The Moneychanger
Weekly Commentary
Monday, 31 December a.d. 2012 Browse the commentary archive
Here's the weekly scorecard:
  3-Jan-12 31-Dec-12 Change % Change
Silver, cents/oz. 2,953.30 3,017.30 64.00 2.2
Gold, dollars/oz. 1,599.70 1,674.80 75.10 4.7
Gold/silver ratio 54.167 55.507 1.340 2.5
Silver/gold ratio 0.0185 0.0180 -0.0004 -2.4
Dow in Gold Dollars (DIG$) 160.20 161.74 1.54 1.0
Dow in gold ounces 7.75 7.82 0.07 1.0
Dow in Silver ounces 419.78 434.30 14.52 3.5
Dow Industrials 12,397.38 13,104.14 706.76 5.7
S&P500 1,277.06 1,426.19 149.13 11.7
US dollar index 79.62 79.78 0.16 0.2
Platinum 1,435.00 1,538.70 103.70 7.2
Palladium 667.25 702.65 35.40 5.3

I'm not too high on these year-end comparisons, since I am cynical enough to believe (from past evidence) that the Nice Government Men manipulate these figures to create a Potemkin economic performance. Yet some crave them, so I basely comply, slave to the public mood that I am.

For the year, the Dow appeared to do very well, up 5.7% and the S&P500 up 11.7%. Appeared, that is, to do well until you remember than valued against gold, the Dow gained only 1% and against silver only 3.5%. And you remember that silver & gold spent most of the year correcting a preceding THREE YEAR rise. Whoops -- tacky of me to mention that, wasn't it?

Big gainers among the metals, thanks to strikes in supply-rich Africa, were Platinum (up 7.2%) and palladium (up 5.3%). Both are just too quirky for me to parse.

But how about that US dollar index, Currency Fans? Stayed within 0.2% of where it began the year. Oh, yeah, that's a "natural" market. Naw, no NGM fiddling around in THAT market, no, sir!

What about next year?

Big open garbage can in the living room is the bond market, where the Fed hath so long suppressed interest rates. One day bond buyers will catch on that the Fed can only suppress rates by printing money, & the Fed's bond bubble will burst & interest rates will scream like New Year's rockets to the sky. Good chance that will happen next year.

Fed is busy buying maggoty Mortgage Backed Securities from the banks trying to clean up their balance sheets, but there are more corpses in those closets than in Fibber McGee's. Same holds for European banks, only worse. And don't even talk about Japanese banks. So we're beginning the year carrying the same slimy load of bad banks we carried into last year.

Fiscal cliff? Well, Quarterback O'Bama slammed down the football, but unfortunately he was still a few yards shy of the goal line. 'Twill turn out no more than a mouse-burp. Federal government will keep spending and borrowing, & Fed will keep monetizing the debt. They can do no other, they are made to do that. They inflate, or die. Course, in the end they will inflate AND die, but as long as that comes "tomorrow," who cares?

US dollar index has range-traded since 2008 between 71.33 and 89.11, more narrowly (last half 2010 - 2012) 84 - 72.7. Long term the trend is down, but clearly the Fed is trying to maintain a range with the yen & euro of about US$1=Y85=E0.85 to US$1=Y74=E0.74 (or think of it as Y74 on the low side and Y135 on the high side, or E118 low and E135 high). As long as they depreciate in unison, no destructive competitive devaluation takes place. And make no mistakes, central banks work together as closely as pickpockets at a Yankees ball game, and for the same reason.

US$=Y86.75=E0.7578=0.033 142 oz Ag=0.000 597 oz Au.

Euro may rise as high as $1.3500 early in the year, before the corpses come floating to the top of the pond again. Closed today $1.3196, down 0.17%.

Japanese politicians have run their "depreciate the yen" game about as far as the Fed & ECB can tolerate. Yen hit a new low for the move today at 115.28c/Y100 (US$1=Y86.75). That can't last much longer, but it helps Japanese imports while it does. Of course, if Abe gets his way, the inflation will wreck the Japanese economy, already the most over-indebted of the three big ones.

Gold probably made its ultimate low for this move on December 20 with a low at $1,636.00, silver the same day with a 2964c low. But we'll see. Rest of the year should prove spectacular for silver & gold, with gold reaching $2,300 by June and silver $51 or higher.

Long term situation is this: from 2008 through April and August 2011 silver and gold rallied, from 880 cents to 4850c and from $705 to $1,880. After a rally that long, a correction follows, so do go wringing out your hankies on me. It's nature. Both silver & gold broke through the downtrend lines from those 2011 highs in August 2012, and rallied to 3450c & $1,800, then -- no surprise, folks -- corrected. It now appears they corrected almost al the way back to those downtrend lines for a Final Kiss Good-Bye, with no intention of coming back.

