The Moneychanger
Weekly Commentary
Friday, 19 October a.d. 2012 Browse the commentary archive
Here's the weekly scorecard:
  12-Oct 19-Oct Change % Change
Silver, cents/oz. 3,363.30 3,207.30 -156.00 -4.6
Gold, dollars/oz. 1,758.00 1,722.80 -35.20 -2.0
Gold/silver ratio 52.270 53.715 1.440 2.8
Silver/gold ratio 0.0191 0.0186 -0.0005 -2.7
Dow in Gold Dollars (DIG$) 156.73 160.11 3.38 2.2
Dow in gold ounces 7.58 7.75 0.16 2.2
Dow in Silver ounces 396.30 416.04 19.73 5.0
Dow Industrials 13,328.85 13,343.51 14.66 0.1
S&P500 1,428.59 1,433.19 4.60 0.3
US dollar index 79.69 79.63 -0.06 -0.1
Platinum 1,657.10 1,613.00 -44.10 -2.7
Palladium 637.95 623.30 -14.65 -2.3

What do you call a dinosaur with an extensive vocabulary? A thesaurus.

Last week's confusion broke this week. Stocks tried to rally, but failed wretchedly. Dollar index probed lower, but climbed back up to unchanged. Metals took a beating all around, & silver took the worst bruising. Euro tried to climb but fell back with only 0.55% gain to its credit. Yen lost 1.1%, big move for a currency.

Once again European Union leaders have firmly decided to re-decide everything decided shortly before without taking any action, even the sort of goofy action you expect from statists & Keynesians & socialists. They can only make up their minds to consider & re-consider.

This equates to pure strychnine for markets, for all markets hate uncertainty. Thus even US stocks were kneecapped, the euro made no headway for the week, & the dollar begins to look not so bad after all. After all, it's late, and the bar is closing.

Let us stand back & take a long term view -- really long term, about 350 years or since 1650 when the centralizing trend really took hold in creating national states. Yes, there is a "primary trend" in society as well as markets.

That trend has been rolling over since about 1980. Conventional war's cost has made armies like those of the 1940s impossible -- witness the 4th generation guerilla warfare of the last 45 years. Viet Nam, Iraq, Kosovo, Afghanistan -- armor & paratroops won't work. Now the national state's economic system has begun irretrievably faltering. Worse yet, the ultimate centralization -- the empires into which the national states have been fondued -- are stumbling. Soviet Union's gone, USA is overstretched in 130 countries around the world & dead broke, European Union is flying apart of its own volition.

National states & empires have had passed their prime. The process of decentralization in human affairs, including the economic, began with the Viet Nam era and is proceeding rapidly. Even if growing popular opinion weren't on its side, centralization can no longer keeps its promises & will alienate even more. Ask anybody under 30 whether he believes centralized power is better than decentralized. They young have already decided. The future will be decentralized. Power will flow away from centers to the periphery, & not a moment too soon.

We are now in the worst turmoil, that change where the old is fighting not to give way to the new, and the new is not yet strong enough to take control. The future belongs not to empires, but to secession, to affinity tribes, to small nations. The giant national state is dead for another 300 years.

Meantime, while the elephants battle, we ants must hide.

Currencies today stand at US$1 = Y79.28 = E0.7678.

That lying US dollar index, like a trashy girl, lied about breaking down & turned around and gave us a big kiss. (I won't miss it when it's gone.) Didn't close the week higher, but cast dark cloudy doubt on any further fall. It closed 29 basis points higher today at 79.633. This left behind a rounding bottom Wednesday & Thursday, and victoriously pierced the 79.40 lip of that bowl. Unless it falls below that 79.40 next week, the dollar will climb.

Stocks simply collapsed today, sinking, sinking, sinking. Dow lost -- WHOA! -- 205.43 points (1.52%) and closed at 13,343.51. S&P500 shucked even more percentagewise, 1.66% or 24.15, ending at 1,433.19.

Friends, boys & girls, ladies & gentlemen, this dragged the Dow to a close beneath its 50 DMA (13,353), erasing the last five days' gains. If it continues to plunge, the next support stands at 13,250. A close below that pulls the trip rope on Madame Guillotine.

Ponder the gold/silver ratio. When metals are rallying, it falls (because silver usually outperforms gold) and when they are correcting it rises. Right now, it's rising. Closed last week at 52.270 but today at 53.715, up 2.8%. Today it filled the gap left behind on the way down, & nearly closed above its 200 DMA. I haven't mentioned it before, but another gap stands at the beginning of the August rally, when the ratio leapt from 57 to 56.5. Yes, it is possible that gap, too, might be filled. $1650 gold at a 57:1 ratio puts silver at 2895 cents. Not predicting, just mathematicizing.

Gold cascaded down $20.50 to $1,722.80 while silver waterfalled 76.5 cents to 3207.3c. Ranges were $1,738.9 - $1,715.89 & 3276.5c - 3192c.

Gold has now touched its 50 DMA ($1,720 today) which certainly MIGHT fulfill a correction target. A 38.2% correction would end about $1,718, a 50% about $1,693. Yet below that the 150 & 200 DMAs stand at $1,648.52 & $1,662.39, along with lateral support smeared from $1,650 to to $1,680.

