The Moneychanger
Weekly Commentary
Friday, 25 January a.d. 2013 Browse the commentary archive
Here's the weekly scorecard:
  18-Jan-13 25-Jan-13 Change % Change
Silver, cents/oz. 3,190.20 3,118.00 -72.20 -2.3
Gold, dollars/oz. 1,686.60 1,656.40 -30.20 -1.8
Gold/silver ratio 52.868 53.124 0.260 0.5
Silver/gold ratio 0.0189 0.0188 -0.0001 -0.5
Dow in Gold Dollars (DIG$) 167.30 173.11 5.81 3.5
Dow in gold ounces 8.09 8.37 0.28 3.5
Dow in Silver ounces 427.86 444.86 17.00 4.0
Dow Industrials 13,649.70 13,870.75 221.05 1.6
S&P500 1,485.98 1,500.67 14.69 1.0
US dollar index 80.03 79.75 -0.28 -0.4
Platinum 1,672.10 1,693.90 21.80 1.3
Palladium 722.00 740.25 18.25 2.5

Bad week for silver & gold, good week for stocks. Hard to parse, but may be explained by Mackay's book, Extraordinary Popular Delusions & the Madness of Crowds.

Again today stocks reached new high closes for the move. Dow added 45.42 (0.33%) to 13,870.75 while the S&P500 moved about the same, up 5.85 (0.39%) to 1,500.67. That close over 1,500 offers big round number support to morale, and never mind that it's only 2/3 of a point over 1,500.

Should you take a ruler and draw a line across the 12,875 Dow high in May 2011, the 13,238 in May 2012, and the October 2013 high at 13,662, you have an upward slope that defines the upper Jaw of Death, the upper boundary of a broadening top. (Lower boundary runs from May 2011 at 12,876 through 12,035 in June 2012.) Against that backdrop, within those Jaws of Death, all the present stock rally is playing out. Keep that in mind. (S&P500 backdrop is about the same.)

It is possible the Dow might punch through that upper jaw & reach for the 14,000 high made in October 2007. Witnessing against that is a VERY overbought RSI (75.69 today when 70 is overbought), more so than it was in 2007. MACD -- market's distance above its moving averages -- isn't quite that bad, but strongly overbought.

Stocks have also traded in a rising wedge since November, and the last three days have taken them above that wedge's point. Generally a rising wedge resolves by dropping. Stocks have also risen 8 days running.

It's also possible that stocks will break here for a correction, then renew their rise into March before their final breakdown, assuming that the next one isn't the big one.

But in the teeth of all the Fed's manipulation and the President's Plunge Protection Team and all the twitching and tweaking they can do, stocks are locked in a primary down trend (bear market), & those who have been seduced into believing that a new bull market is arrived and Dow 36,000 lies just around the corner will be undeceived in dust, sackcloth, ashes, weeping and wailing.

Dow in gold has broken above resistance and has an upward target of about 9.12 oz (G$188.53). Today it stands at 8.39 oz (G$173.44). Dow in silver was trying to break down but last two days has rallied no, gapped, above the 200 DMA & the 20 DMA and penetrated the downtrend line. Target here is about 475 oz, from today's 445.3.

US dollar index has a tee-tiny uptrend working, but today lost 23.7 basis points (0.3%) to 79.748. Euro finally burst through $1.3400 resistance to $1,3460, up 0.64%. Target now becomes $1.3486, the Feb. 2012 high. Yen made ANOTHER new low for the move today at 109.98 (-0.69%). I reckon you could take a sauna in the offices of the Federal Reserve & the ECB today, they are so mad at the Japanese for their jawboning competitive devaluation. Lower the yen falls, more it steams the other central banks. I reckon the proverb is true, there is no honor among theives.

Excitement over the brave new era in stocks is no doubt pulling money away from gold and silver. Gold lost $13.10 today to close near the low at $1,656.40. Silver lost 51.5 cents to 3118c.

Gold and silver are not at a point -- $1,655 & 3100c -- where they must either catch or fall further, to $1,640 & 2975c.

