The Moneychanger
Daily Commentary
Tuesday, 13 November a.d. 2012 Browse the commentary archive

I know it doesn't quite reflect the reality, but reading news last night about the Greeks needing $6 billion by Friday to roll over their debt raised pictures in my mind of somebody in a flea market trying to sell the family silver and crystal and even old furniture. For several years now the Euros just haven't been quite able to decide whether they're going to bail out everybody or not. Not bailing out everybody, or bailing out everybody would at least keep the markets from stewing in constant agitation & befuddlement & fear, but the Head Goofs in Europe don't get it. In the end they'll bail, and everybody, because it's not Greece or Spain or Italy or Malta they're bailing out but those who own that sovereign debt, namely, the Banks. And when Banks sneeze, politicians pull out their handkerchiefs -- and tremble.

Meanwhile the euro-indecision is making the plug-ugly, scrofulous US dollar look like the prettiest girl at the dance. US Dollar index gained again today, 0.045 to 81.115, up a mighty 0.06%.

Thus was I forced to return & review the dollar index chart. It showeth a clean, unblemished, albeit slow rally from the October bottom at 78.93. In fact, one might argue that the rally actually began mid-September. You can see the chart at

The channel formed by the September rally upper boundary and the October rally lower boundary line is split amidships. If the dollar can pierce that mid-line, a goal it shows right now no more ambition toward than a college freshman toward spending a beer-free Friday, it could run to 83 - 83.5. Generally that means a headwind against silver & gold, but presently they don't give a hoot what the dollar is doing, but just keep marching up.

The yen has rallied to a falling fanline & for all it stands barely above its 200 day moving average (125.75) is fixing to launch another spike down. Closed today at 125.89c/Y100, up a nonsensical 0.03%.

Today the Euro finished its fifth down day running, tenth if you don't count the little mouse burp up 7 days ago. What scientist of Count Frankenstein's stature can bring it back to life? Not one. Today it closed at $1.2703, down 0.09%. It stands beneath its 20, 50, 200, and 62 day moving averages, which is a recipe for massive downside plunging about as complete as it comes. I don't think it can be fixed.

I thought stocks were due for a little dead-cat bounce at least, but that old cat won't bounce. Dow dropped another 58.9 today to 12,756.18, a new low for the move. From where it lies it can hardly spy the 200 DMA far above at 12,993. S&P500 also lost another 5.50 today to close at a new low for the move, 1,374.53.

These are broadening top formations, and slow to roll over and fulfill their promise, so stocks might yet stage a rally into year end. Still, the die is cast, the cards are played, the tires are flat, and the rings are shot. Next big move for stocks is earthward, ever earthward. Better swap you stocks for silver & gold while time remaineth.

Why do I mumble so much about moving averages? Because they offer an inarguable indicator of a market's direction.

Think about a 200 Day Moving Average. You add up the last 200 days action and average it. Then tomorrow you drop the oldest price & add back the newest. Because it is averaging 200 days, the average filters out the daily noise and smooths out the trend. A market below its 200 DMA has turned its face down. When it's also below the 50 DMA and 20 DMA, & those are stacked above it in order, well, it's like playing Tarot and drawing the Death card. Likewise, a market above its 200 day & other moving averages has turned its face sunward.

Today silver & gold, as expected, turned down a bit. Gold lost $6.10 to $1,724.20 while silver lost a mere 3.5 cents to 3247.8c.

Silver actually began the day climbing, but spiked down about 9:30 a.m. as low as 3207c. That didn't last long. Silver immediately gapped up to 3255c! It settle back and traded the rest of the day above 3240c. Obviously, there are buyers galore waiting around 3200c. That re-iterates that support's strength. Also, the 20 DMA lies at 3211, & it was a no-brainer to buy silver at the 20 DMA. Whole day looks like a spike-bottomed reversal.

Stepping back from the daily action, silver's four month chart shows the rally from mid-August to the October high, and decline following. It also shows the false breakout through the downtrend line right at 1 November, followed by the collapse and low the next two days. Look at it here

Since 22 October silver has built a pattern that resembles an upside-down head & shoulders reversal. The "neckline" slants from 3153c to about 3200c. As long as silver remains above that line -- shucks, it could even drop to 3150c (coincidentally the current whereabouts of the crucial 300 DMA at 3152c) without damaging silver's reversal & rally.

There's more: silver's strong pattern is to make NO calendar year lows in December. Seasonally it routinely rises strongly into year end. Unless silver gainsays me first, I expect it to rise into spring 2013.

