The Moneychanger
Daily Commentary
Monday, 9 January a.d. 2012 Browse the commentary archive

Don't look now, but the US dollar index has started its next leg up. Oh, today it gave up 45.6 basis points (0.6%), but gave it up to 80.98, after Friday's close at 81.264. Dollar gained 164.4 basis points last week! Face it: y'all will be dealing with a strong dollar for several months, UNLESS it falls below 79.50.

The euro is no longer a contender, except in the "Fiat Currencies Race to the Bottom." It rose a bit today, 0.4%, to 1.2764, but this is virtual leagues from support around 1.3200. Market refuseth yet to believe that the euro has been fixed.

Yen is still playing with that bottom channel boundary line -- the bottom line of the channel it fell OUT of. Rose today 0.17% to 130.15c/Y100 (Y76.83/$1). Doubtful that the Nice Government Men in Japan would let the yen out from under their thumb.

STOCKS have stalled around 12,400. Dow today stirred a little bit, up 32.77 (0.27%) to 12,396.69. S&P500 rose about the same, 2.89 (0.23%) to close 1,280.70.

Back off & you'll see a gigantic broadening top, like unto the top posted in 1999 - 2000. Takes a long time for a market that big to roll over, but by the time it does it has built up lots of downside inertia.

I know there will be sirens aplenty, crooning in your ears that the worst of the recession is over & the economy will come back this year. All I can say is, Hide and watch.

For the past six months or so it seems that when silver & gold close one-up/one-down, the next day they both rise. Now that doesn't happen every time, but enough to spook me. And today silver rose up 9.6% (piddling amount, 0.3%) to 2874.9c while gold fell $8.60 (1/2%) to $1,607.50.

The gold chart has that "I've built a mountain peak & now I'm skidding down the other side" look to it. It is skids past $1,605, 'twill skid a ways further.

On the other hand (there's that double-minded phrase again), if gold can clear $1,625/$1,630, why it would look strong as a garlic milkshake & attract all sorts of hangers-on.

Range for gold was not noticeably weak today, $1,623.20 to $1,606.43 against Friday's $1,631 to $1,608.75. Well, it won't hang around here long, & tomorrow ought to find gold higher.

Silver's range today wasn't much different to Fridays (low came 6c lower, high 24c lower), but silver has established an ever so slight downtrend with support at 2860c. If silver breaks that mark, all its new found friends & cheerleaders will head for the exits like dope-dealers at a concert when the cops show up. But you let silver rise a dollar & pierce 2960c, and investors will be swarming silver like politicians around a money hole.

And I don't know which way it will break. I don't think either metal has a lot of downside left. They've withstood huge drops, from $1,927 to $1,522 (21%) and from 4950c to 2600c (48.3%). That just about does it.

But I am quixotically hoping still that silver will fall off the wall once more time while gold holds its place, and take that gold/silver ratio up to 57.5 for another swap. If it doesn't, well Sancho Panza & I will just go looking for more windmills.

Times come when you can pay little attention to markets but this isn't one of them. Watch silver & gold closely, looking for that ratio over 57.5, & use that as your trigger to buy more.

I manage a few accounts for some charitable entities, & I've been casting up accounts lately, looking over performance. Big question in my mind was the wisdom of keeping presently-unneeded cash in silver or gold (I don't mean cash you'll need in six months or less, or even 12 necessarily) rather than keeping it in a bank.

Some of these accounts add some gold or silver nearly every week, so they've bought this year high & low. And in years past. Since some of them are 12 years old and some only two or three, their performance varies a lot, but the lowest shows a 21% lifetime gain while the greatest has added 71%.

So y'all can leave your money in banks if you want, but that's sufficiently proved to me that my money ought to be held in silver & gold. Let the market rage, up and down, I'll just keep on converting those excess bucks into metals. Course, I ain't got one of them fancy money-manager decrees from Harvard or MYT -- I'm just a natural born fool from Tennessee, so what do I know?

On 9 January 1990 a SWAT team surrounded my house shortly after dawn, invaded my house, & arrested me and my wife on federal criminal charges.

It's the oddest thing what great calm and courage God gives his children in the midst of the most fearful circumstances. I was in my underwear shaving when they hit the door, glanced out my window, & thought it was awfully strange that some silly person in a black ninja suit was walking around on my deck with a machine gun. They burst into my bedroom & told me to put on some clothes. I did, and walked out of the bedroom as they swarmed all around. About the time I got thru the door, I realized I had left my Bible on the nightstand. I turned around & bumped into a cop that looked like a solid wall of (lots of) flesh, and I'm no short fellow (6'3"). He blustered at me, "You can't go back in there!"

With a calm not from within me I looked him in the eye and said, "I'm going in there to get my Bible. Now, you can shoot me if you want, but I'm going to get my Bible." I pushed past him and got my Bible, and he never even squeaked.

Lots of people think that the Almighty God of heaven & earth is powerless, but only those on whose behalf he has not acted. Men are less than grasshoppers in his sight, money nothing, and the power of men even less. We had the almighty yankee government with all the money in the world and innumerable agents at their disposal & the whole machinery of the judiciary on their side, and we didn't have a pot to pea in or a window to throw it out of. Least amount any lawyer quoted for a defense was $50,000, which might as well have been $50 million for all we had. Government spent, I've been told, $2 million on the trial alone, and who knows how many millions more on the investigation, and what did we do? We prayed. We prayed the psalms. And we worked 'em over triple time, too, you can be sure.

