The Moneychanger
Weekly Commentary
Friday, 4 January a.d. 2013 Browse the commentary archive
Here's the weekly scorecard:
  28-Dec-12 4-Jan-13 Change % Change
Silver, cents/oz. 2,992.00 2,989.60 -2.40 -0.1
Gold, dollars/oz. 1,654.90 1,648.10 -6.80 -0.4
Gold/silver ratio 55.311 55.128 -0.180 -0.3
Silver/gold ratio 0.0181 0.0181 0.0001 0.3
Dow in Gold Dollars (DIG$) 161.61 168.52 6.90 4.3
Dow in gold ounces 7.82 8.15 0.33 4.3
Dow in Silver ounces 432.42 449.40 16.97 3.9
Dow Industrials 12,938.11 13,435.21 497.10 3.8
S&P500 1,402.43 1,466.47 64.04 4.6
US dollar index 79.66 80.49 0.83 1.0
Platinum 1,517.40 1,555.20 37.80 2.5
Palladium 699.60 687.80 -11.80 -1.7

One week can certainly turn things around. For stocks & the dollar, a turnaround upwards, for metals (other than platinum) downward. Is that all there is? Is it the end of the silver & gold bull market? Have stocks begun a new bull market?

Yes, and if frogs had wings they wouldn't bump their little rears when they jump. Just be patient.

Here's the biggest story of the week, although you may not see it mentioned many places. The YIELD on the US 10 year treasury note broke out to the Upside. It gapped up to the downtrend line on Monday, then smartly advanced the rest of this week. Look at the chart here, http://bit.ly/VJ8Kpr

So what does this whisper? Since the yield (interest paid over the life of the bond) is the INVERSE of the bond's price, this implies lower bond prices. It's also not good news for Ben the Beneficent, because the Zero Interest Rate Policy has been the keystone of his rickety recovery arch. The Fed does NOT control interest rates, any more than a flea riding an elephant controls the elephant. Fed controls only the Fed Funds rate, and if the market decides it does not trust the dollar, they will shuck bonds like they were blankets from a leper colony (bonds are only a promise to pay dollars tomorrow, when the dollars will be worth less).

Ben's Zero Interest Rate Policy has also been wreaking havoc in the economy, because pension funds and insurance companies must operate on virtually no interest income when for long years they have assumed 4% - 6%. And of course, Ben's dumb policy has created a bubble in US treasury bonds because his ever lowering interest rates guaranteed the bonds' price would rise.

Too early to say yet exactly what this 10 year yield breakout means, but at the least it means lower bond prices for a while, & headaches for the NGM at the Fed. First big resistance to further rise in the yield come at 24 (2.4%).

A bursting bond bubble might cover everybody in goo.

US dollar index surged yesterday and appeared to break through its downtrend line, but was it real, or only a feint for suckers? Dollar dropped back 7.7 basis points today to 80.491. Dollar cannot maintain upward momentum if it closes below 80, but for now it's headed up.

Euro gained a little today, up 0.21% to $1.3075, but this repairs on damage. Euro has gapped down through its 20 day moving average (1.3128) & is hovering above its clustered 62 DMA ($1.2985) and 50 DMA ($1.2984) Uptrend appears broken beyond repair, but who ever knows with currencies?

Defying even pessimism, the Yen made a new low for the move today, down a whopping 0.98% to 113.45 cents/Y100, and at its lowest level since June 2010. Must be somewhere near a bottom -- monstrously oversold.

Stocks jubilated today. Dow rose 43.85 (0.33%) to 13,435.21, still comfortably above that ol' 13,300 resistance/support. However, they're blocked right now by a long standing internal resistance line. S&P500 rose 0.49% (7.1) to close at 1,466.47.

As they did from June 2012 through September 2012, stocks are forming another Rising Wedge. This pattern is a trickster. It points upward, & will fool you with its apparent strength & enthusiasm, but 'tis destined to respond to gravity, not levitation. Will break down, and hard.

But stocks may rise to a new high, even above 13,660. Right now they are running on hope, not evidence. Regardless how long this rally lasts, eventually economic gravity will take them down. US economy has not recovered, and can't until it purges out all the bad investment from the last boom. Banks haven't cleaned up their balance sheets, real estate remains oversupplied, & prices haven't retreated enough to form a bottom. That will take another 15 years or so.

Sooner or later, stocks will bend their back under those burdens.

Silver & gold suffered again today. Gold lost 25.60 (1.5%) to $1,648.10 while silver lost 77.5 cents (2.5%) to 2989.6.

Then a funny thing happened after the Comex closes: gold shot up nearly $10 and silver nearly 30 cents.

Bollinger bands are a technical indicator too complicated to explain (a 20 day running band at +/1 2 standard deviations from the mean) but fairly reliable. Both silver & gold have now twice punched the bottom band. Points to higher prices immediately

Gold low today was $1,625.25. New low for the move, but it closed nearer the top of today's range ($1,658.43) than the bottom. All today's loss came before New York opened, so st4rainge as it sounds, today in New York gold steadily climbed.

