The Moneychanger
Daily Commentary
Wednesday, 30 January a.d. 2013 Browse the commentary archive

Yea, the Fed hath spoken, & 'tis naught but vexation, vanity, & hot air. His Munificence Ben said he will keep on buying $85 billion in securities ever month, because of "bad weather."

Nay, I joke not. The FOMC blamed the "temporary pause" in the economy (temporary since 2008) on "temporary forces," like bad weather. I couldn't make up stuff this silly if I stayed up late nights.

His Munificence said he is not backing off his inflation, so gold & silver surged higher. So did the 10 year Treasury yield. It rose a huge 0.91% to 2.006%, punching through resistance at the upper channel line. If it clears 2.4%, many more folks will begin to wonder why they are holding a losing position in US treasuries.

Of that $85 billion His Munificence plans to spend monthly monthly, he will spend $45 billion on Treasuries & another $40 bn on Mortgage Backed Securities. In other words, he's bailing out the banks still. He's making the Fed the septic tank for their sewage-grade assets. HMB also said he would keep on spending $85 bn a month if the outlook for the labor market does not improve substantially.

The Keynesian stupidity motivating HMB is like your mechanic claiming he aims to fix your automobile by taking off all four wheels, dropping the transmission, dousing it with gasoline, and throwing in a match. This will do the same for the economy.

Stocks did not like His Munificence's plans, & dropped. Dow lost 49.69 (0.38%) to 13,904.73. S&P lost 6.8 (0.45%) to 1,501.03.

Since I am only a natural born fool from Tennessee, I don't claim to know much. But I have observed that tops in the stock market are just about impossible to pinpoint, even as you watch them. 'Tis an enormous market, & just about the time you are certain it's been beat, it raises its head for one last spike up. Therefore, I am not pinpointing or predicting, only pointing out the witnesses for the prosecution

First, the Dow & the S&P500 both have pricked their overhead resistance (top jaw of the Jaws of Death), & both have peeked through the top of a fatal rising wedge. Both are in the right shoulder of a 16-year old head & shoulders. Both have traced out a broadening top ("Jaws of Death") since May 2011, and within that have formed another head & shoulders through 2012.

Call the other witnesses. The Dow in Gold gapped up four days ago, formed an island reversal, and if it gaps down again tomorrow will complete the formation. In the same time silver gapped up, gapped again to a single day top (452.10 oz), gapped down yesterday & again today, leaving that top isolated in what also partakes of Island Reversal flavor. Wait! Call those other two witnesses, the RSI & MACD that both point out a severely overbought Dow & S&P500.

But shucks -- all those witnesses may be lying.

Ben's generosity to the banks didn't help the US dollar index much. It fell , losing 31.4 basis points (0.4%) to end at 79.255. This confirms its breakdown from its short term uptrend yesterday.

Euro gapped up on that news, way over $1.3500 resistance, up 0.56% to $1.3565. That answers what it intends to do: rise.

Yep, the yen made another new low for the move today, closing down 0.4% at 109.84 cents/Y100.

US$1=Y91.04=E0.7372=0.031102 oz Ag=0.000595 oz Au.

Silver rose 99.3 cents today to close Comex at 3215.2c. Gold added $19.10 to $1,679.90.

In the last two days silver has risen 139.6c (4.5%) & gold $27 (1.6%).

What jumps out at us today is silver closing above its 50 day moving average (3189c). Either telepaths are working in the silver market, or news of the FOMC's announcement leaked out. Silver gapped up on the open, traded straight up, then gapped up again, & crossed 32 resistance & the 50 DMA in the bargain.

What's important about the 50 DMA? Because it has capped every move since mid-October. Only barrier left before silver is the downtrend line from the October 2012 high, tomorrow about 3245c. Last high was 3249c, so any close over 3250c tomorrow will send silver shooting for 3450c, next resistance. I can't see what will stop it, but then, I not a telepath or clairvoyant.

