The Moneychanger
Daily Commentary
Tuesday, 4 December a.d. 2012 Browse the commentary archive

Woe, Woe, smarting day for silver & gold. Not much else prospered, either.

US DOLLAR INDEX, having signalled its mind to move lower yesterday, consummated that threat by losing 32.2 basis points (0.41%) slicing clean through an old support line. Next support lies about 78.80, but when the dollar slices that, blood will gush the sharks will gather, & the mayhem will become general. Better shuck those dollars for something with more staying power -- and I DON'T mean Yen or Euros, or stocks.

Euro is waving a flag, blue I reckon, poking through that short term downtrend line. All set up to run higher, & could reach 134.50 before the next inevitable crisis sucks the wind out of its sails. Rose 0.29% today to $1.3093.

Yen jumped 0.34% to 122.03c/Y100. It's gappy up and down, a wretched chart. However, while candidate Abe is talking it down, the US dollar is lifting it up. No good thing awaiteth the yen.

US$1=Y81.95=E0.7638=0.030 549 oz Ag = 0.000 590 oz Au.

Since Thursday last stocks have been unable to climb, blocked about 13,050. Dow held the loss to 13.82 (0.11%) today, closing at 12,951.78. Dow lost 2.41 (0.17%) to 1,407.05.

I reckon stocks are hard pressed to make any headway against the storm of selling that Obama's threatened tax increase has sparked, like hitting a mule with a cattle prod. Everybody wants to take profits this year before they have to pay twice as much tax next year.

My, my! This soak the rich scheme, it is sure enough one brilliant program, ain't it?

If I hear the inanity "fiscal cliff" one more time, I am going to tap the speaker between the eyes with a ball peen hammer. I've seen soap operas that made more sense & were more believable. These people aren't responsible enough to make decent snake-oil salesmen. Listen! It would take a statesman of the stature of Washington or Jackson or Jefferson Davis to solve the mess in Washington, and today in America men like that are rarer than passenger pigeons.

Today gold tumbled $25.20 (1.5%) to $1,694.40 at the Comex close. Silver lost 94.7 cents (2.81%) to end Comex at 3273.4c.

Here's how gold's day played out. Overnight it dropped to $1,700 but climbed back above $1,705. Come New York open & the selling began, driving gold down to $1,693 by 9:30. It gapped up, failed to breach $1,700, then traded mostly sideways until about 5:30 Eastern time when for about 30 minutes it traded back & forth between $1,688 & $1,698. Now it has levelled off to about $1,698.

It's conceivable gold might stop here, but since it broke that neckline support, not likely. Momentum points down, as gold is floating below its 50 day moving average ($1,736.41) & its 20 DMA (1,725.68).

Logical stopping points are the clustered 200 (at $1,665.40) & 150 ($1,661.78) DMAs, just a bit below the last low at $1,672.50. Below those is the uptrend line from the June low today about $1,640.

Other half of my mind is screaming, "Whipsaw!" Just about the time you switch position, market turns on a dime & runs the other way. Here's another eyecatcher: draw a line under the end- September low at $1,674.10, November low at $1,672.50, & it strikes today's market about $1,680. Naaa, unlikely. If this is the last leg down, most likely is that it exceeds the November low and touches that 150 DMA. Of course, it could whipsaw back the other way, but would have to rise above $1,725 resistance (also the 20 DMA) to evidence that.

Nothing to do but stand aside and wait. However, I would buy some at $1,662 and more at $1,640.

Silver punctured 3320c about 1 a.m. Eastern time, but traded up over 3340c, vacillating between there and 3320c until about 7:30. Selling began then that took silver below 3320c to 3280c by 8:30. By 9:30 silver had found its nerve again & bounced up to 3310. Failing to hold on, it hit its 3267c low about 1:30, then climbed above 3280c to trade between there & 3300c the rest of the day. Odd, how silver's low & gold's both came in about Comex closing time. Looks like a little Sherwin- Williams to spruce up that old tape.

