The Moneychanger
Weekly Commentary
Friday, 26 October a.d. 2012 Browse the commentary archive
Here's the weekly scorecard:
  19-Oct 26-Oct Change % Change
Silver, cents/oz. 3,207.30 3,201.10 -6.20 -0.2
Gold, dollars/oz. 1,722.80 1,710.90 -11.90 -0.7
Gold/silver ratio 53.715 53.447 -0.270 -0.5
Silver/gold ratio 0.0186 0.0187 0.0001 0.5
Dow in Gold Dollars (DIG$) 160.11 158.37 -1.74 -1.1
Dow in gold ounces 7.75 7.66 -0.08 -1.1
Dow in Silver ounces 416.04 409.46 -6.58 -1.6
Dow Industrials 13,343.51 13,107.21 -236.30 -1.8
S&P500 1,433.19 1,411.94 -21.25 -1.5
US dollar index 79.63 80.04 0.41 0.5
Platinum 1,613.00 1,544.80 -68.20 -4.2
Palladium 623.30 595.70 -27.60 -4.4

I have to re-think this gold & silver thing. They may have bottomed this week. Stocks took a bad beating with a stout stick. Dollar index rose .05%, but didn't jump high enough over 80 to prove a rally. Platinum & palladium lost more than 4%. Euro & Yen both faded this week.

The treacherous US dollar index climbed from 79.633 to 80.043. At last, it has closed above 80, first hurdle of a dollar rally. However, today the dollar lunged to 80.27 only to be slapped back in a few hours to 79.923. Rest of the day leveled out, leaving behind a toppy formation that looks like a head and shoulders. Of course, that might also be a continuation pattern, too

My surprise dollar rally suspicion would be gainsaid next week if the dollar index closes below 79.70. Really, it ought to advance above today's high, 80.27, by Tuesday. Otherwise it will just be spinning tires & wasting buying power and attention.

Whether the dollar rallies or not, this week the yen & euro fainted. Euro relentlessly slid this week, stopping today at $1.2938 (US$1= E0.7729). Momentum is down: euro sank below the 20 DMA ($1.2974) and stands only a few points above the 200 DMA at 128.36. Euro turns smartly down should it break that 200 DMA.

Yen has played a jerky game this week. Gapped down, looked like it had found its feet, then gapped down again to a low at 124.48 cents per 100 yen (US$1 = Y79.68). About to drop further, right? Nope, turned smack around & rose 0.82% to close today at 125.56, filling the gap & reaching for the 200 DMA at 125.97. Direction is firmly down as long as the yen remains below that 200 DMA.

Right now, the Japanese Nice Government Men are winning the Race To Depreciate, the euro is running second while the dollar keeps gaining weight. Ben Bernanke won't enjoy his martini tonight.

Stocks are badly confused. Today the Nasdaq, Nasdaq 100, & midget Nasdaq indices, along with the Dow industrials, all rose minutely. The broader S&P500 & Russell 2000 both dropped a wee bit.

Dow had another raggedy day, spent almost all the day deeply under water, as low at 13,046, then found friends to buy about 1:30, & fluttered around unchanged, climbed a little, but closed only 3.53 (0.03%) higher at 13,107.21. S&P 500 ran about the same, but when the bell rang it was 1.02 lower (0.07%) at 1,411.94.

I'm re-thinking silver & gold: they may have posted their lows this week at 3118.4 cents & $1,698. Possibility is great enough to tempt me to buy a little bit here. Note that the gold/silver ratio fell from 53.715 to 53.418. Not big, but the right direction (down when silver & gold are rising) for higher silver & gold prices.

What's this meditation's other side? It's Friday, so people who were holding profitable short positions tend to close them out at the weekend. That might buoy up the market for one day alone. Also, the weekly silver & gold charts so the August breakout & peak, then a decline toward the downtrend line (which both metals broke in August). A kiss good-bye move might touch that downtrend line.