Gold's story is a wee bit more complicated. It didn't quite best its 50 DMA (1688.44), but shot through its 20 DMA and punched into the 150 DMA (1,681.13). One tee tiny jump tomorrow takes it through the 50 DMA, but a much bigger test faces gold: bursting through $1,700. Exactly at that resistance tomorrow awaits the downtrend line from the October 2012 high. Breaking through now will boost gold to challenge $1,725.

Every move you THINK is a breakout needs to confirm by moving further in the same direction the next day. Still, both silver & gold have built an uptrend -- higher highs and higher lows -- since 4 January.

Look for higher silver & gold prices tomorrow. Again I will say, I believe silver & gold made their post-October correction low on 4 January 2013. From here both should launch a rally that will carry gold to $2,350, maybe by end-May, that will mark only the first leg of a much longer rally.

I have to warn y'all to be careful of "We Buy Gold & Silver Shops." Today I had a customer who wanted to sell US 90%. He called one of these shops, & they offered him $14.8 times face value for what I bought for $22.802 times face value. Y'all have to check around for pricing. Some of these folks would steal the quarters off a dead man's eyes.

On 30 January 1649 Charles Stuart, former king of England, was beheaded. Twelve years later, in 1661 after the Stuarts had been restored to the throne, Oliver Cromwell, Lord Protector of the English Commonwealth, was dug up and ritually executed, even though he had been thoroughly dead for two years.

On 30 January 1900 the British who had invaded the Boer republics in South Africa asked for a larger army. The Boers proved superior fighters (they invented the "commando") and were armed with the most modern rifles (Mausers) with smokeless powder. They could fire away at the British, but without smoke the British couldn't determine where they were.

Henry Ford said, "Any man who thinks he can be happy & prosperous by letting the government take care of him better take a close look at the American Indian."

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
30-Jan-13 Price Change % Change
Gold, $/oz 1,679.90 19.10 1.15%
Silver, $/oz 32.15 0.99 3.19%
Gold/Silver Ratio 52.249 -1.052 -1.97%
Silver/Gold Ratio 0.0191 0.0004 2.01%
Platinum 1,687.80 10.40 0.62%
Palladium 751.00 1.65 0.22%
S&P 500 1,501.03 -6.80 -0.45%
Dow 13,904.73 -49.69 -0.36%
Dow in GOLD $s 171.10 7.50 4.58%
Dow in GOLD oz 8.28 0.36 4.58%
Dow in SILVER oz 432.47 -15.38 -3.43%
US Dollar Index 79.26 -31.40 -28.38%
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: 1,675.10      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,718.65 1,731.22 1,731.22
1/2 AE 0.50 853.79 882.36 1,764.72
1/4 AE 0.25 426.90 449.55 1,798.22
1/10 AE 0.10 175.78 183.42 1,834.23
Aust. 100 corona 0.98 1,633.72 1,647.72 1,681.01
British sovereign 0.24 394.32 398.32 1,692.09
French 20 franc 0.19 312.74 316.74 1,696.52
Krugerrand 1.00 1,706.93 1,721.93 1,721.93
Maple Leaf 1.00 1,685.10 1,700.10 1,700.10
1/2 Maple Leaf 0.50 963.18 879.43 1,758.86
1/4 Maple Leaf 0.25 427.15 448.09 1,792.36
1/10 Maple Leaf 0.10 177.56 182.59 1,825.86
Mexican 50 peso 1.21 2,009.40 2,026.40 1,680.69
.9999 bar 1.00 1,680.96 1,691.96 1,691.96
SPOT SILVER: 31.99      
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 23,301.85 23,659.35 33.09
US 40% silver 1/2s 0.30 9,392.80 9,467.80 32.09
100 oz .999 bar 100.00 3,199.00 3,239.00 32.39
10 oz .999 bar 10.00 324.90 327.40 32.74
1 oz .999 round 1.00 32.09 32.54 32.54
Am Eagle, 200 oz Min 1.00 33.24 34.24 34.24
SPOT PLATINUM: 1,687.80      
Plat. Platypus 1.00 1,712.80 1,752.80 1,752.80
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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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