The Moneychanger
Daily Commentary
Wednesday, 28 November a.d. 2012 Browse the commentary archive

Right about the time you think you are pretty smart had have this market thing pert nigh figured out, markets slap you winded to remind you how priceless humility is. So silver & gold slapped my jaws today. I'll get to that in a second.

US dollar index lost 9.7 basis points today to 80.252, so that did not occasion the drop in silver & gold. It's flat today, but headed to the bowels of the earth.

Euro rose 0.11% to $1.2958, but merely continues to dance over & around its 50 DMA ($1.2913) & 62 DMA ($1.2879). News out of Europe reported today that EU regulators approved E37 bn (US$47.9bn) for Spanish banks. Top 4 have a credit portfolio equal to 40% of Spain's GDP. EU approved E100 bn last June, but this is the first dose they've released.

Spit in the wind, but the markets suck it up as if it were angels riding to the rescue on chariots of fire.

Yen today rose 0.08% to 121.85c/Y100. Has risen enough to close the gap left behind on its plunge. Can it continue to advance? Like betting on a one-legged rooster at a cockfight.

Believe it or not, stocks rose 106.98 (0.83%) to Dow 12,985.11 and 10.99 (0.79% to S&P500 1,409.93, and they STILL couldn't break through the downtrend line from October. I expect they will, though, & rally further between now & year end, but it's a doomed rally.

As always, the media, seeking some cause, offered the meretricious US budget talks & a rise in housing prices. In fact, stocks plunged until 10:00 a.m., and only then began to rise.

Do yourself a favor and stay away from stocks.

Gold got hit over the head with a baseball bat just about exactly when the New York market opened this morning, plunging in seconds from $1,735 to $1,705.88 by 9:30. Then it began to climb, reached as high as $1,722, and traded the rest of the day above $1,715. Closed down $25.80 at $1,716.50.

Filter out the noise. On the 4 month chart gold merely fell back to the neckline of that upside-down head & shoulders. Yep, it fell through its 50 DMA (1,740.90) and the 20 DMA ($1,722.51).

Two outcomes are possible: lower or higher.

If lower, gold will breach $1,705 tomorrow & trade toward $1,670. If this marks gold finishing the correction begun in October, it could fall all the way to $1,640, where the rising uptrend line from the June low awaits.

If higher, then gold may piddle tomorrow, perhaps climb above $1,720, licking today's wounds. Any close above $1,726 points it upward, but this shame will only be fully removed by a close above that $1,740.90 fifty-day moving average.

The market will tell you which route it prefers tomorrow.

Same forces that attacked gold today as the market opened assaulted silver as well, driving it from 3380c to 3291 by 9:30 a.m. Yet silver came back sharply and reached 3365 by 12:45, then traded sideways above 3360c the rest of the day. Silver lost 29.7 cents to close Comex at 3368.4c, down only 0.87% to gold's 1.48% loss. Ratio showed silver's relative strength by closing at 50.959, down from yesterday by 0.61%.

Silver's four month chart looks right different to gold's, mostly because it stands so far above the neckline of that upside-down head & shoulders. Silver did prick its 50 DMA (3319c) but closed way above that.

Once again, two outcomes are possible. If lower, silver will trade through the neckline (now about 3200c) & trade to the uptrend line from the June l02, now about 3025c. Before that comes the 300 DMA (3128c) and the 200 DMA (3098c) either of which might prove to be silver's safety net.

If higher, silver ought to turn tomorrow & not trade below 3290 and closing at least above the 50 DMA (3319c). Best of all would be a close -- soon, if not tomorrow --above the last intraday high at 3428c.

Market is going to tell you tomorrow, & that right early, I suspect. Maybe silver & gold can move lower, but a huge buying interest lurks around $1,705 and 3300c.

On 28 November 1905 Irish nationalist Arthur Griffith founded Sinn Fein (Gaelic for "We ourselves"), a political party dedicated to independence for Ireland, then firmly a part of the British Empire, and had been for 400 years. Most people, most of them Irish, thought he was crazy, but truth is the daughter of time. By 1921 Ireland had won independence, although divided.

On 28 November 1925 the forerunner of the Grand Ole Opry, the WSM Barn Dance, began broadcasting from Nashville, 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
28-Nov-12 Price Change % Change
Gold, $/oz 1,716.50 -25.80 -1.48%
Silver, $/oz 33.68 -0.30 -0.87%
Gold/Silver Ratio 50.959 -0.314 -0.61%
Silver/Gold Ratio 0.0196 0.0001 0.62%
Platinum 1,610.10 -7.90 -0.49%
Palladium 673.15 -4.95 -0.73%
S&P 500 1,409.93 10.99 0.79%
Dow 12,985.11 106.98 0.83%
Dow in GOLD $s 156.38 3.60 2.36%
Dow in GOLD oz 7.56 0.17 2.36%
Dow in SILVER oz 385.50 6.52 1.72%
US Dollar Index 80.26 -0.09 -0.12%
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SPOT GOLD: 1,718.40      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,769.95 1,778.54 1,778.54
1/2 AE 0.50 875.87 902.16 1,804.32
1/4 AE 0.25 442.23 455.38 1,821.50
1/10 AE 0.10 182.04 186.45 1,864.46
Aust. 100 corona 0.98 1,675.95 1,686.38 1,720.44
British sovereign 0.24 404.51 408.51 1,735.39
French 20 franc 0.19 320.83 324.83 1,739.82
Krugerrand 1.00 1,740.74 1,755.74 1,755.74
Maple Leaf 1.00 1,728.40 1,748.40 1,748.40
1/2 Maple Leaf 0.50 850.61 893.57 1,787.14
1/4 Maple Leaf 0.25 425.30 455.38 1,821.50
1/10 Maple Leaf 0.10 170.12 185.59 1,855.87
Mexican 50 peso 1.21 2,055.13 2,072.13 1,718.61
.9999 bar 1.00 1,724.41 1,735.41 1,735.41
SPOT SILVER: 33.65      
SILVER Fine Tr.Oz. BID ASK $/oz
VG+ Morgan $B4 1905 0.77 26,000.00 27,750.00 36.27
VG+ Peace dollar 0.77 25,000.00 27,500.00 35.95
90% silver coin bags 0.72 24,056.18 24,306.18 33.99
US 40% silver 1/2s 0.30 9,733.53 9,908.53 33.59
100 oz .999 bar 100.00 3,364.50 3,414.50 34.15
10 oz .999 bar 10.00 341.45 343.95 34.40
1 oz .999 round 1.00 33.50 34.35 34.35
Am Eagle, 200 oz Min 1.00 35.25 35.90 35.90
SPOT PLATINUM: 1,610.10      
PLATINUM Fine Tr.Oz. BID ASK $/oz
Plat. Platypus 1.00 1,635.10 1,675.10 1,675.10
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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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