The Moneychanger
Daily Commentary
Thursday, 13 December a.d. 2012 Browse the commentary archive

Well, something happened today, but who knows why. After Bernanke announced the Fed would add $1.02 trillion to the dollar supply last year, instead of tanking today the dollar actually gained 2.6 basis points. And the inflation-happy stock market turned sad instead. And just in case you are one of those Pollyannas who believe that central banks & governments have got it all figured out & we're "coming out of the woods," Gretel, the top 5 central banks (less Japan, but they're coming shortly) announced today simultaneously that the Fed would extend to 1 February 2014 its swap line to the other central banks, a swap line the Fed used to loan $585 billion (half a trillion, give a billion or so) to foreign central banks so they could keep their own banks afloat on the Global Sea of Liquidity. Think of it as Homeland Security buying up 30 million rounds of ammo. What do they know we don't know?

US Dollar index yesterday made a low about 79.70, so it needs to hold on there to keep from falling further. Up above 80 offers a solid barrier.

Euro barely rose today, up 0.05% to $1.3078. Can't muster the strength to push through that downtrend line, although it stands above all its moving averages. However, it's in an uptrend, so odds favor a breakout.

The Yen fell off a cliff again today, down 0.49% to 119.61 cents/Y100. Yen must be nearing the point at which the rest of the world's Nice Government Men swing into action. Can't imagine them letting the yen drop below 117.64 cents (=Y85 to the dollar).

Things just got gloomier & gloomier for stocks as the day wore on. Markets just adore uncertainty, & O'Bama & his dance partner Boehner are keeping the world as uncertain as they possibly can. Dow lost 0.56% (74.73) to 13,170.72 while the S&P500 gave back 9.03 (0.63%) to 1,419.45.

This amounts to the Dow being turned back at 13,300 resistance (yesterday's high was 13,329.44). Probably plenty more upside here, but for now the market just can't deal with the schizophrenia pouring out of Washington.

Gold today fell a meaty $21 (1.22%) through $1,705 to close Comex at $1,695.60. Silver lost a heart-stopping 4.23% (142.7 cents) and ended at 3228, smashing 3350c & 3300c support, and even cutting through support that had cradled it since early November. Go look at http://bit.ly/SUDFzS

Fake-out break-outs occur when a market breaks out of a pattern one way, then immediately wheels on its heel & reverses. That's what silver did yesterday, breaking out of a little even- sided triangle toward the upside, then falling down through it to break out on the downside today. Along the way it made a new low for the move at 3228c.

If markets behaved perfectly predictably, it wouldn't be fun.

Only target left is the 200 & 300 day moving averages, nested now at 3090c and 3135c. Beneath that lies the uptrend line from the June 2012 low around 2900c. Silver may fall much further, or it may simply torture us by zigging and zagging back & forth until year end.

Gold broke $1,705 late yesterday supposedly on Bernanke's statements about the fiscal cliff. (He's against it.) By 9:30 a.m. it had fallen to $1,689.50. It rebounded to $1,701.90, then fell below $1,700 again & spent the rest of the day hanging out at $1,695.60. See the chart here, http://bit.ly/SoDA5t

Yesterday gold touched the downtrend line from the late November November high, then reversed vigorously today, gravity-ward. Support stands at the last two lows, today about $1,687.50, about where today's $1,689.50 low struck.

What's possible? Gold might hold that line. You'll know that tomorrow. If it doesn't, then the 150 & 200 DMAs stand beneath to catch it at $1,666 or $1,663.56. Beyond that the uptrend line form the June 2012 low stands about $1,650 today.

A couple of other things I want to mention. http://bit.ly/Z3RBxN shows the Dow in gold chart. That's one weird rascal, hugging that uptrend line so tightly since mid-November, and hitting the 200 DMA from below today, & a long term (since mid-2007) downtrend line. Either stocks are getting to rally hard against gold by breaking through that point, or they are about to fall back hard. Since the long term trend is down, odds favor fall back hard.

Both platinum & palladium have been trending upward since end-October. Platinum took a $33 hit today, but it didn't harm the chart. Palladium 4 days ago hit 706, its September high, and fell back but remains in an uptrend. Today might have marked a breakdown.

If you're one of those folks who frets over the uncertainty that governments & central banks inevitably inject into your life, I suggest you move where there isn't either one. Whoops -- sorry. They've crowded all the intelligent life off the planet. You'll have to move to Mars to escape them.

Today, a distinctly attractive possibility.

