The Moneychanger
Weekly Commentary
Friday, 10 August a.d. 2012 Browse the commentary archive
Here's the weekly scorecard:
  3-Aug 10-Aug Change % Change
Silver, cents/oz. 2,779.00 2,806.20 27.20 1.0
Gold, dollars/oz. 1,606.00 1,619.70 13.70 0.9
Gold/silver ratio 57.791 57.719 -0.070 -0.1
Silver/gold ratio 0.0173 0.0173 0.0000 0.1
Dow in Gold Dollars (DIG$) 168.57 168.57 0.00 0.0
Dow in gold ounces 8.15 8.15 0.00 0.0
Dow in Silver ounces 471.25 470.67 -0.58 -0.1
Dow Industrials 13,096.17 13,207.95 111.78 0.9
S&P500 1,390.99 1,405.87 14.88 1.1
US dollar index 82.32 82.56 0.24 0.3
Platinum 1,412.90 1,398.40 -14.50 -1.0
Palladium 577.40 581.50 4.10 0.7

Simple-minded as I am -- so simple-minded I can only follow a long term strategy of riding the primary trend in silver & gold -- I was instructed & enlightened late yesterday to read in Andrew Peaple's Wall Street Journal blog that 9 August marked the 5th anniversary of the global financial crisis' beginning, when the ECB injected E95 billion of emergency liquidity.

Now what investment do y'all reckon has returned the most since then? Wasn't US bonds, or dollars or stocks. Nope, tied for No. 1 were gold and corn, both up 144%. Silver came in next, up 122%, followed by Brent crude oil, up 61%. US Treasuries? Not quite so fruitful with only a 38% return. Stocks? Well, S&P500 has returned a rich 7.7% in five years.

I'm not saying a word.

Here's a tee-tiny fact that catches the inquiring eye of a suspicious mind. US dollar index ended up about the same place it was last week, almost as if . . . Somebody were managing it. Anyhow, it coughed up 9.1 basis points (0.12%) to end at 82.559. Up above stands the 50 DMA at 82.66, while below the dollar dances along a rising fan line. Trend is down, but don't expect any big breaks since the Nice Government Men are holding down the dollar like a basketball underwater.

Does the euro no good, though. It dropped again today, down 0.11% to $1.2289 and near falling through the 20 day moving average ($1.2262) gapped down twice this week, sick as a bull eating Jimson weed. This is getting so painful to watch you start wishing somebody would step forward & put the euro out of its misery. Y'all believe me now about the utter vanity of Draghi's promises? It's dead-dog easy to tell when a central banker is lying. Y'all know how? If his lips are moving, he's lying -- same as a presidential candidate.

Y'all remember them Greek plays? Whenever the plot backed itself into a corner, stagehands back stage would tie a rope to an actor & lower him down on the stage. He was the "God out of a machine," Zeus or Mammon or Luigi, who would miraculously set everything aright. Don't know what them Greeks called him, but the Romans called him "deus ex machina." Even in those days, it was a cheap & corny way to solve a plot.

Well, the deus ex machina struck the stock market today when in the last 45 minutes of trading after a whole day underwater stocks suddenly got religion as buyers were lowered down on ropes by the NGM.

Dow rose 42.76 (0.32%) to 13,207.95. S&P500 rose 0.22% (3.07 points) to 1,405.87. Congratulations! The NGM got to the end of the day & their pre-prandial martini without the world flying apart.

Y'all don't keep hoping that deus ex machina will return. That rope's frayed already & liable to break.

'Twasn't a legendary week for silver or gold, but I'll take what I can get, especially silver above 2800 cent resistance.

Today gold scraped out another $2.60 to end at $1,619.70. Knocked on $1,626, but couldn't burst through yet. Y'all keep a close watch, because one day soon gold's liable to surprise with a Great Leap Upward.

