The Moneychanger
Daily Commentary
Monday, 5 November a.d. 2012 Browse the commentary archive

Please accept my humble thanks for all your emails offering condolences and sympathy on my daughter-in- law's death. I deeply appreciate your kind sympathy. I pray that out of this evil event God will bring good things, & believe he has already begun.

Friday brought the [likely] final break in the silver & gold correction. More on that below.

Relentlessly, yea, relentlessly the US dollar index continues to climb: 80.018 on 1 November, 80.606 on 2 November, and 80.723 today. Rose 13.1 basis points to 80.723, up 0.17% today.

On a longer term chart, the dollar index has climbed back over the mid-channel trend line that stretches back to May 2011. Friday it jumped up to its 200 Day Moving Average AND out of the range below 80.25 which had imprisoned it. Today, it closed above that 200 DMA (80.63), and already stands above its 20 (79.92) & 50 DMA (80.00). All that & other indicators point to a higher dollar. Maybe this merely anticipates some change from the US presidential election, but technically the trend points higher.

Most of the dollar's gains are being paid by the euro. It gapped down Friday and today, ending down 0.78% at $1.2829. Now it has drawn nigh its crucial 62 DMA ($1.2774). If it closes below that, 'twill drop to $1.2600. It also today closed below the major downtrend line. Market is screaming, "No good news for Europe!"

The yen rose 0.23% today to 124.36 cents per 100 yen. Friday it touched one of the many dropping fan lines, and bounced up. Yen has waterfalled like IguaƧu from 128.91c at end-September. Shouldn't some little rally follow?

What must you say about stocks when the Dow gains 138.61 on Thursday then loses 139.46? Sick. Puking sick.

Today saved no face. Dow gained 19.28 (0.15%) to 13,112.44 while the S&P500 raked in 3.06 (0.22%) to 1,417.26. Look at the chart, Immediately you'll see the Dow has been hovering for two weeks like smoke over a garbage dump, just above the 200 DMA (12,987.89). Tried once to pierce that neckline from a head and shoulders earlier this year, with shameful failure. Probably the only thing holding it up is the Quixotic hope that Romney can beat the incumbent, Bernard O'Bama.

Whoever wins, this is a sick market that has topped. Take your money out of stocks & put it into silver & gold.

Thursday silver & gold dilated & diddled, but Friday the dam burst. Friday took gold down $40 to $1,674 and silver down an agonizing 189.1 cents to 3083.5c. Ratio popped up to 54.292.

Guessing, anticipating, & prognosticating, I suspect that Friday's Niagara pretty well ended the correction that began in October (really mid-September with the first peak of a double top). Friday's gold low at $1,674.97 fairly fulfilled at 61.8% correction. Gold is also hovering above its 200 Dma ($1,665.80) & 150 DMA ($1,651.77), the frequent targets of its bull market corrections.

Could it drop more? Sure, but what is the expected risk of that? Let's say to the August low at $1,650. From today's close that's a tee-tiny 1.9% downside risk, enough for me to throw in the towel and stop waiting. That's true, even though I see a remote possibility it might drop to $1,620 where the long term down-trend line (from Sept 2011) meets the uptrend line from last summer. Go look at the chart, Sorry, I am less than perfect, & less than a perfectionist. If I get within 2% of a bottom, I'll be happy as a red hog in slop, and brag about it.

Silver appears to have completed a move analogous to gold's but -- & here's the worst burr under my saddle -- it hasn't made that 61.8% correction. Friday's low came at 3082c, not some price nearer 3000c. That leaves some slack, some possibility for another spike down.

But whither? What's the risk? Give it a wide margin, go back to this summer's August resistance at 2833c. That's an 8.9% risk from here, and I don't think silver will drop that far. At 3000c, silver will attract buyers like pretty girls attract men to a kissing booth. And from today's 3111.3c close, that's a 3.6% risk.

As I have many times repeated, I am only a natural born fool from Tennessee, so don't swing over hell using my opinion for a rope. But fool or not, I will be buying both silver & gold tomorrow, while the market is frozen before the US election. Y'all, on the other hand, are free to put your trust in politics, & hope that will bail you out.

Remember, Remember, the Fifth of November,

Gunpowder, treason, & plot!

On 5 November 1605 eleven men led by Guy Fawkes hatched a plot to return England to Roman Catholic obedience by blowing up the King and all the Parliament members on 5 November, packing 36 barrels of gunpowder under the Houses of Parliament. On 4 November the plot was uncovered, the conspirators arrested, & later tried, & convicted. Next January Fawkes & 7 other survivors were hanged, drawn, & quartered & their heads displayed on pikes on London Bridge. The next year Parliament established 5 November as a national day of Thanksgiving. Since then the English have celebrated with bonfires & fireworks. Onto the bonfires they toss effigies called "Guys", and recite the other two lines of the verse I began above:

I see no reason why Gunpowered Treason

Should ever be forgot. The outcome for Roman Catholics was the opposite of what the conspirators had hoped. Civil disabilities of Roman Catholics in England were imposed & not removed until the 1820s.

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
5-Nov-12 Price Change % Change
Gold, $/oz 1,682.20 8.10 0.48%
Silver, $/oz 31.11 0.28 0.90%
Gold/Silver Ratio 54.067 -0.225 -0.41%
Silver/Gold Ratio 0.0185 0.0001 0.42%
Platinum 1,538.70 2.20 0.14%
Palladium 602.20 3.35 0.56%
S&P 500 1,417.26 3.06 0.22%
Dow 13,112.44 19.28 0.15%
Dow in GOLD $s 161.13 -0.52 -0.32%
Dow in GOLD oz 7.79 -0.03 -0.32%
Dow in SILVER oz 421.45 -3.17 -0.75%
US Dollar Index 80.72 0.13 0.16%
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SPOT GOLD: 1,683.40      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,730.54 1,742.32 1,742.32
1/2 AE 0.50 858.02 886.73 1,773.46
1/4 AE 0.25 429.01 451.78 1,807.13
1/10 AE 0.10 176.65 184.33 1,843.32
Aust. 100 corona 0.98 1,641.82 1,652.07 1,685.44
British sovereign 0.24 396.27 400.27 1,700.39
French 20 franc 0.19 314.29 318.29 1,704.82
Krugerrand 1.00 1,708.65 1,725.65 1,725.65
Maple Leaf 1.00 1,693.40 1,708.40 1,708.40
1/2 Maple Leaf 0.50 833.28 875.37 1,750.74
1/4 Maple Leaf 0.25 416.64 446.10 1,784.40
1/10 Maple Leaf 0.10 166.66 181.81 1,818.07
Mexican 50 peso 1.21 2,013.27 2,030.27 1,683.89
.9999 bar 1.00 1,689.29 1,700.29 1,700.29
SPOT SILVER: 31.15      
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 22,232.93 22,482.93 31.44
US 40% silver 1/2s 0.30 8,996.03 9,196.03 31.17
100 oz .999 bar 100.00 3,106.50 3,154.50 31.55
10 oz .999 bar 10.00 316.45 318.95 31.90
1 oz .999 round 1.00 31.00 31.70 31.70
Am Eagle, 200 oz Min 1.00 32.65 33.35 33.35
SPOT PLATINUM: 1,538.70      
Plat. Platypus 1.00 1,548.70 1,588.70 1,588.70
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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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