Confused markets don't rise, & now bewilderment beclouds the horizon: currency turmoil, weak dollar/strong dollar, presidential election. That sky will clear, but meanwhile the storm.

Silver fell through its 50 DMA (3246c) today to its 300 DMA (3205c), but closed barely above that at 3207.3c. The 300 Day Moving Average acts for silver as the 200 DMA acts in other markets. After breaking above the 300 in September's first days, it was to be expected silver would return for a last kiss good-bye. That's how it's behaved before during this bull market.

The 200 DMA stands beneath at 3094c, and that's an often seen target of corrections. Today's close fulfilled a 38.2% correction, & 3112c will fulfill a 50%. Of course, volatile silver often overshoots, so don't overlook the 61.8% correction to 3013c. If all also fails, there's a floor at 2840c.

Whoa! Put that pistol down. I'm only the messenger. Besides, it's not enough to get bothered about. This correction won't last much longer than the election, and even in the unlikely event Romney wins, will reverse by endo-November latest.

I got a note from the printer today that At Home in Dogwood Mudhole ought to ship on 24 October, which puts them here about the 29th. We'll start shipping then. Thanks very much for your orders & generous patience.

If you don't want to wait for a hard copy, the digital versions of At Home in Dogwood Mudhole are ready. You can purchase AHIDM in PDF, Kindle, or e-Pub format for $16.95 at I can't figure out how to autograph the durned thing, so it won't do you any good to ask. It has plumb defeated me.

There's a story in there about our Percheron draft horses, Boaz & Jachin, running away with my son Justin. Like to have killed all of us, & taught my youngest, Zachariah, how to pray fervently. Y'all won't know whether to gasp or laugh out loud. I sure didn't.

On 19 October 202 BC the invading Romans under Scipio Africanus at the battle of Zama in North Africa beat Hannibal Barca, Carthaginian general who had invaded Italy and wreaked havoc on Rome for decades. Zama ended the Second Punic War, and Carthage had to accept terms that forever removed it as a challenge to Roman control of the Mediterranean. Fifty years later in the Third Punic War the Romans captured Carthage, razed it, and sowed the ground with salt.

Oddly enough, on 19 October 439 a.d., over 600 years later, the Germanic Vandals led by King Gaiseric took a re-built Carthage from the Roman empire.

On 19 October 1781 Cornwallis, trapped at Yorktown, Virginia by a French fleet & combined French & American army, surrendered to George Washington & Count de Rochambeau. His surrender effectively ended the War for Independence in an American victory.

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
19-Oct-12 Price Change % Change
Gold, $/oz 1,722.80 -20.50 -1.2
Silver, $/oz 32.07 -0.77 -2.3
Gold/Silver Ratio 53.715 -0.626 -1.2
Silver/Gold Ratio 0.0186 -0.0004 -2.3
Platinum 1,613.00 -28.20 -1.7
Palladium 623.30 -24.20 -3.7
S&P 500 1,433.19 -205.43 -12.5
Dow 13,343.51 -24.15 -0.2
Dow in GOLD $s 160.11 1.61 1.0
Dow in GOLD oz 7.75 0.08 1.0
Dow in SILVER oz 416.04 8.96 2.2
US Dollar Index 79.63 0.29 0.4
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: 1,721.60      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,766.36 1,781.86 1,781.86
1/2 AE 0.50 877.51 906.85 1,813.71
1/4 AE 0.25 438.75 462.03 1,848.14
1/10 AE 0.10 180.66 188.52 1,885.15
Aust. 100 corona 0.98 1,679.07 1,689.51 1,723.64
British sovereign 0.24 405.26 409.26 1,738.59
French 20 franc 0.19 321.42 325.42 1,743.02
Krugerrand 1.00 1,742.26 1,759.26 1,759.26
Maple Leaf 1.00 1,731.60 1,746.60 1,746.60
1/2 Maple Leaf 0.50 852.19 895.23 1,790.46
1/4 Maple Leaf 0.25 426.10 456.22 1,824.90
1/10 Maple Leaf 0.10 170.44 185.93 1,859.33
Mexican 50 peso 1.21 2,058.96 2,075.96 1,721.79
.9999 bar 1.00 1,727.63 1,738.63 1,738.63
SPOT SILVER: 32.07      
SILVER Fine Tr.Oz. BID ASK $/oz
VG+ Morgan $B4 1905 0.77 30,500.00 32,500.00 42.48
VG+ Peace dollar 0.77 30,000.00 32,000.00 41.83
90% silver coin bags 0.72 22,640.48 22,890.48 32.01
US 40% silver 1/2s 0.30 9,267.43 9,467.43 32.09
100 oz .999 bar 100.00 3,198.50 3,246.50 32.47
10 oz .999 bar 10.00 325.65 328.15 32.82
1 oz .999 round 1.00 31.92 32.62 32.62
Am Eagle, 200 oz Min 1.00 33.57 34.27 34.27
SPOT PLATINUM: 1,613.00      
Platinum Platypus 1.00 1,623.00 1,663.00 1,663.00
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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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