Palladium & platinum argue for an end to the decline. Palladium has given up most of what it has gained since July (from $556 to $705.8 & back to $586.65 three days ago). Platinum has given up a little more than 50% of the same crazed move ($1,378.50 to $1,734.50). Today it closed $1,544.3 just below its 200 DMA (1,552.86), frequent end target of a correction.

Gold today fell back $1.10 to $1,710.90. Silver frittered away 3.8 cents to 3201.1c. Thing that catches my eye is this: after the big losses of last week, this week they barely declined. At least the rate of fall is shrinking. There's a landing for silver & gold here somewhere.

Besides, metals have reached the point where downside risk has shrunk to manageable size. From 3201.1, even a fall to 3050c is only 4.5% From $1,710.90 to $1,650, 4.6%. Unless Monday shows a freefall, I will buy at least some silver below 3200c or gold below $1,700. A little anyway, just in case they might have finished their decline.

Silver & gold are completing the correction of the August - September rally. Start nibbling at them, but give them a little time. Presidential election uncertainty still overhangs silver & gold as well as all markets, even though it won't make any difference to metals' inevitable & relentless bull market. Buy when everybody else's spine is turning to Jell-O.

I'm not at home in Tennessee, but I got a text from my daughter that the hard copies of At Home in Dogwood Mudhole have arrived from the printer. They'll begin shipping on Monday. I appreciate y'all's patience.

You can still buy At Home in Dogwood Mudhole at in hard copy (yes, I'll still autograph it if you order by Monday, 29 October). Or you can download it instantly (once you pay for it, of course) in PDF, Kindle, or ePub format.

On 26 October 1949 President Harry Truman raised the minimum wage from 40 cents an hour to 75 cents an hour (87.5% increase in one jump), continuing a long tradition of meddling in an economy he didn't understand. Presidents have been doing that ever since.

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
26-Oct-12 Price Change % Change
Gold, $/oz 1,710.90 -1.10 -0.1
Silver, $/oz 32.01 -0.04 -0.1
Gold/Silver Ratio 53.447 -0.034 -0.1
Silver/Gold Ratio 0.0187 -0.0000 -0.1
Platinum 1,644.80 -22.80 -1.4
Palladium 595.70 -9.10 -1.5
S&P 500 1,411.94 3.53 0.3
Dow 13,107.21 -1.03 -0.0
Dow in GOLD $s 158.37 0.11 0.1
Dow in GOLD oz 7.66 0.01 0.1
Dow in SILVER oz 409.46 0.45 0.1
US Dollar Index 80.04 0.01 0.0
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: 1,712.20      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,760.14 1,772.13 1,772.13
1/2 AE 0.50 872.71 901.90 1,803.80
1/4 AE 0.25 436.36 459.51 1,838.05
1/10 AE 0.10 179.68 187.49 1,874.86
Aust. 100 corona 0.98 1,669.91 1,680.30 1,714.24
British sovereign 0.24 403.05 407.05 1,729.19
French 20 franc 0.19 319.67 323.67 1,733.62
Krugerrand 1.00 1,731.03 1,748.03 1,748.03
Maple Leaf 1.00 1,722.20 1,737.20 1,737.20
1/2 Maple Leaf 0.50 847.54 890.34 1,780.69
1/4 Maple Leaf 0.25 423.77 453.73 1,814.93
1/10 Maple Leaf 0.10 169.51 184.92 1,849.18
Mexican 50 peso 1.21 2,047.71 2,064.71 1,712.46
.9999 bar 1.00 1,718.19 1,729.19 1,729.19
SPOT SILVER: 32.09      
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 22,765.60 23,015.60 32.19
US 40% silver 1/2s 0.30 9,274.80 9,474.80 32.12
100 oz .999 bar 100.00 3,201.00 3,249.00 32.49
10 oz .999 bar 10.00 325.90 328.40 32.84
1 oz .999 round 1.00 31.94 32.64 32.64
Am Eagle, 200 oz Min 1.00 33.59 34.29 34.29
SPOT PLATINUM: 1,644.80      
Platinum Platypus 1.00 1,654.80 1,694.80 1,694.80
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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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