The Moneychanger
Daily Commentary
Tuesday, 21 February a.d. 2012 Browse the commentary archive

On Friday, 24 February, I will be speaking for the Fayette County (Tenn.) Tea Party at the Fayette County Courthouse, in the town square at Somerville, Tennessee. Party starts at 7:00 p.m., and the topic will be "Restoring Freedom by Rebuilding Local Economy." This may be your only chance to see a natural born fool from Tennessee live and outside captivity.

When you put three men all anxious to get home to their wives in a car, you throw the brains right out the window. We started out from Houston Friday at 2:00 p.m. and arrived at my house at 5:30 a.m. Brainless.

Looking at markets, you can't afford to wear blinders. You have to look at markets that feed back on each other, & inwardly you have to look at more than a market's close. If something doesn't fit, that's probably because it really doesn't fit, and something is up.

Today, it appears for the nonce, that Greek Debt Deal was finally accepted. Just wait to see how permanent that is. Reports I hear from Greece indicate a level of economic suffering that can't be maintained.

Today came the answer to my riddle last week, Why have silver & gold not fallen further, following through on their repulse at $1,750? Answer is, Because they are strong, and haven't yet completed the upward move that began from the 29 December bottom.

Today the headlines crowed that the Dow hit 13,000, and it did, 13,005.04 as a matter of fact, highest since May 2008, but -- whoops! -- it didn't close near there. Meanwhile, if you merely glance at today's chart, you will notice that the Dow climbed up a mountain, then fell off the mountain from about 1:30 onwards, closing at 12,965.69, up only 15.82 points (0.12%) and 40 points lower than the high. Now glance over at the Dow in Gold Dollars, and you'll see that it in fact DROPPED G$2.68, about an eighth of an ounce and way below the last high.

Meanwhile, the S&P500 rose 0.98 point, a noteworthy 0.07%, to 1,362.21.

Now I will give y'all that if the Dow intended to clear 13,000, it might first bounce off & try again, but today's chart indelibly resembles a market running clean out of steam and fainting. I also wonder why amidst this general jubilating the NASDAQ dropped 0.11% and the Russell 2000 dropped 0.7%. Not everybody in the choir is singing the same tune. Why not?

The US dollar index gave up 11.5 basis points (0.15%) to close 79.058, down over 50 basis points from a week ago. The euro gained 0.75%, but the jubilators might want to notice that price didn't reach the last peak, which it must BEST to rally further. The yen has spent the last three weeks dropping. Today it dropped another 0.21% to 125.46c/Y100 (Y79.71/US$1).

Being no more than a natural born fool & not one of them genius economists, I am plain bumfuzzled by the popular belief that when the US dollar drops, it is good for stocks. But wait. If the dollar drops, that signals inflation or some monetary problem, & that introduces confusion into the entire economy, so explain to me exactly why the dollar dropping is good for stocks?

Last three days of last week silver & gold steadfastly refused to drop further, even though gold hit a low of $1,705.60 on 16 February -- & then closed $21 higher. Now we are left with the interpretation that both have been undergoing a correction within a rally, that the rally ain't over yet, and that gold will reach $1,805 or higher before the rally ends and a bigger correction sets in.

Gold today closed a little higher than its last peak, up $32.60 to $1,757.10 (versus $1,756.80 at the 2 February peak, when all this fun began). On Friday it closed at $1,724.60, so it knocked down all the gates of resistance around $1,730, $1,740, & $1,750. Hard to imagine that it won't follow through tomorrow with a higher close still. It closed near the high for the day ($1,759.43). Only thing that could gainsay higher prices and a continuing rally would be a close below $1,725 tomorrow. Otherwise gold has the wind in its sails.

Gold leapt 1.9% but silver pulled on its 7-league boots and vaulted 3.7%! High came at 3445c, & silver closed near that at 3441.3c, up 121.3c.

Low last week arrived on Thursday at 3262c, then over the next three days silver kept bouncing against 3360c, like a helium balloon patting on the ceiling. Once it cleared 3380c in Europe, it was bound to break 3400c & run higher in the US.

Pointing to better things still, silver has now reached its 300 day moving average (3468c) once again. 200 DMA is not much higher at 3495c. When silver crosses that line, buyers will pile on. Silver has in it 3570c at least, and maybe 3900c.

Unless contradicted by lower closes tomorrow, gold and silver will move higher.

On 21 February 1885 the Washington Monument was dedicated. It only took 36 years to reach its 555 foot height.

On 21 February 1848 the Communist Manifesto, written by Karl Marx and Friedrich Engles, was published in London. Hard to recall any other document from history that has shed so much blood.

