The Moneychanger
Daily Commentary
Wednesday, 24 October a.d. 2012 Browse the commentary archive

Surprise, surprise: the world's still going to hell in a handbasket, & the Federal Reserve Open Market Committee did nothing to stop its slide. They're just going to keep on pouring voltage to the printing machines.

I'm not sure exactly where the US dollar index closed but right now it's trading 4.8 basis points lower than this time yesterday, at 79.912. High today was 80.151, with a much higher low at 79.82. Dollar is tugging at the leash to go higher.

Currencies: US$1.00 = Y79.80 = E0.7707.

Euro looks like too-old baloney in the meat cooler, with that greenish glaze on it. Closed today at $1.2975, down 0.8%. No significant move, but traded below its 20 DMA (now 129.69) most of the day, then closed not far above. Not optimistic, when the trend is down.

After a nasty plunge through most of October, the Yen appears to have hit pavement. Today it gained 0.8% to to 125.31 cents per 100 yen.

None of these currency charts are artifacts of nature. They all bear the scars of frequent government interventions. Things would probably be worse, but the US presidential election keeps enough uncertainty beclouding markets that few are brave enough to take large new positions. Safer to sit it out & see who wins.

I know it makes y'all REALLY mad for me to say it makes no difference who wins, & I have received more than one smoking, glowing email to that effect. Friends, I would it were no so, but 'tis, & my lying about it won't change it a whit. For instance, if Mitt with Grit got elected, will he abolish the Federal Reserve? Restore constitutional silver & gold money? Pull the troops back from the 700 imperial overseas bases? Reduce government spending during a depression when over 50% of U.S. income arises from state & local & federal government spending? Will he purge the tapeworm banks from the nations' bowels? He won't -- he won't be allowed to -- do anything more dramatic than changing the trim on the White House curtains. All of these things are built into the structure of the US economy, & it will dry up & blow away without that inflation & government spending and war. Changing the captain on the Titanic while it's sinking won't help a bit. I'm sorry if my telling you that offends you, but it is the truth learned the hard way. Politics is a false messiah

Everybody has to learn that it's a delusion to believe the politicians are coming to save you or the country. Y'all had better be figuring how you can save yourself, your family, your neighbors, & your community. You rebuild your own community & the nation will take care of itself.

Gold closed today at $1,700.50, $7.50 lower than yesterday. Silver followed right along, losing 17.5 cents to 3159.5c.

Although gold is declining less & more slowly every day, sellers continue to batter it relentlessly. This decline is cooked into the market's mind, otherwise today's FOMC announcement -- "We're still going to keep on inflating!" would have kicked gold into high gear.

By "cooked in the market's mind" I mean that rallies & declines, the outcome of thousands of participants, just have to work through the minds of all those people. And humans are herd animals, but who knows why a herd of wildebeests or a flock of blackbirds or a school of salmon all wheel right or left at once in perfect unison? Nobody, but they do. So we have to patiently wait until markets reach the inevitable excess in one direction before they turn & go the other. It's a mystery, like why any woman would every love any man, or why my wife loves me -- but she does.

Gold's decline is decelerating, but as it stands below its 20 DMA ($1,757.12) and 50 DMA ($1,726) momentum is dragging it down.

Where might it halt? Just below $1,700, about $1,690, there was a tussle on the way up. Then comes $1,680, where over the past 16 months many other battles have been fought. Below that the 150 DMA ($1,650) & 200 DMA ($1,663.80) are waiting to catch gold. That level also marks a 61.8% correction.

RSI & MACD indicators have dived deep, but have not yet signaled an upturn.

For those outraged by silver's fall, I'd remind y'all that it is up 21% from its July 2610c low. All things considered, not so terrible.

For silver 3200 cents has become a portal barred & locked. Today's low came at 3153c. Silver has already fallen below its milestone 300 DMA (3197c). Don't panic, a return for a last kiss good-bye is frequent. 200 DMA stands beneath to catch silver at 3098c. Beneath that the uptrend line from the July & August lows stand about 2950. And there's more support from the summer highs around 2840c.

Most of all, SILVER IS IN A BULL MARKET. In bull markets, corrections always eventually resolve by turning up. Same holds for gold.

I know waiting through these corrections is almost as much fun as wearing towsack underwear, but it shouldn't last much longer now. Better yet, we are going to get an opportunity to buy much more silver & gold, more cheaply.

On 24 October the Treaty of Westphalia ended the 30 Years' War and the Holy Roman Empire, which wasn't by then at all holy and had no Romans, only Germans & French & Dutch. The 30 Years was the very worst war of religion Europe suffered, & Germany suffered most. Travellers 100 years later were still reporting entire districts nearly unpopulated. In some places 90% of the population died. The cost of intolerance is high.

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
24-Oct-12 Price Change % Change
Gold, $/oz 1,708.30 -16.80 -0.97%
Silver, $/oz 31.77 -0.46 -1.42%
Gold/Silver Ratio 53.774 0.245 0.46%
Silver/Gold Ratio 0.0186 -0.0001 -0.45%
Platinum 1,560.20 -12.90 -0.82%
Palladium 593.05 -1.10 -0.19%
S&P 500 1,408.75 -4.46 -0.32%
Dow 13,077.34 -25.19 -0.19%
Dow in GOLD $s 158.25 1.26 0.80%
Dow in GOLD oz 7.66 0.06 0.80%
Dow in SILVER oz 411.65 5.08 1.25%
US Dollar Index 79.91 -0.05 -0.06%
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SPOT GOLD: 1,699.20      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,746.78 1,758.67 1,758.67
1/2 AE 0.50 866.08 895.05 1,790.11
1/4 AE 0.25 433.04 456.02 1,824.09
1/10 AE 0.10 178.31 186.06 1,860.62
Aust. 100 corona 0.98 1,657.23 1,667.56 1,701.24
British sovereign 0.24 399.99 403.99 1,716.19
French 20 franc 0.19 317.24 321.24 1,720.62
Krugerrand 1.00 1,719.59 1,736.59 1,736.59
Maple Leaf 1.00 1,709.20 1,724.20 1,724.20
1/2 Maple Leaf 0.50 841.10 883.58 1,767.17
1/4 Maple Leaf 0.25 420.55 450.29 1,801.15
1/10 Maple Leaf 0.10 168.22 183.51 1,835.14
Mexican 50 peso 1.21 2,032.17 2,049.17 1,699.57
.9999 bar 1.00 1,705.15 1,716.15 1,716.15
SPOT SILVER: 31.66      
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 22,454.58 22,704.58 31.75
US 40% silver 1/2s 0.30 9,146.48 9,346.48 31.68
100 oz .999 bar 100.00 3,157.50 3,205.50 32.06
10 oz .999 bar 10.00 321.55 324.05 32.41
1 oz .999 round 1.00 31.51 32.21 32.21
Am Eagle, 200 oz Min 1.00 33.16 33.86 33.86
SPOT PLATINUM: 1,560.20      
Plat. Platypus 1.00 1,570.20 1,610.20 1,610.20
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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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