were not from the South, but New England.

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
5-Jan-12 Price Change % Change
Gold, $/oz 1,619.40 7.50 0.5
Silver, $/oz 29.27 0.20 0.7
Gold/Silver Ratio 55.336 -0.127 -0.2
Silver/Gold Ratio 0.0181 0.0000 0.2
Platinum 1,412.90 -5.10 -0.4
Palladium 638.70 -28.55 -4.3
S&P 500 1,281.06 3.76 0.3
Dow 12,415.70 -2.72 -0.0
Dow in GOLD $s 158.49 -0.76 -0.5
Dow in GOLD oz 7.67 -0.04 -0.5
Dow in SILVER oz 424.25 -3.04 -0.7
US Dollar Index 80.91 0.78 1.0
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: 1,622.30      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,664.48 1,679.48 1,679.48
1/2 AE 0.50 819.26 851.71 1,703.42
1/4 AE 0.25 413.69 429.91 1,719.64
1/10 AE 0.10 171.96 180.08 1,800.75
Aust. 100 corona 0.98 1,572.69 1,586.69 1,618.74
British sovereign 0.24 381.89 388.89 1,652.04
French 20 franc 0.19 302.88 309.88 1,659.79
Krugerrand 1.00 1,641.77 1,656.77 1,656.77
Maple Leaf 1.00 1,634.30 1,655.30 1,655.30
1/2 Maple Leaf 0.50 803.04 843.60 1,687.19
1/4 Maple Leaf 0.25 401.52 429.91 1,719.64
1/10 Maple Leaf 0.10 160.61 175.21 1,752.08
Mexican 50 peso 1.21 1,942.15 1,958.15 1,624.08
.9999 bar 1.00 1,627.98 1,638.98 1,638.98
SPOT SILVER: 29.22      
SILVER Fine Tr.Oz. BID ASK $/oz
VG+ Morgan $B4 1905 0.77 23,598.75 25,098.75 32.81
VG+ Peace dollar 0.77 23,098.75 28,800.00 37.65
90% silver coin bags 0.72 20,677.80 21,002.80 29.37
US 40% silver 1/2s 0.30 8,029.90 8,329.90 28.24
100 oz .999 bar 100.00 2,947.00 3,007.00 30.07
10 oz .999 bar 10.00 292.20 298.20 29.82
1 oz .999 round 1.00 29.32 30.07 30.07
Am Eagle, 200 oz Min 1.00 30.97 31.47 31.47
SPOT PLATINUM: 1,412.90      
PLATINUM Fine Tr.Oz. BID ASK $/oz
Plat. Am Eagle 1.00 1,412.90 1,512.90 1,512.90
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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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