The Moneychanger
Weekly Commentary
Friday, 21 December a.d. 2012 Browse the commentary archive
Here's the weekly scorecard:
  14-Dec 21-Dec Change % Change
Silver, cents/oz. 3,223.00 3,014.20 -208.80 -6.5
Gold, dollars/oz. 1,695.80 1,659.10 -36.70 -2.2
Gold/silver ratio 52.616 55.043 2.430 4.6
Silver/gold ratio 0.0190 0.0182 -0.0008 -4.4
Dow in Gold Dollars (DIG$) 160.12 164.35 4.24 2.6
Dow in gold ounces 7.75 7.95 0.20 2.6
Dow in Silver ounces 407.54 437.62 30.08 7.4
Dow Industrials 13,135.01 13,190.84 55.83 0.4
S&P500 1,413.58 1,430.15 16.57 1.2
US dollar index 79.57 79.57 0.00 0.0
Platinum 1,613.60 1,536.90 -76.70 -4.8
Palladium 700.80 681.80 -19.00 -2.7

I'm not sure anyone got away from this week without bleeding: stocks gained slightly, but looking closer failed to breach resistance. Metals were beaten with barbed wire whips and left for the buzzards. Oddly, yea, oddly, the US dollar index closed the week within two-thousandths (2/1000s) of last week's close. Good shooting, that!

Here before Christmas I'm going to try to sum up events of the past month. By the way, I will be celebrating the Incarnation of Jesus Christ the Son of God on Christmas Eve, Christmas Day, and St. Stephen's Day, so I won't return with a commentary until 27 December. I pray each of you has a Merry Christmas.

Since mid-November the US dollar index has dropped from 81.46 to 79.569 today, a 2.3% loss. This has carried the buck down to support at 79. From here it will likely rally up to the downtrend line, today about 80, but dropping fast. If the dollar index closes below 79, it will attract sellers like a pretty girl attracts male eyeballs at the beach.

Because the Management (the Fed & any Administration) has demonstrated since 1914 they will depreciate the dollar, it's almost silly to talk about the dollar's short term fate. Long term it will go the way of all paper. Meanwhile, the central banks want to keep out of a devaluation competition, so they manage their currencies in ranges. That for the dollar index is probably about 84 to 72. But remember no central bank is managing its exchange rate to preserve purchasing power, but only to keep it from depreciating or appreciating too rapidly against the other two of the Big Three Turkeys, yen, euro, & dollar. Against anything with value -- a package of gum, a share of stock, an ounce of silver or gold -- all those currencies will continue to depreciate, because governments must borrow or die, and central banks must inflate or die. Long term, not the tiniest fact appeareth on the horizon to gainsay this easy descent into hell.

Dollar index today closed 2/1000s higher than last week. 2/10 of a basis point. Passing odd.

Euro looked a bit carsick today. Lost 0.45% to $1.3189. If $1.3400 doesn't stop it, could rise clean to $1.3500. In the undercarriage, however, the euro is even more salt-and-rust rotten than the US dollar, & only terror that it might fall apart keeps it together. Despite what the well-trained & well-paid actors assure you, the European bank, currency, and economic problems are not cured, anymore than the Black Death promised to stop at Naples & not move up into Europe.

Euro since mid-November low at $1.2672 has gained 0.517 to 1.3189 today, up 4.1%.

In the same period the yen has dropped from 126.43 cents/Y100 to 118.73 today, down 6.1%. Since September it's lost 8.4%. Clearly, a deal was made amongst the central banks to cheapen the yen, the sickest of a plague-rotted lot. Bottom should be found here somewhere around 118 cents.

US$1=YU84.22=E0.7582=0.033 176 oz Ag=0.000 603 oz Au.

US$1=0.969 gram silver = 0.187 gram gold.

Stocks gained a little this week, but every time the Dow approaches that 13,300 resistance, a big hand reaches out and slaps it winded. Today the Dow lost a breath-catching 120.88 (0.91%) to 13,190.84 & the S&P500 tumbled 13.54 (0.94%) to 1,430.15.

Unless the Dow falls significantly below its 50 day moving average (now 13,091.51) 'twill yet score higher prices in this move. With the new year, sobriety will return. Settling the fiscal cliff will prove a greater disappointment than encouragement. Better sell that news.

Go to http://bit.ly/TdQcP2 to see the Dow priced in gold. Ahh, here you will note the last four days have drawn the Death Card with a clear Island Reversal. The Dow in gold gapped up through the downtrend line, made a new high for the move, then fell back. At the very least that gap will be filled, but it looks more like an Island Reversal that appears when a move exhausts itself, surges one last time, then falls away. The "falling away" is due very, very shortly.

Mathematically that can mean stocks rise while gold rises faster, or stocks fall while gold remains steady or rises. Either way, gold will begin to outpace stocks. (I don't make this stuff up. I just look at the chart. This plainly implies stocks' move up is ending, or gold's move down.) Same picture, with gaps leading to the island, appears in the Dow in Silver. More overvalued than a brand new automobile waiting on the lot for a sucker to buy.