Here's where it starts to get funny, how evil always shoots itself in the foot. We couldn't afford lawyers, & since the judge wanted us to stay good & convicted, she had to provide lawyers for us. Right, God raised up defenders for us, and the government had to pay.

We were so involved in our defense that we could hardly work in the discovery phase of the trial, & not at all once the trial started. Yet gifts appeared. God raised up friends to provide for us since we couldn't provide for ourselves.

Oh, and how many liars the government imported, and what great lies they told! How many mole hills they tried to bulldoze into mountains, and what little mouse burps they all turned out to be. They brought in documents by the hundredweight, in shopping carts, and subpoenaed witnesses by the dozens, from all over the country.

All for naught. On 9 July 1991, exactly, precisely one year and one half after we were arrested, the jury came back with a verdict: all defendants not guilty on all counts of a 72 page 1-1/2 inch indictment. They had charged us with conspiracy to defeat and delay the IRS because I had the almighty gall & effrontery to act on my rights and open a gold and silver bank. Because we all acted on our rights and asked what statute made anybody liable to pay an income tax. IRS couldn't bring it into court, prosecutors couldn't bring it into court, judge couldn't bring it into court, because there's not one.

I don't minimize the heroic agency of our attorneys -- the government assembled the best defense team available in the city of Memphis, all against their own will. But when people ask me what our secret was, what our great strategy, I just shrug. We never had a strategy, except to trust God & tell the truth, and stand still and see the salvation of the Lord. And surely, his will might have been to send me and Susan and the rest of us -- the 16 defendants that held out to the end -- to jail rather than free us, but he would still have been God, & I hope he would have given me grace to praise him for that, too.

One more little detail about that Bible. They held us in the Federal Building lock-up all day, but several of us -- Bill Horner, decorated Marine pilot, Mark Denison, Jim Hollingsworth, Lloyd Bauer, & I -- couldn't make bond, so they put us all in waist chains & leg irons & hand cuffs & herded us past a TV camera into a van lined with chain link and padlocked outside & drove us 60 miles to the jail at Earle, Arkansas. When we got there they took away the plastic bags with all our property, and my Bible. I could see it there, on the console, through the window. I could only look. Couldn't ask. Would do no good. Then as I watched, one man, without saying a word to anyone, picked up my Bible and as he left pushed it into my hands.

Never said a word. Didn't have to. I knew who had sent him.

"For in the time of trouble he shall hide me in his tabernacle;

"Yea, in the secret place of his dwelling shall he hide me,

"And set me up upon a rock of stonre.

"And now shall he lift up my head,

"Above mine enemies round about me.

"Therefore will I offer in his dwelling an oblation, with great gladness:

"I will sing and speak praises unto the Lord."

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
9-Jan-12 Price Change % Change
Gold, $/oz 1,607.50 -8.60 -0.5
Silver, $/oz 28.75 0.10 0.3
Gold/Silver Ratio 55.915 -0.487 -0.9
Silver/Gold Ratio 0.0179 0.0002 0.9
Platinum 1,427.50 9.50 0.7
Palladium 617.90 -49.35 -7.4
S&P 500 1,280.70 2.89 0.2
Dow 12,392.69 32.77 0.3
Dow in GOLD $s 159.37 1.28 0.8
Dow in GOLD oz 7.71 0.06 0.8
Dow in SILVER oz 431.07 -0.30 -0.1
US Dollar Index 80.98 -0.46 -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: 1,610.90      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,654.39 1,669.39 1,669.39
1/2 AE 0.50 813.50 845.72 1,691.45
1/4 AE 0.25 410.78 426.89 1,707.55
1/10 AE 0.10 170.76 178.81 1,788.10
Aust. 100 corona 0.98 1,561.64 1,575.64 1,607.46
British sovereign 0.24 379.21 386.21 1,640.64
French 20 franc 0.19 300.76 307.76 1,648.39
Krugerrand 1.00 1,630.23 1,645.23 1,645.23
Maple Leaf 1.00 1,622.90 1,643.90 1,643.90
1/2 Maple Leaf 0.50 797.40 837.67 1,675.34
1/4 Maple Leaf 0.25 398.70 426.89 1,707.55
1/10 Maple Leaf 0.10 159.48 173.98 1,739.77
Mexican 50 peso 1.21 1,928.51 1,944.51 1,612.76
.9999 bar 1.00 1,616.54 1,627.54 1,627.54
SPOT SILVER: 28.95      
SILVER Fine Tr.Oz. BID ASK $/oz
VG+ Morgan $B4 1905 0.77 23,386.06 27,500.00 35.95
VG+ Peace dollar 0.77 22,886.06 27,000.00 35.29
90% silver coin bags 0.72 20,481.18 20,806.18 29.10
US 40% silver 1/2s 0.30 7,948.78 8,248.78 27.96
100 oz .999 bar 100.00 2,919.50 2,959.50 29.60
10 oz .999 bar 10.00 289.45 309.45 30.95
1 oz .999 round 1.00 29.05 29.80 29.80
Am Eagle, 200 oz Min 1.00 30.70 31.20 31.20
SPOT PLATINUM: 1,427.50      
PLATINUM Fine Tr.Oz. BID ASK $/oz
Plat. Am Eagle 1.00 1,427.50 1,527.50 1,527.50
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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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