The Moneychanger
Weekly Commentary
Friday, 14 December a.d. 2012 Browse the commentary archive
Here's the weekly scorecard:
  7-Dec 14-Dec Change % Change
Silver, cents/oz. 3,305.30 3,223.00 -82.30 -2.5
Gold, dollars/oz. 1,704.00 1,695.80 -8.20 -0.5
Gold/silver ratio 51.554 52.616 1.060 2.1
Silver/gold ratio 0.0194 0.0190 -0.0004 -2.0
Dow in Gold Dollars (DIG$) 159.59 160.12 0.53 0.3
Dow in gold ounces 7.72 7.75 0.03 0.3
Dow in Silver ounces 398.00 407.54 9.54 2.4
Dow Industrials 13,155.13 13,135.01 -20.12 -0.2
S&P500 1,418.07 1,413.58 -4.49 -0.3
US dollar index 80.43 79.57 -0.86 -1.1
Platinum 1,605.50 1,613.60 8.10 0.5
Palladium 696.50 700.80 4.30 0.6

'Twas a hard week on the little things, like silver & gold. Stocks & the dollar had nothing to crow about either.

Before I talk about the week, I want to explain Lurch-o-nomics to y'all. Lurch-o-nomics is what your government & your central bank practice. Luther said that mankind is like a drunk: he falls off the horse on one side, climbs back up, and then trying to keep from falling off on that same side, he falls off on the other. Sort of like Ben Bernanke (and every central banker's) recipe for economic intervention, he lurches from one stupidity-spawned catastrophe to the next by trying to clean up the last.

Consider mighty Alan Greenspan -- not many have the gall to call him mighty today, after a couple of years' perspective -- lurching from side to side. He lurched to prevent a depression in the early 1990s, & spewed out so much liquidity he created a tech-stock bubble and fueled a stock market blow-off. Sensing that he might have made a tee-tiny mistake, he then lurched into a bond-bubble, & when that blew up he lurched into a real estate bubble, which burst in 2006 & ain't over till now & may abide unhurt the rest of my born days.

Lurch-o-nomics: it's what central banks do!

Now in lurching from side to side, like a drunken fireman spraying his flopping nozzle off a speeding truck, Ben has managed to create a truly gigantical bubble in the bond market. He has accomplished this either out of disingenuous stupidity, ignorance, or manic Keynesian brainwashing. The whole WORLD has bought US treasury bonds, because Ben has launched tsunami after tsunami of new money across the Seas of Finance, while keeping interest rates near zero.

Here's what will happen, & put down that crystal ball, Louise, you don't need THAT to make this forecast! One day the realizers will realize. One day one of them will awaken, & say to himself, "Wow. Those interest rates have been zero for a coon's age. Why, there's no direction for them to go but up from here, which means my bonds will go down. And Bernanke is spinning dollars like a cotton candy machine, which means the dollars the bonds promise to pay are going to sink like your wedding ring in a running garbage disposal. I'm selling those bonds." Trouble is, realizers travel in herds, like lemmings, & one of 'em selling will spook others, & pretty soon the bond bubble will have burst.

Lurch-o-nomics: it's what they do. Watch out for the inevitable snap-back when interest rates rise. 'Twill rank right up there with the real estate bubble.

Oh, & about that myth the Fed propagates that it "controls" interest rates? Fed controls nothing but the measly Fed Funds rate, & if the market stampedes over it the Fed will no more be able to command interest rates than King Canute could command the tide.

And y'all know, it MIGHT be necessary for the Nice Government Men to strike gold with a little manipulation if it rises too fast, cause fast-rising gold makes realizers REALLY twitchy. Fact is, they might have done that this week.

US DOLLAR INDEX has seen better weeks. I couldn't understand why, after the Fed's announcement they were going to increase the US money supply by $1.02 trillion (about 11%) next year the dollar didn't sink like a fat frog in a deep well, but it floated instead. Today then it broke 79.70 support and fell 36.2 basis points (0.47%) to 79.5467 now. Standeth right on the last low, & if it falls through that floor, will fall toward 78.90. Much further to fall. Better shuck them dollars while ye may!

Euro at last made it past resistance of that downtrend line, gaining 0.64% to $1.3161. Will hit $1.3200, no doubt, & might head for $1.3400. Thus the euro draws near the end of this rally. European economy remains rotten, European banks are rotten, European politics & politicians & central bankers are rotten. What's left to help them? Well, they make great wine & cheese in Italy.

Japanese Yen has fallen just about as low as the Fed & other central bankers will tolerate. Rose today 0.23% to 119.81.

