Mercy, we got skewered by 3 week old news today -- yet another reason to love that good old stabilizing, prosperity-promoting Federal Reserve.

They released minutes of the FOMC meeting 3 weeks ago which suggested they saw little need for more stimulating, which suggests they MIGHT not inflate with another round of money printing like QE1 & QE2.

Here we enter into the wholly irrational realm of reading the Fed's tea leaves. Market today read it that Fed will back off inflating (well, not inflate any faster than they already are) so if nature takes its course, interest rates must rise and the dollar's value will bloom.

Then there is this natural born fool from Tennessee, who trusts the Fed to (1) speak their minds truthfully or (2) have any mind at all or (3) not inflate, about as much as I trust a 6 foot rattler not to bite me if I warm him up in my bosom.

I think the Fed has a problem. Every time they make one of these "we're going slow on inflation" announcement, interest rates rise. But their announced policy -- to stimulate the economy -- is to keep interest rates near zero (to match their economic IQ). So how will they keep rates near zero if their own words make them rise? Why, by buying more bonds. And how do they do that? By printing more money.

The phrase "shoot yourself in the foot" springs to mind.

It pains the rational mind to deal with such trifling liars, cheats, & fools. Triflin' -- that's the best I can say about 'em.

Stocks dropped on the Fed's news. Dow gave back 64.94 (0.49%) to 13,199.55 and the S&P500 dropped 5.66 (0.4%) to 1,413.38.

Stocks are still defying gravity, and fool that I am, I have never seen anybody succeed at that endeavor.

Fed's announcement drove the dollar up 59.9 basis points or 0.77% to 79.366. That amounts to nothing more than a kiss-back to the uptrend line it lately broke down through (I'll try to string more prepositions together, but how I know not to). 'Tain't nothing permanent or substantial there. All pop, no corn.

Euro took it on the chin, losing 0.68% to $1.3234. Continueth the same indecision. Yen was knocked back below its 20 DMA, dropping 0.93% to 120.71c (Y82.84). Till giving Nice Government Men fits because it wants to rise.

SILVER & GOLD were slapped around by the Fed, too. Although gold closed down only $7.50 (not many people knew what the Fed's announcement held, I reckon) to $1,670, while silver actually gained 16.7c by Comex close, ending at 3325c. Then came the Fed's moldy FOMC minutes, & just like flying a jet plane in a movie, things went bad fast.

Time the smoke & dust cleared, gold had touched $1,638.90 & silver 3245. Well, shucks! Should I cry or just wring my hands. Didn't do any more than drive them both back to their uptrend lines. If it was victory the Fed was looking for, this wasn't it.

My "must-hold" lines are $1,630 for gold and 3140c for silver. I'm speculating that tomorrow they will see lows no lower than today's.

Like a pit bull-alligator cross, I am holding on. I think silver & gold have seen their lows, & unless they breach my "must hold" points, I'm clamped down on that & won't let go till Bernanke thunders. Mercy, I won't even let go then, knowing what a little mouse-burp deal that would be.

On 3 April 1865 the invading Union army occupied the Confederate capital of Richmond, Virginia. That makes us the largest occupied nation in the world today, and the longest occupied & denied the right of self-determination. I reckon that's okay for Czecho-Slovakia, Yugoslavia, and all those really big countries like Bosnia & Kosovo, but not for the South. Go unravel that, if you can.

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

— Franklin Sanders, The Moneychanger

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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.

Other Important Information

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