Clearly, jumping over $1,700 will take some work.

Looking at it through the optimist's lens, today's gold retreat did no more than take gold down for a final kiss good-bye to the downtrend line from the high from mid-November. That's $1,656. Final kiss good-bye, I remind y'all, occurs after a market breaks through resistance, peaks, then corrects and touches back to that resistance line before it once again takes off.

I've been through these long soul-harrowing times before. You think metals have begun to take off again, only to disappoint you again. It can last a long time. Why shouldn't silver & gold go lower? The low on 4 January was too complete from a lot of angles. Most likely outcome will see silver & gold trading sideways next week, then attempting that $1,700 mark in a week or two.

Y'all think this is bad because you weren't watching silver & gold in October and November 2008. Gold dropped 32% from its 2008 peak and silver gave up 105% of its preceding gain. Brutal, but by no means the end of the bull market. From an 880 cent and $704.50 low silver & gold rallied for 3 years. As I keep on telling y'all, the bull is always working to shake off as many riders as possible.

Wise words for today: "Keep about your work. Do not flinch because the lion roars. Do not stop to stone the devil's dogs. Do not fool away your time chasing the devil's rabbits. Do your work."

On 25 January 1533 Henry VII secretly married Anne Boleyn. She later gave birth to Elizabeth I.

On 25 January 1856 took place the Battle of Seattle between Boeing & MicroSoft. Whoops! Just kidding. It was really between the settlers & the Indians.

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
18-Jan-13 Price Change % Change
Gold, $/oz 1,686.60 -3.80 -0.2
Silver, $/oz 31.90 0.12 0.4
Gold/Silver Ratio 52.868 -0.121 -0.2
Silver/Gold Ratio 0.0189 0.0001 0.4
Platinum 1,672.10 11.10 0.7
Palladium 722.00 14.30 2.0
S&P 500 1,485.98 5.04 0.3
Dow 13,649.70 53.80 0.4
Dow in GOLD $s 167.30 1.05 0.6
Dow in GOLD oz 8.09 0.05 0.6
Dow in SILVER oz 427.86 0.13 0.0
US Dollar Index 80.03 0.32 0.4
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SPOT GOLD: 1,685.50      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,731.85 1,741.96 1,741.96
1/2 AE 0.50 859.10 887.84 1,775.67
1/4 AE 0.25 429.55 452.35 1,809.38
1/10 AE 0.10 176.87 184.56 1,845.62
Aust. 100 corona 0.98 1,640.56 1,654.56 1,687.98
British sovereign 0.24 396.77 400.77 1,702.49
French 20 franc 0.19 314.68 318.68 1,706.92
Krugerrand 1.00 1,715.84 1,730.84 1,730.84
Maple Leaf 1.00 1,695.50 1,710.50 1,710.50
1/2 Maple Leaf 0.50 969.16 884.89 1,769.78
1/4 Maple Leaf 0.25 429.80 450.87 1,803.49
1/10 Maple Leaf 0.10 178.66 183.72 1,837.20
Mexican 50 peso 1.21 2,015.78 2,032.78 1,685.98
.9999 bar 1.00 1,691.40 1,702.40 1,702.40
SPOT SILVER: 31.84      
SILVER Fine Tr.Oz. BID ASK $/oz
VG+ Morgan $B4 1905 0.77 30.50 34.00 0.04
VG+ Peace dollar 0.77 29.00 33.00 0.04
90% silver coin bags 0.72 23,230.35 23,480.60 32.84
US 40% silver 1/2s 0.30 9,348.55 9,423.55 31.94
100 oz .999 bar 100.00 3,184.00 3,224.00 32.24
10 oz .999 bar 10.00 323.40 325.90 32.59
1 oz .999 round 1.00 31.94 32.39 32.39
Am Eagle, 200 oz Min 1.00 33.09 34.09 34.09
SPOT PLATINUM: 1,672.10      
Platinum Platypus 1.00 1,697.10 1,737.10 1,737.10
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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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