Y'all go look at a 15 year S&P500 chart. You'll see the most bodacious Head & Shoulders top you ever saw in your life, & it's just about now completing that right shoulder. Mercy! That's gonna wreck the party like three carloads of liverish cops when that comes down!

Today the Dow chiseled off 35.71 (0.27% to close at 13,135.01. S&P500 appeared just as raggedy, lost 5.87 (0.14%) to 1,413.58.

It's likely only correcting to continue its rally. Hitting on the 50 DMA today, often the target of corrections. Real challenge for the Dow is to beat through the fence at 13,300. Ought to rally for the rest of the year, maybe into January, maybe up to 13,750. It will be the last Kiss of Death.

Get out of mutual funds & stocks while there are still buyers.

Silver & gold took a hard whupping with a big club this week. Well, it hurt a lot but didn't do any permanent damage. Today silver lost 5.7 cents while gold gained twenty cents [sic] to $1,695.80.

One of two scripts is playing out. (1) Gold has support at a line touching the recent bottoms at $1,672.50 and $1,684.10, today about $1,688, OR, (2) gold will breach that line & stop at the 150 & 200 DMAs (now $1,667 & $1,663.5) or even fall to the uptrend line from the June low, about bout $1,650.

Nope, I don't know which, but don't reckon this indecision or weakness will last more than December.

This week silver fell out of a little even-sided triangle with a target of about 3150 (300 DMA, 3136c (200 DMA), or the rising trend line from the June 2012 low about 3090c. Like gold, we'll probably have to endure this torment till year end, unless silver could climb back above 3350c in one great bound.

At the risk of repeating myself repeatedly, silver & gold remain in a PRIMARY UPTREND (BULL MARKET) which will run several more years and carry prices to heights it now seems ridiculous, risible, & feverish to utter. Yet happen it will. Keep calm, keep buying when they drop. Much higher prices coming next year, gold over $2,300 and silver over $50 by end-May, most likely.

On 16 December 1967, today just shy of 45 years ago, I married Susan Askew in Memphis. It stuck, and am I glad. Don't know why she has stuck with me, but I am most heartily glad, seven children & 45 years later. By the way, her wedding dress still fits her, and I believe she is immune to gravity. Still pretty enough to stop heavy traffic in a rainstorm.

On 14 December 1819 Alabama volunteered to join the Union as the 22nd state. Wonder what they think about that decision now?

Y'all enjoy your weekend.

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
14-Dec-12 Price Change % Change
Gold, $/oz 1,695.80 0.20 0.0
Silver, $/oz 32.23 -0.06 -0.2
Gold/Silver Ratio 52.616 0.007 0.0
Silver/Gold Ratio 0.0190 -0.0000 -0.2
Platinum 1,613.60 6.30 0.4
Palladium 700.80 0.95 0.1
S&P 500 1,413.58 -35.71 -2.5
Dow 13,135.01 -5.87 -0.0
Dow in GOLD $s 160.12 -0.07 -0.0
Dow in GOLD oz 7.75 -0.00 -0.0
Dow in SILVER oz 407.54 0.54 0.1
US Dollar Index 79.57 -0.36 -0.5
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: 1,696.30      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,747.19 1,755.67 1,755.67
1/2 AE 0.50 864.60 890.56 1,781.12
1/4 AE 0.25 436.54 449.52 1,798.08
1/10 AE 0.10 179.70 184.05 1,840.49
Aust. 100 corona 0.98 1,654.40 1,664.71 1,698.34
British sovereign 0.24 399.31 403.31 1,713.29
French 20 franc 0.19 316.70 320.70 1,717.72
Krugerrand 1.00 1,721.74 1,736.74 1,736.74
Maple Leaf 1.00 1,706.30 1,726.30 1,726.30
1/2 Maple Leaf 0.50 839.67 882.08 1,764.15
1/4 Maple Leaf 0.25 419.83 449.52 1,798.08
1/10 Maple Leaf 0.10 167.93 183.20 1,832.00
Mexican 50 peso 1.21 2,028.70 2,045.70 1,696.69
.9999 bar 1.00 1,702.24 1,713.24 1,713.24
SPOT SILVER: 32.30      
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 23,019.43 23,269.43 32.54
US 40% silver 1/2s 0.30 9,335.28 9,510.28 32.24
100 oz .999 bar 100.00 3,229.50 3,279.50 32.80
10 oz .999 bar 10.00 327.95 330.45 33.05
1 oz .999 round 1.00 32.15 33.00 33.00
Am Eagle, 200 oz Min 1.00 33.90 34.55 34.55
SPOT PLATINUM: 1,613.60      
Platinum Platypus 1.00 1,638.60 1,678.60 1,678.60
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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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