The Moneychanger
Daily Commentary
Monday, 7 May a.d. 2012 Browse the commentary archive

Imagine that at the US election in the fall, both Republicans & Democrats together fail to win 49.5% of the vote. Neither O'Bama or Romney (or whatever other apparatchik the Republicans front) wins, but Ron Paul wins the presidency while the Green Party wins control of the House.

That is something like what happened in Greece over the weekend, where the New Democracy Party & PASOK (the establishment parties) failed to win 49.5%, couldn't form a government, & the far left party stepped up to bat next. They are trying to form a coalition with a far right party, and both the press is predictably terming "fringe" parties because they spout not the establishment line, i.e., "bail out the banks."

To heap hand grenade on dynamite for the euro, in France Sarkozy, who has served as German Chancellor Merkel's faithful toady in bailing out the banks, was overthrown by a socialist, Hollande. Don't get too excited, in spite of the name the Socialists in France are roughly like Demos & Repubs here, an establishment party. Expect no revolution there.

All this sayeth not exactly that Greece will exit the euro & the euro will implode, but it surely increaseth the likelihood. Markets thought so, anyway. The Nice Government Men in the US must have lost lots of sleep over the weekend as those rogue elections sent the dollar shooting above 80: "Send in the Manipulators!" Didn't do the euro any good, It gapped down & fell clean to 1.2960 over the weekend, but climbed above $1.3000 to end today at $1.3053, down only 0.24%. That $1.3000 stands as the Euro's last support between it & $1.2600. Japanese yen stayed out of the fray, closing at 125.18c (Y79.88/US$1), about unchanged.

US DOLLAR INDEX closed up only 8.5 basis points (0.11%). That leaves it ambiguously poised just above its 20 day moving average (79.33) but beneath the upper boundary of the triangle (or diamond) it's been painting since January. If the euro breaks $1.3000 & gets into serious trudging, dollar could hit 81 overnight, nice government men notwithstanding.

Strange, strange US stock markets today. Dow chart looks like an ironing board, with most of the action in the legs, down below Friday's close. Dow lost 29.74 points (0.23%) to end barely clinging by its hangnails to 13,000 at 13,008.53.

On the other hand, the S&P500 & Nasdaq Comp. charts look nearly identical, with both indices underwater until 12:30, then rising to end the day barely up (0.04% & 0.05%). S&P500 gained a -- get out your magnifying specs -- 0.48 point -- to 1,369.58.

Last week I kept telling y'all about that head & shoulders in the stock charts, & this week the S&P500 stands right on the neckline, ready to fall through that trap door. Dow has not yet completed its right shoulder, but today closed below its 20 & 50 DMAs (13,044 & 13,062). If any of this argues for higher stock prices, it's such a squeaky small voice I can't hear it.

Today on Comex Gold lost $6.10 to close $1,638.60 while silver lost 30.8 cents and ended at 3007.2c.

Riddle this: gold's low today at $1,632.66 was higher than Friday's low at $1,626.50. Don't make a lick of sense. Today's high came in lower than Friday's by $4 at $1,642.50.

Anyhow, this was not Disaster Day for gold. It remains above the upper boundary of that falling wedge (which foretells a leap up), sliding down that boundary like a kid on a playground slide. This constitutes no "break down", is a higher low than Friday's, & overall offers some hope that gold made its low for this move on Friday.

Time I walked in the office this morning silver was at 2978c and had been as low as 2968.9. That was only a few cents lower than Friday, so that might mark a double bottom.

I am sure waxing tired of these predictable days in silver & gold where "somebody" enters the market on open or an hour later & sells the snot out of it, driving it down suddenly, only to watch it bounce back to reclaim most of the loss. So it was today, so I just bought some down there under 3000c. That close above 3000c was good for silver morale, & shows some strength. However, silver lost against gold today. Gold/Silver Ratio rose from 54.138 on Friday to 54.489 today, making that swap from gold to silver shine even brighter.

How is silver doing on that falling wedge? Well, it fell through the top boundary toward the lower one and I'd say it bounced off. As long as silver does not close below 2950c, that falling wedge remains intact & points to an upside move.

On 7 May 1525 the Peasants Revolt was crushed in Germany. This was not Luther's finest hour, as he sided with the nobles completely against the peasants.

Ironically enough, on 7 May 1832 Greece became an independent kingdom.

On 7 May 1941 Glenn Miller & his Orchestra recorded Chattanooga Choo Choo, which earned the first gold record for selling over a million copies, but won no literary awards for depth of thought.

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
7-May-12 Price Change % Change
Gold, $/oz 1,638.60 -6.10 -0.37%
Silver, $/oz 30.07 -0.31 -1.01%
Gold/Silver Ratio 54.489 0.352 0.65%
Silver/Gold Ratio 0.0184 -0.0001 -0.65%
Platinum 1,525.60 1.80 0.12%
Palladium 645.60 -4.30 -0.66%
S&P 500 1,369.58 0.48 0.04%
Dow 13,008.53 -29.74 -0.23%
Dow in GOLD $s 164.11 0.25 0.15%
Dow in GOLD oz 7.94 0.01 0.15%
Dow in SILVER oz 432.58 3.41 0.79%
US Dollar Index 79.58 0.09 0.11%
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: 1,638.20      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,674.24 1,690.24 1,690.24
1/2 AE 0.50 827.29 860.06 1,720.11
1/4 AE 0.25 417.74 434.12 1,736.49
1/10 AE 0.10 173.65 180.20 1,802.02
Aust. 100 corona 0.98 1,589.71 1,604.71 1,637.12
British sovereign 0.24 385.63 392.63 1,667.94
French 20 franc 0.19 305.85 312.85 1,675.69
Krugerrand 1.00 1,641.48 1,657.48 1,657.48
Maple Leaf 1.00 1,648.20 1,668.20 1,668.20
1/2 Maple Leaf 0.50 810.91 851.86 1,703.73
1/4 Maple Leaf 0.25 405.45 434.12 1,736.49
1/10 Maple Leaf 0.10 162.18 176.93 1,769.26
Mexican 50 peso 1.21 1,955.26 1,972.26 1,635.78
.9999 bar 1.00 1,643.93 1,654.93 1,654.93
SPOT SILVER: 30.03      
SILVER Fine Tr.Oz. BID ASK $/oz
VG+ Morgan $B4 1905 0.77 25,721.34 29,000.00 37.91
VG+ Peace dollar 0.77 24,221.34 28,000.00 36.60
90% silver coin bags 0.72 20,931.63 21,181.63 29.62
US 40% silver 1/2s 0.30 8,385.38 8,560.38 29.02
100 oz .999 bar 100.00 2,972.50 3,012.50 30.13
10 oz .999 bar 10.00 302.75 306.75 30.68
1 oz .999 round 1.00 29.78 30.68 30.68
Am Eagle, 200 oz Min 1.00 31.63 32.33 32.33
SPOT PLATINUM: 1,525.60      
PLATINUM Fine Tr.Oz. BID ASK $/oz
Plat. Platypus 1.00 1,565.60 1,620.60 1,620.60
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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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