Silver has divers safety nets below. There's that old neckline support at 3200c, then the 300 DMA at 3129c, just above the 200 DMA at 3098c. If all those give way, the uptrend line from June comes in about 3000 - 3050c.

So where are gold & silver? UNLESS they catch in the next couple of days and reverse upward, I misjudged the end of the correction & called it too soon. However, this doesn't change my interpretation of events since August. The August rally took both metals through their downtrend lines from the 2011 highs, effectively ending the corrections following those highs. We saw the first little upleg-let of that rally that topped in September. Now it appears this last leg down of that post September correction must travel a bit further down to find its feet. Mean time, we watch, Oh, and buy a little more silver at 3200c and 3150c, and 3050c.

Don't ever let these short-term flip-flops blind you to the big picture: silver & gold remain in a PRIMARY UPTREND, a 15 - 20 year trip that has another 5 - 10 years to run. Best strategy is never to trade in and out, whipsawing yourself & emptying your own pockets, but to climb aboard that bull & ride, and never let him shake you off. WABI-SABI

Forgive me, I'm a stasher. When somebody gives me something REALLY nice, I stash it back and wait a while to use it. Last spring when I spoke at the Fayette County Tea Party Richard & Leah Williams kindly gave me a pair of black Alpaca dress socks spun out of the Alpaca wool grown on their own Asah farm. I never put them on until a week ago. I was saving them.

MERCY! I had no idea socks could do that! It's like walking on air, like somebody is kissing your feet all day, not that I really want anybody to kiss my feet all day, but I'm trying to explain how comfortable they feel.

Alpaca fiber is not scratchy like wool & it's hypoallergenic. I think they have SERIOUSLY underpriced these socks at US$13 a pair, or $16 for the outdoor version, so if I were y'all I'd race to & order some before they either run out or raise the price.

The Williams' Asah Farm is in Moscow -- Tennessee, of course.

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
4-Dec-12 Price Change % Change
Gold, $/oz 1,694.40 -25.20 -1.47%
Silver, $/oz 32.73 -0.95 -2.81%
Gold/Silver Ratio 51.763 0.707 1.39%
Silver/Gold Ratio 0.0193 -0.0003 -1.37%
Platinum 1,581.40 -30.90 -1.92%
Palladium 681.10 -8.35 -1.21%
S&P 500 1,407.05 -2.41 -0.17%
Dow 12,951.78 -13.82 -0.11%
Dow in GOLD $s 158.01 2.17 1.39%
Dow in GOLD oz 7.64 0.10 1.39%
Dow in SILVER oz 395.67 10.71 2.78%
US Dollar Index 79.67 -0.32 -0.40%
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GOLD Fine Tr.Oz. BID ASK $/oz
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Aust. 100 corona 0.98 1,655.96 1,666.28 1,699.94
British sovereign 0.24 399.69 403.69 1,714.89
French 20 franc 0.19 317.00 321.00 1,719.32
Krugerrand 1.00 1,719.97 1,734.97 1,734.97
Maple Leaf 1.00 1,707.90 1,727.90 1,727.90
1/2 Maple Leaf 0.50 840.46 882.91 1,765.82
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Mexican 50 peso 1.21 2,030.61 2,047.61 1,698.28
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SILVER Fine Tr.Oz. BID ASK $/oz
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VG+ Peace dollar 0.77 25,000.00 27,500.00 35.95
90% silver coin bags 0.72 23,505.63 23,755.63 33.22
US 40% silver 1/2s 0.30 9,521.13 9,696.13 32.87
100 oz .999 bar 100.00 3,292.50 3,342.50 33.43
10 oz .999 bar 10.00 334.25 336.75 33.68
1 oz .999 round 1.00 32.78 33.63 33.63
Am Eagle, 200 oz Min 1.00 34.53 35.18 35.18
SPOT PLATINUM: 1,581.40      
Plat. Platypus 1.00 1,606.40 1,646.40 1,646.40
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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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