The Moneychanger
Daily Commentary
Wednesday, 31 October a.d. 2012 Browse the commentary archive

Markets reopened today after Hurricane Sandy gave us an object lesson in the advantages of centralization.

One of the highest hurdles trying to read charts is to believe what your eyes see, instead of what your mind wants to see. Today I will ruthlessly talk about what I see.

Take the US dollar index for starters. The dollar index since mid-September has left behind a series of slightly higher lows and higher highs. Looks sloppy, and has been blocked by the 200 day moving average (80.63), but still looks like a market that is turning up. MACD indicator says the same, & it stands above its 20 DMA (79.72). Today it backed off 2.1 basis points to 79.906, but remains above 79.90 & the 20 DMA.

It would be an arrogant error to write the dollar off unless it closes below the last low at 78.93. Most likely next move is up, not down.

Euro is vibrating like a tuning fork but with less purpose & meaning. 20 DMA is $1.2977, & it buzzed back & forth across that line today but closed beneath it at $1.2958, although it rose 0.15%. Trend is down, if you believe the momentum indicators & chart.

Yen lost another 0.2% today to 125.31 cents & stands below its 200 DMA (125.95c). I wouldn't trade that nasty thing with your money. Locked in a downtrend.

Today's score: US$1 = Y79.80 = E0.7717.

Stocks looked sorry as gully dirt today. Every index except the S&P500 & Russell 2000 fell, & those two didn't rise enough to talk about.

S&P500 rose 0.22 (0.2%) to 1,412.16. Dow fell 10.75 (0.08%) to 13,096.46. Day's trading for both was weak as the Democratic Party Platform or Republican pacificism. Started the day off with a little rise, fell below unchanged by 11:00, then struggled underwater until day's end. Not the sort of result that builds confidence.

Look at that chart & admit what you see. Since September the Dow has rolled over, broken support of the rising wedge, traded up for the kiss good-bye, fallen off a cliff in what looks like a 3-wave, & is fixing to break down through its 200 DMA (12,979). Momentum indicators point straight down as a well pipe. Weeping, wailing, & gnashing of teeth in store here.

Now turn the page to the gold & silver charts & report honestly what you see there: a breakout. Yes, a one-day breakout only. Yes, through the downtrend line only and not above lateral support, but it's plain as a wart on your nose.

Silver gobbled up 50 cents to close at 3228.8c, well above that 3200c blockade. Needs now to confirm the upturn by closing higher than 3250c.

Gold pulled in $7 to close at $1,717.50. Now it needs to confirm with a close above $1,725.

If we get the second day's close tomorrow above today's closes, the case is pretty well made that the correction has ended. Translation: if they close higher tomorrow, STOP WAITING & BUY.

I'm sorry but I will not be sending a commentary tomorrow (Thursday) or Friday, because I will be in Colorado attending my daughter-in-law's funeral. God willing I'll return on Monday, 5 November.

On 31 October 1863 the Maori Wars resumed in New Zealand as British forces began invading the Waikato. New Zealanders today had better hope & pray that US developers never discover THEIR land, the size of California, inexpressibly beautiful, with every climate from tropical to Alpine, and only 4-1/2 million people (a million fewer than Tennessee).

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
31-Oct-12 Price Change % Change
Gold, $/oz 1,717.50 7.00 0.41%
Silver, $/oz 32.29 0.50 1.57%
Gold/Silver Ratio 53.193 -0.616 -1.15%
Silver/Gold Ratio 0.0188 0.0002 1.16%
Platinum 1,576.00 23.40 1.51%
Palladium 609.00 13.65 2.29%
S&P 500 1,412.16 0.22 0.02%
Dow 13,096.46 -10.75 -0.08%
Dow in GOLD $s 157.63 -0.76 -0.48%
Dow in GOLD oz 7.63 -0.04 -0.48%
Dow in SILVER oz 405.61 -6.72 -1.63%
US Dollar Index 79.91 0.02 0.03%
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: 1,719.50      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,765.93 1,779.68 1,779.68
1/2 AE 0.50 876.44 905.75 1,811.49
1/4 AE 0.25 438.22 461.47 1,845.88
1/10 AE 0.10 180.44 188.29 1,882.85
Aust. 100 corona 0.98 1,677.03 1,687.45 1,721.54
British sovereign 0.24 404.77 408.77 1,736.49
French 20 franc 0.19 321.03 325.03 1,740.92
Krugerrand 1.00 1,745.29 1,762.29 1,762.29
Maple Leaf 1.00 1,729.50 1,744.50 1,744.50
1/2 Maple Leaf 0.50 851.15 894.14 1,788.28
1/4 Maple Leaf 0.25 425.58 455.67 1,822.67
1/10 Maple Leaf 0.10 170.23 185.71 1,857.06
Mexican 50 peso 1.21 2,056.44 2,073.44 1,719.70
.9999 bar 1.00 1,725.52 1,736.52 1,736.52
SPOT SILVER: 32.25      
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 22,951.50 23,201.50 32.45
US 40% silver 1/2s 0.30 9,322.00 9,522.00 32.28
100 oz .999 bar 100.00 3,217.00 3,265.00 32.65
10 oz .999 bar 10.00 327.50 330.00 33.00
1 oz .999 round 1.00 32.10 32.80 32.80
Am Eagle, 200 oz Min 1.00 33.75 34.45 34.45
SPOT PLATINUM: 1,576.00      
Plat. Platypus 1.00 1,586.00 1,626.00 1,626.00
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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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