It appears that silver & gold are on their way to lower lows before this correction ends. Be patient, be patient. The bull market will raise silver & gold to higher a& higher prices. Keep your eyes on the horizon & off the goofs in Washington. Pay 'em no mind. Eventually they'll get tired & go away.

On 13 December 1913, with many members of congress already gone home for the holidays, the Federal Reserve Act was rammed through congress to establish the Federal Reserve system. This time they didn't make the same mistake the 1st & 2nd Banks of the United States had made: they got a charter without any expiry, and they've been feeding off us ever since.

On 13 December 1862 Union commander Gen. Ambrose Burnside foolishly threw his forces against entrenched Confederate forces on Marye's Heights behind the city, resulting in about 11,000 casualties, more than twice those of his Confederate opponents. It was another case of technology outstripping tactics. West Point graduates had been taught Napoleonic tactics designed for attack against soldiers armed with muskets accurate at 50 - 100 yards, and wildly inaccurate past that. Thus massing troops and sending them against fortifications worked for Napoleon. Not for Burnside, however, or the many other generals north & South who tried the same over and over. Between Napoleon's time and 1860 the rifle had been perfected. Rifling or grooves in the barrel caused the bullet to spin, making it accurate up to 500 yards, and the advantage swung mightily to defense.

On 13 December 1814 Tennesseean General Andrew Jackson announced martial law in New Orleans as British troops disembarked at Lake Borgne, 40 miles east of the city. In January Jackson & his Tennessee militia (okay, there were a few also from Kentucky & Mississippi) would smash the British at the Battle of New Orleans.

IS AMERICA TOO BIG?

It's pretty odd when somebody called "leftist" agrees with somebody called "right wing." Might be an accident, or it might be that the terms "left" and "right" have lost all meaning, like "big government conservative" & phony Newt Gingrich. Maybe left & right are labels used merely to mislead us so we'll get so busy fighting on the front porch we won't notice the men emptying out our house through the back door.

Kirkpatrick Sale, decentralist author of Human Scale (1980) & head of the Middlebury Institute has teamed with Don Livingston of the Abbeville Institute in a four minute video, "Is America Too Big?" Could it be that the source of our social & political problems is our size? Check it out, see what you think. http://www.youtube.com/watch?v=RCNd7h0fsdE&

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-Dec-12 Price Change % Change
Gold, $/oz 1,695.60 -21.00 -1.22%
Silver, $/oz 32.28 -1.43 -4.23%
Gold/Silver Ratio 52.528 1.601 3.14%
Silver/Gold Ratio 0.0190 -0.0006 -3.05%
Platinum 1,611.90 -33.00 -2.01%
Palladium 690.25 -9.40 -1.34%
S&P 500 1,419.45 9.03 0.64%
Dow 13,170.72 74.73 0.57%
Dow in GOLD $s 160.57 2.88 1.83%
Dow in GOLD oz 7.77 0.14 1.83%
Dow in SILVER oz 408.01 19.49 5.02%
US Dollar Index 79.92 0.03 0.03%
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SPOT GOLD: 1,694.80      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,747.34 1,754.12 1,754.12
1/2 AE 0.50 863.84 889.77 1,779.54
1/4 AE 0.25 436.15 449.12 1,796.49
1/10 AE 0.10 179.54 183.89 1,838.86
Aust. 100 corona 0.98 1,652.94 1,663.24 1,696.84
British sovereign 0.24 398.96 402.96 1,711.79
French 20 franc 0.19 316.42 320.42 1,716.22
Krugerrand 1.00 1,718.53 1,733.53 1,733.53
Maple Leaf 1.00 1,704.80 1,724.80 1,724.80
1/2 Maple Leaf 0.50 838.93 881.30 1,762.59
1/4 Maple Leaf 0.25 419.46 449.12 1,796.49
1/10 Maple Leaf 0.10 167.79 183.04 1,830.38
Mexican 50 peso 1.21 2,026.90 2,043.90 1,695.20
.9999 bar 1.00 1,700.73 1,711.73 1,711.73
SPOT SILVER: 32.36      
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 23,026.58 23,276.58 32.55
US 40% silver 1/2s 0.30 9,352.98 9,527.98 32.30
100 oz .999 bar 100.00 3,235.50 3,285.50 32.86
10 oz .999 bar 10.00 328.55 331.05 33.11
1 oz .999 round 1.00 32.21 33.06 33.06
Am Eagle, 200 oz Min 1.00 33.96 34.61 34.61
SPOT PLATINUM: 1,611.90      
PLATINUM Fine Tr.Oz. BID ASK $/oz
Plat. Platypus 1.00 1,636.90 1,676.90 1,676.90
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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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