But don't pay no 'tention to me! I'm just a natural born fool from Tennessee who didn't know no more in 2001 than to trade them good Wall Street stocks for that ol' silver & gold. What do you expect from a fool like that?

Silver & gold could make one deeper strike down, but daily that grows less likely. If so, bottoms are 2900c and $1,620 or so.

Today gold gained an astonishing $19.90 to close at $1,674.80, above the November low close but not quite to the December low at $1,684.20. Also closed above the 200 ($1,662.70) and 150 ($1,6783.71) day moving averages. Good, good, good. First tripwire of an upmove, the 20 DMA stands only about $10 above at $1,685.80.

We may have seen the bottom. Regardless, I'm buying. I'll take some chance.

Silver today gained 25.3 cents to 3017.3c, not as enthusiastic as gold. Gold was very perky, silver just dragged along.

That's okay. Silver often lags as rallies begin. Silver stands below its 200 DMA (3075c) and 150 DMA (3075C), but the big barrier now is first 3100c and then 3200c. Needs to punch through those to make itself respected.

Whether we have already seen the lows for this silver & gold correction or not, by mid-January they should be behind us. A very fast rise will signal no more downside coming any time soon.

It's time to buy more silver & gold. The monetary & economic problems that are driving monetary demand into silver & gold have not been cured, not lessened, and will return with a vengeance to drive them much, much higher. Don't get stuck holding stocks or dollars -- or euros or yen, for that matter.

On 31 December 1862 at Parkers' Crossroads, Tennessee after he had raided through Tennessee unchallenged, a very reluctant Yankee army caught up with Gen'l Nathan Bedford Forrest. He knew another force was behind him, but the troops he sent to delay them got lost and the yankees caught him in the rear just as he was about finished whipping the army in front. A courier rode up to him and said, "General, there's another yankee army at our rear. What should we do?"

Never hesitating a moment, Forrest bellered, "Charge both ways!"

It worked, and he extracted his army with surprisingly few prisoners left behind.

Charging both ways worked for one reason: Forrest knew what he was doing. He knew what his own forces could do, and what his opponents could not do. He knew the land and the currents of the times. If you have grasped the world you live in, the primary trends, the currents that willy-nilly will work themselves out, then I couldn't give metals investors any better advice for 2013 than, "Charge both ways!"

God bless y'all in 2013 and always!

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
31-Dec-12 Price Change % Change
Gold, $/oz 1,674.80 19.90 1.2
Silver, $/oz 30.17 0.25 0.8
Gold/Silver Ratio 55.507 0.655 1.2
Silver/Gold Ratio 0.0180 0.0001 0.8
Platinum 1,538.70 21.30 1.4
Palladium 702.65 3.05 0.4
S&P 500 1,426.19 23.76 1.7
Dow 13,104.14 168.03 1.3
Dow in GOLD $s 161.74 0.17 0.1
Dow in GOLD oz 7.82 0.01 0.1
Dow in SILVER oz 434.30 1.94 0.4
US Dollar Index 79.78 0.01 0.0
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: 1,675.95      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,731.26 1,729.58 1,729.58
1/2 AE 0.50 854.22 879.87 1,759.75
1/4 AE 0.25 431.30 444.13 1,776.51
1/10 AE 0.10 177.54 181.84 1,818.41
Aust. 100 corona 0.98 1,634.55 1,644.77 1,677.99
British sovereign 0.24 394.52 398.52 1,692.94
French 20 franc 0.19 312.90 316.90 1,697.37
Krugerrand 1.00 1,702.77 1,717.77 1,717.77
Maple Leaf 1.00 1,685.95 1,705.95 1,705.95
1/2 Maple Leaf 0.50 829.60 871.49 1,742.99
1/4 Maple Leaf 0.25 414.80 444.13 1,776.51
1/10 Maple Leaf 0.10 165.92 181.00 1,810.03
Mexican 50 peso 1.21 2,004.36 2,021.36 1,676.50
.9999 bar 1.00 1,681.82 1,692.82 1,692.82
SPOT SILVER: 30.47      
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 21,964.80 22,214.80 31.07
US 40% silver 1/2s 0.30 8,796.90 8,971.90 30.41
100 oz .999 bar 100.00 3,047.00 3,097.00 30.97
10 oz .999 bar 10.00 309.70 312.20 31.22
1 oz .999 round 1.00 30.32 31.17 31.17
Am Eagle, 200 oz Min 1.00 32.07 32.72 32.72
SPOT PLATINUM: 1,538.70      
Platinum Platypus 1.00 1,563.70 1,603.70 1,603.70
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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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