Where silver hath led, gold followeth. Today's gold action also traced out an upside-down head & shoulders or V-bottom reversal. Low came at $1,717.80, plumb near the 20 DMA ($1,717.41).

Gold kept on knocking at the gates of $1,730 with two with two highs near $1,731.80. Tomorrow it will likely break down those gates. Only a close below $1,713 would argue against that.

On the four month chart gold has build a reversal pattern like silver's, with a "neckline" slanting up from $1,700 to $1,715. Glance at it right here,

Gold remains above its 20 DMA, successfully defended today, and above its 150 & 200 DMAs. Above remains only the 50 DMA at $1,743. Probably gold will reach for that, and perhaps breach that, tomorrow.

As with silver, gold's calendar year lows simply do not appear in December. More than that, gold made an interim low on 2 November, which sets it up to follow the normal seasonal pattern, rallying into year end. I expect gold to keep on rallying into spring, but I'm not going to mention how high it will reach, lest y'all send me one of those white canvas jackets whose sleeves buckle in the back. I may be only a natural born fool from Tennessee, but I ain't that big a fool.

I hope y'all are listening: buy silver & gold. Buy more silver than gold because with the gold/silver ratio at 53.088, silver is cheap in gold terms. More than that, next ratio low will be 30:1 or less. Buy US 90% silver coin because offers the lowest cost per ounce, most flexible form of investment silver. In gold, steer clear of the expensive American Eagle gold coins & go for the less costly Austrian 100 coronas or Mexican 50 pesos. It's all gold, & over time premium always disappears.

On 13 November 1805 Johann Georg Lehner, a butcher in Vienna ("Wien" in German), created a new sausage he called the "Frankfurter." Oddly enough, that same year Gottfried Leopold Schnitzel, a butcher in Frankfurt, created a new sausage he called the "Wiener."

Anent the secession petitions flooding the White House lately from 20 states, on 13 November 1835 Texans officially declared their independence from Mexico. In the treaty that joined it to the United States, Texas reserved the right to secede.

And on 13 November 1860 South Carolina's legislature called a special convention to discuss secession. On 20 December 1860 after deliberating three days, the Convention adopted the Secession Ordinance by a vote of 169 to zero.

I reckon nowadays, post-election so to speak, secession doesn't look as crazy as y'all thought, does it?

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
13-Nov-12 Price Change % Change
Gold, $/oz 1,724.20 -6.10 -0.35%
Silver, $/oz 32.48 -0.04 -0.11%
Gold/Silver Ratio 53.088 -0.130 -0.25%
Silver/Gold Ratio 0.0188 0.0000 0.25%
Platinum 1,583.40 20.90 1.34%
Palladium 635.80 28.55 4.70%
S&P 500 1,374.53 -5.50 -0.40%
Dow 12,756.18 -58.90 -0.46%
Dow in GOLD $s 152.94 -0.15 -0.10%
Dow in GOLD oz 7.40 -0.01 -0.10%
Dow in SILVER oz 392.76 -1.39 -0.35%
US Dollar Index 81.12 0.05 0.06%
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: 1,725.20      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,776.96 1,785.58 1,785.58
1/2 AE 0.50 879.34 908.75 1,817.50
1/4 AE 0.25 439.67 463.00 1,852.00
1/10 AE 0.10 181.04 188.91 1,889.09
Aust. 100 corona 0.98 1,682.59 1,693.04 1,727.24
British sovereign 0.24 406.11 410.11 1,742.19
French 20 franc 0.19 322.09 326.09 1,746.62
Krugerrand 1.00 1,751.08 1,768.08 1,768.08
Maple Leaf 1.00 1,735.20 1,750.20 1,750.20
1/2 Maple Leaf 0.50 853.97 897.10 1,794.21
1/4 Maple Leaf 0.25 426.99 457.18 1,828.71
1/10 Maple Leaf 0.10 170.79 186.32 1,863.22
Mexican 50 peso 1.21 2,063.26 2,080.26 1,725.36
.9999 bar 1.00 1,731.24 1,742.24 1,742.24
SPOT SILVER: 32.48      
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 23,223.20 23,473.20 32.83
US 40% silver 1/2s 0.30 9,389.85 9,589.85 32.51
100 oz .999 bar 100.00 3,240.00 3,288.00 32.88
10 oz .999 bar 10.00 329.80 332.30 33.23
1 oz .999 round 1.00 32.33 33.03 33.03
Am Eagle, 200 oz Min 1.00 33.98 34.68 34.68
SPOT PLATINUM: 1,583.40      
Plat. Platypus 1.00 1,593.40 1,633.40 1,633.40
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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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