Stocks since mid November have risen from 12,471.49 to 13,190.84 today, up 5.8%.

Over that same space gold has dropped from $1,755 to $1,659, down $96 or 5.5%. Silver has lost 14.1%, dropping from 34.49 to 29.64, lower by $4.85.

Think about the Final Kiss Good-bye, the one that says, "I'm leaving, & I ain't coming back."

Both silver & gold formed descending right triangles with highs in April 2011 and September 2011. In August, they both broke through the falling hypotenuse of that triangle, the break-out marking the escape from that correction. It is common, yea, frequent for markets to break out (up or downside), then return to the resistance or support they broke through earlier for that Final Kiss Good-bye and last reversal.

I reckon that's what you're seeing right now in both silver & gold, because both have nearly touched that downtrend line. If they fall through that support, then the carnage & bloodshed becometh general, sending silver back toward 2600c and gold toward $1,525.

I don't believe that will happen. I believe we are within pennies of a bottom, maybe $1,636 for gold and 2900c for silver.

Today silver gained 53 cents to 3014.2 while gold gained a meaty $14.20 to $1,659.10. I wouldn't chortle too much about these gains, because short-covering at week's end easily explains them. Besides, gold didn't clear $1,675 nor silver 3150c, which they must do to reverse upward.

Few people make commitments in the days right before Christmas. Come the day after Boxing Day (26 December) we'll see their intentions.

Back away a minute. Even if silver & gold return to those support lines that were 12 and 18 months a-building, it matters not. They remain in a primary uptrend, a bull market. Calm yourself with that reminder, & don't fret corrections and short term moves. I've been on the winning and the losing sides of these moves -- you just have to keep your head and remember you have a LONG-TERM strategy and are not a day-trader.

Finest line to come out of an American in World War II was spoken on 21 December 1944 during the Battle of the Bulge when US commanding General Anthony McAuliffe responds to a German surrender request with one word: "Nuts!"

On 21 December 1989 the bizarre and blood-soaked Romanian regime of Nicolae Ceausescu was overthrown, ending 42 years of communist rule. On 25 December Ceausescu & his wife Elena were tried in a quick show trial and sentenced to death by a military court. They were taken outside, put against a wall, and shot. Hundreds of soldiers volunteered for the job. Oddly enough, a 2010 opinion poll showed that 41% of Romanians would vote for Ceausescu. That's way more than voted for Obama in the last election. That democracy is a goin' jessie, ain't it?

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
21-Dec-12 Price Change % Change
Gold, $/oz 1,659.10 14.20 0.9
Silver, $/oz 30.14 0.53 1.8
Gold/Silver Ratio 55.043 0.462 0.8
Silver/Gold Ratio 0.0182 0.0003 1.8
Platinum 1,536.90 -9.30 -0.6
Palladium 681.80 2.05 0.3
S&P 500 1,430.15 -120.88 -7.8
Dow 13,190.84 -13.54 -0.1
Dow in GOLD $s 164.35 -1.57 -0.9
Dow in GOLD oz 7.95 -0.08 -0.9
Dow in SILVER oz 437.62 -8.29 -1.9
US Dollar Index 79.57 0.32 0.4
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SPOT GOLD: 1,656.60      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,711.27 1,714.58 1,714.58
1/2 AE 0.50 844.36 869.72 1,739.43
1/4 AE 0.25 426.32 439.00 1,756.00
1/10 AE 0.10 175.49 179.74 1,797.41
Aust. 100 corona 0.98 1,615.68 1,625.80 1,658.64
British sovereign 0.24 389.96 393.96 1,673.59
French 20 franc 0.19 309.29 313.29 1,678.02
Krugerrand 1.00 1,683.11 1,698.11 1,698.11
Maple Leaf 1.00 1,666.60 1,686.60 1,686.60
1/2 Maple Leaf 0.50 820.02 861.43 1,722.86
1/4 Maple Leaf 0.25 410.01 439.00 1,756.00
1/10 Maple Leaf 0.10 164.00 178.91 1,789.13
Mexican 50 peso 1.21 1,981.22 1,998.22 1,657.31
.9999 bar 1.00 1,662.40 1,673.40 1,673.40
SPOT SILVER: 29.98      
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 21,507.20 21,757.20 30.43
US 40% silver 1/2s 0.30 8,652.35 8,827.35 29.92
100 oz .999 bar 100.00 2,998.00 3,048.00 30.48
10 oz .999 bar 10.00 304.80 307.30 30.73
1 oz .999 round 1.00 29.83 30.68 30.68
Am Eagle, 200 oz Min 1.00 31.58 32.23 32.23
SPOT PLATINUM: 1,536.90      
PLATINUM Fine Tr.Oz. BID ASK $/oz
Platinum Platypus 1.00 1,561.90 1,601.90 1,601.90
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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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