London p.m. fixes have now double bottomed. 21 December 2012 fix was $1,651.50 (a.m. fix that day was $1,648.25) while today's p.m. fix was $1,648. That doesn't answer any question beyond quibble, but points in the right direction.

Downtrend line from recent lows stands about $1,620 today, and from the Sept 2011 high at about $1,610. Final kiss good-bye?

Silver made a new low today at 2920c, just about the downtrend line defining recent lows. A bit further draw, about 2875c, lies the downtrend from the April 2011 high. Again, this appears a likely place to turn around.

I throw my hands up in the air and wait for the market to speak. 'Tis long past time silver & gold should have turned around, but they work on their schedule, not mine. One comforting encouragement is to hear long time gold advocates growing chilly about the bull market. That generally is a sign a significant bottom has been reached.

A bull market climbs a wall of worry -- the bull wants to shake off as many riders as possible. Neither in time nor price has this metals bull market fulfilled reasonable targets, so the best must lie in front of us.

I keep accumulating on the way down. If it falls more, I'll buy more. I remain persuaded that 2013 will take silver & gold up wildly.

On 4 January 1884 in London was established the Fabian Society. Its goal was to gradually transform society to socialism. It was named for the Roman general, Fabius "Cunctator" ("The Delayer") who pursued a slow strategy of harassment and attrition against the Carthaginian general Hannibal, and eventually won. I can't remember where the building is, but in some Fabian Society building is found its symbol, worked into a stained glass window: A wolf in sheep's clothing.

The Fabian Society offers one of the most striking examples of the suicidal impulse in 19th Century English & European society. Most of all, they were anxious to throw off the so-called restraints of Christianity. Their members included silly people, like the Theosophist Annie Besant, and nasty people, like Havelock Ellis, who was a strong supporter of eugenics, that is, snuffing out what he considered those "unfit to carry on the race." Many of them were connected to Madame Blavatsky, the Theosophist poseur and occultist. Ellis later worked & had an affair with Margaret Sanger, enthusiastic eugenicist & Mother of Abortion.

It's instructive that now that the Fabians have won, their victory is seen to be Pyrrhic (named for the Greek general, who won a victory so costly he lost the war). Rather than freedom, their throwing off the "restraints" of Christianity brought only slavery, personal and social. In order to perfect the world, socialism & communism managed to soak the 20th century with the bloodiest wars in human history, killing well over 100 million people. For peace, they gave us a desert. For life, death wholesale & unimaginable. For contentment, never-ending envy.

God save us from do-gooders! Hell hath no fury like a do-gooder armed with government force.

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
4-Jan-13 Price Change % Change
Gold, $/oz 1,648.10 -25.60 -1.5
Silver, $/oz 29.90 -0.78 -2.5
Gold/Silver Ratio 55.128 -0.842 -1.5
Silver/Gold Ratio 0.0181 -0.0005 -2.5
Platinum 1,555.20 -21.50 -1.4
Palladium 687.80 -8.65 -1.2
S&P 500 1,466.47 7.10 0.5
Dow 13,435.21 43.85 0.3
Dow in GOLD $s 168.52 3.14 1.9
Dow in GOLD oz 8.15 0.15 1.9
Dow in SILVER oz 449.40 12.79 2.9
US Dollar Index 80.49 -0.08 -0.1
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: 1,656.40      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,702.78 1,716.03 1,716.03
1/2 AE 0.50 844.25 869.61 1,739.22
1/4 AE 0.25 426.27 438.95 1,755.78
1/10 AE 0.10 175.47 179.72 1,797.19
Aust. 100 corona 0.98 1,615.49 1,625.60 1,658.44
British sovereign 0.24 389.92 393.92 1,673.39
French 20 franc 0.19 309.25 313.25 1,677.82
Krugerrand 1.00 1,788.91 1,803.91 1,803.91
Maple Leaf 1.00 1,666.40 1,686.40 1,686.40
1/2 Maple Leaf 0.50 819.92 861.33 1,722.66
1/4 Maple Leaf 0.25 409.96 438.95 1,755.78
1/10 Maple Leaf 0.10 163.98 178.89 1,788.91
Mexican 50 peso 1.21 1,980.98 1,997.98 1,657.11
.9999 bar 1.00 1,662.20 1,673.20 1,673.20
SPOT SILVER: 30.18      
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 21,864.70 22,139.70 30.96
US 40% silver 1/2s 0.30 8,858.85 8,933.85 30.28
100 oz .999 bar 100.00 3,018.00 3,068.00 30.68
10 oz .999 bar 10.00 306.80 309.30 30.93
1 oz .999 round 1.00 30.03 30.88 30.88
Am Eagle, 200 oz Min 1.00 31.78 32.43 32.43
SPOT PLATINUM: 1,555.20      
PLATINUM Fine Tr.Oz. BID ASK $/oz
Platinum Platypus 1.00 1,580.20 1,620.20 1,620.20
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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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