However, I find it wryly amusing, in a sort of gallows-humor way, that in supposedly capitalist and anti-socialist America, all ten planks of the Communist Manifesto are written into law & daily practiced, to wit:

1. Abolition of private property & application of all rents of land to public purposes. If you believe you own property, just ignore the property tax bill & see if the real owner doesn't show up. And, what's that thing called "zoning"?

2. A heavy progressive or graduated income tax.

3. Abolition of all rights of inheritance. We call it an estate tax.

4. Confiscation of the property of all emigrants & rebels. We call it government seizures, tax liens, & anti-terrorism laws.

5. Centralization of credit in the hands of the state by means of a national bank with State capital & an exclusive monopoly. Behold, I give you the Federal Reserve system.

6. Centralization of the means of communication & transportation in the hands of the State. Think FCC & DOT & ICC and FAA and driver's licenses.

7. Extension of factories & instruments of production owned by the state, bringing into cultivation of waste lands, & improvement of the soil generally in accordance with a common plan. Think "state sponsored enterprises", Department of Agriculture, Dept of Commerce & Labor, Dept. of Interior, EPA, BLM, etc., etc.

8. Equal liability of all to labor. Establishment of industrial armies, especially for agriculture. Think minimum wage laws and social security & again, the Department of Agriculture.

9. Combination of agriculture with manufacturing industries, gradual abolition of the distinction between town & country, by a more equitable distribution of population over the country. Think "factories in the field" which the Dept. of Agriculture has been pushing since the 1930s, zoning, & government control of manufacturing and agriculture. The "more equitable distribution" has meant depopulation of the countryside.

10. Free education for all children in public schools. Abolition of children's factory labor in its present form. Combination of education with industrial production. I don't know about y'all, but in Tennessee we have these outfits called "public schools." Maybe y'all don't have those up north. And if you haven't realized it yet, all that state sponsored "higher" education is nothing more than vocational training for white collar workers.

COMRADES! We have met the communists, & they are us!

Argentum et aurum comparanda sunt —
Silver and gold must be bought.

— Franklin Sanders, The Moneychanger

Your source for gold and silver. Read our latest reviews and testimonials.
Market Snapshot See more charts and market data
21-Feb-12 Price Change % Change
Gold, $/oz 1,757.10 32.60 1.89%
Silver, $/oz 34.41 1.21 3.65%
Gold/Silver Ratio 51.059 -0.884 -1.70%
Silver/Gold Ratio 0.0196 0.0003 1.73%
Platinum 1,687.10 49.10 3.00%
Palladium 710.60 15.60 2.24%
S&P 500 1,362.21 0.98 0.07%
Dow 12,965.69 15.82 0.12%
Dow in GOLD $s 152.54 -2.68 -1.73%
Dow in GOLD oz 7.38 -0.13 -1.73%
Dow in SILVER oz 376.77 -13.29 -3.41%
US Dollar Index 79.06 0.12 0.15%
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SPOT GOLD: 1,757.20      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,794.10 1,809.10 1,809.10
1/2 AE 0.50 887.39 922.53 1,845.06
1/4 AE 0.25 448.09 465.66 1,862.63
1/10 AE 0.10 186.26 195.05 1,950.49
Aust. 100 corona 0.98 1,710.35 1,724.35 1,759.18
British sovereign 0.24 413.64 420.64 1,786.94
French 20 franc 0.19 328.07 335.07 1,794.69
Krugerrand 1.00 1,764.23 1,779.23 1,779.23
Maple Leaf 1.00 1,769.20 1,790.20 1,790.20
1/2 Maple Leaf 0.50 869.81 913.74 1,827.49
1/4 Maple Leaf 0.25 434.91 465.66 1,862.63
1/10 Maple Leaf 0.10 173.96 189.78 1,897.78
Mexican 50 peso 1.21 2,101.53 2,117.53 1,756.27
.9999 bar 1.00 1,763.35 1,774.35 1,774.35
SPOT SILVER: 34.34      
SILVER Fine Tr.Oz. BID ASK $/oz
VG+ Morgan $B4 1905 0.77 27,554.69 27,500.00 35.95
VG+ Peace dollar 0.77 26,554.69 26,500.00 34.64
90% silver coin bags 0.72 23,870.28 24,220.28 33.87
US 40% silver 1/2s 0.30 9,656.83 9,831.83 33.33
100 oz .999 bar 100.00 3,458.50 3,498.50 34.99
10 oz .999 bar 10.00 345.85 349.85 34.99
1 oz .999 round 1.00 34.59 35.19 35.19
Am Eagle, 200 oz Min 1.00 36.09 36.69 36.69
SPOT PLATINUM: 1,687.10      
PLATINUM Fine Tr.Oz. BID ASK $/oz
Plat. Platypus 1.00 1,712.10 1,755.10 1,755.10
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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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