That silver lost a measly 3.5 cents today to end still stalled at 2806.2c. It's about to work my nerves to a nub. As with gold, the five day silver chart leaves one with the taste that somebody tried to trash it today, failed, & it broke through 2820 resistance that has stymied it all week. However, it couldn't hold on at 2832c, & faded on the close. Aftermarket didn't believe that close, and is trading 2814c. I bought silver today. When it closes through 2860c, I'll buy more.

Silver & gold remain on the trajectory I've outlined, slugging their way across August building a base for a rally in September. Buy now, & beat the September rush.

On 10 August 1821 Missouri became the 24th state to join the Union. Ironically, Missouri within a few years also prompted the first supreme court test of the constitution's Article I Section 10, "No State shall make any Thing but Gold or Silver Coin a Tender in payment of debt." As I remember, Missouri started a state bank and made its notes a legal tender. Somebody sued, and the supreme court, which in those days required that justices possess a brain bigger than a tunipseed, found that paper was not gold or silver after all. More irony: Missouri is the only state I know of that has exercised its power under Article I Section 10 to declare a tender, and declared that US 90% silver coin is its tender. That was a while ago.

On 10 August 1827 race riots in Cincinnati prompted 1,000 blacks to move to Canada. Most people don't realize that the reason the Underground Railway ended in Canada was that states north of the Ohio had constitutions forbidding blacks to settle there, or placing them under severe legal restrictions.

Y'all enjoy your weekend.

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
10-Aug-12 Price Change % Change
Gold, $/oz 1,619.70 2.60 0.2
Silver, $/oz 28.06 -0.04 -0.1
Gold/Silver Ratio 57.720 0.093 0.2
Silver/Gold Ratio 0.0173 -0.0000 -0.1
Platinum 1,398.40 -12.90 -0.9
Palladium 581.50 -4.50 -0.8
S&P 500 1,405.87 3.07 0.2
Dow 13,207.95 42.76 0.3
Dow in GOLD $s 168.57 0.29 0.2
Dow in GOLD oz 8.15 0.01 0.2
Dow in SILVER oz 470.67 2.11 0.4
US Dollar Index 82.56 -0.09 -0.1
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: 1,619.50      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,661.61 1,672.94 1,672.94
1/2 AE 0.50 825.44 850.24 1,700.48
1/4 AE 0.25 416.76 429.17 1,716.67
1/10 AE 0.10 171.56 175.72 1,757.16
Aust. 100 corona 0.98 1,579.50 1,589.43 1,621.54
British sovereign 0.24 381.23 388.23 1,649.24
French 20 franc 0.19 302.36 309.36 1,656.99
Krugerrand 1.00 1,637.50 1,645.50 1,645.50
Maple Leaf 1.00 1,629.50 1,649.50 1,649.50
1/2 Maple Leaf 0.50 801.65 842.14 1,684.28
1/4 Maple Leaf 0.25 400.83 429.17 1,716.67
1/10 Maple Leaf 0.10 160.33 174.91 1,749.06
Mexican 50 peso 1.21 1,942.71 1,954.63 1,621.16
.9999 bar 1.00 1,625.17 1,636.17 1,636.17
SPOT SILVER: 28.14      
SILVER Fine Tr.Oz. BID ASK $/oz
VG+ Morgan $B4 1905 0.77 26,000.00 27,750.00 36.27
VG+ Peace dollar 0.77 25,000.00 27,500.00 35.95
90% silver coin bags 0.72 20,105.80 20,370.80 28.49
US 40% silver 1/2s 0.30 7,829.30 8,004.30 27.13
100 oz .999 bar 100.00 2,814.00 2,864.00 28.64
10 oz .999 bar 10.00 286.40 288.90 28.89
1 oz .999 round 1.00 27.99 28.84 28.84
Am Eagle, 200 oz Min 1.00 29.74 30.39 30.39
SPOT PLATINUM: 1,398.40      
PLATINUM Fine Tr.Oz. BID ASK $/oz
Platinum Platypus 1.00 1,423.40 1,463.40 1,463.40
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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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