The Moneychanger
Daily Commentary
Monday, 11 February a.d. 2013 Browse the commentary archive

Here I am fidgeting & fussing over 1% or 1.7% moves in silver & gold, and then I get slapped in the face by a currency devaluation in Venezuela. Last Friday, without much warning, Venezuela devalued the bolivar from 4.3 to the dollar to 6.3 to the dollar, a 31.75% loss overnight. Remember that the Nice Government Men give you no warning about these Surprise Parties, because they want the maximum catch of victims in their trap.

Let me give y'all that in terms that you can grasp easily. If the Fed devalued the US dollar 31.75% overnight (and I am NOT saying Ben the Benevolent & Beneficient is about to do that), and you went to bed with silver at $31/oz and gold at $1,660, you would wake up to silver at $40.84 and gold at $2,187.05.

In the good ol' US of A, of course, our rulers steal our money less crudely as the Venezuelans. Rather, our Nice Government men spread the devaluation out over several years, so you go to sleep in 2001 with gold at $252 and silver at $4.01, and wake up in 2013 to $1,660 gold and $31 silver. None of them overnight devaluations for us, no sirree. We're civilized. AND democratic. All our banks are equal.

Folks, when you buy silver & gold, don't ever lose sight of what you are protecting yourself from: the insidious, sudden or slow, theft of your wealth by monetary manipulation. That's why it doesn't pay to let your mind fix too narrowly on daily, weekly, or even yearly moves. You have to ride that primary trend.

But it hurt anyway when silver & gold tumbled to or broke the bottom of that triangle I've been writing about. Silver lost 53 cents and struck bottom at 3089.5 cents. Gold shed $17.80 to perch at $1,648.20. I'll explain below.

Dollar index is stretching higher and has spooked stock investors, I suspect. It edged back today, down 1.2 basis points to 80.199, practically flat. Euro rose, but not convincingly, by 0.28% to $1.3403. If it breaks $1.3150 then it will appear that the long rally from last July has ended. Never mind the yen -- it fell to yet another new low today, down 1.81% to close at 105.99c/Y100. No bottom there, it seems.

Stocks paused today. Dow fell 21.73 (0.16%) to 13,971.24, S&P500 lost 0.92 (0.06%) to 1,517.01.

Way more interesting are the Dow in Silver & Dow in Gold. Dow in Silver gapped up, but only to the last high. Dow in Gold gapped up past the last high. I have to read that as a clear message that the Dow in Gold will rise at least to 9.12 oz (GS188.53). That strongly implies that the Dow in silver will also rise, probably to or beyond the last intraday high (July 2012) at 479.27 oz. Only a reversal in the next day or so would gainsay that.

Gold and silver couldn't agree today, & gold got the short end of the stick.

Gold fell through the uptrend line from the June 2012 low, which formed the bottom boundary of its even- sided triangle. Low came at $1,643.38. Unless gold jumps tomorrow & leaves that behind as a spike low, then it will continue down to $1,629, the last low, & the same place an internal support line should catch it. If it did fall through that line, then it will head for the downtrend line from the September 2011 high, now about $1,595.

Silver, y'all will recall, shows greater strength than gold when stocks are rising. Not too surprising, then, that silver fell not as hard as gold today. Stopped slightly before it hit the June 12 uptrend line with a 3089.5c low. That line also forms the bottom boundary of that even-sided triangle. Oh, the 200 day is also right below, at 3067c. If silver breaks that support tomorrow, it could fall to 2964c, but we might be dealing with another spike bottom. Momentum indicators are plumb discouraging, too.

Today spreads out another example of why H.L. Hunt's wisdom was so useful when he said, "Never get really elated in victory; when times are tough, never get down."

Y'all can fall out by the side of the road in the ditch if you want, but I'm fixing to keep on walking.

On 11 February 1926 the Mexican government nationalized all property of the Catholic Church, a move which helped precipitate the Cristero War (1926-1929), also known as La Cristiada. It was the largest rebellion in Mexican history, and about 90,000 Mexicans were killed in this war to suppress the Church. Odd, very little is known of this war in the United States.

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
11-Feb-13 Price Change % Change
Gold, $/oz 1,648.20 -17.80 -1.07%
Silver, $/oz 30.90 -0.53 -1.69%
Gold/Silver Ratio 53.348 0.333 0.63%
Silver/Gold Ratio 0.0187 -0.0001 -0.62%
Platinum 1,695.00 -18.50 -1.08%
Palladium 758.20 7.10 0.95%
S&P 500 1,517.01 -0.92 -0.06%
Dow 13,971.24 -21.97 -0.16%
Dow in GOLD $s 175.23 7.50 4.47%
Dow in GOLD oz 8.48 0.36 4.47%
Dow in SILVER oz 452.22 6.93 1.56%
US Dollar Index 80.20 -0.01 -0.01%
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: 1,649.50      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,692.39 1,704.76 1,704.76
1/2 AE 0.50 840.74 868.87 1,737.75
1/4 AE 0.25 420.37 442.68 1,770.74
1/10 AE 0.10 173.09 180.62 1,806.20
Aust. 100 corona 0.98 1,608.76 1,622.76 1,655.54
British sovereign 0.24 388.29 392.29 1,666.49
French 20 franc 0.19 307.96 311.96 1,670.92
Krugerrand 1.00 1,675.89 1,690.89 1,690.89
Maple Leaf 1.00 1,659.50 1,674.50 1,674.50
1/2 Maple Leaf 0.50 948.46 865.99 1,731.98
1/4 Maple Leaf 0.25 420.62 441.24 1,764.97
1/10 Maple Leaf 0.10 174.85 179.80 1,797.96
Mexican 50 peso 1.21 1,978.69 1,995.69 1,655.22
.9999 bar 1.00 1,655.27 1,666.27 1,666.27
SPOT SILVER: 30.99      
SILVER Fine Tr.Oz. BID ASK $/oz
VG+ Morgan $B4 1905 0.77 30.50 34.00 44.44
VG+ Peace dollar 0.77 29.00 33.00 43.14
90% silver coin bags 0.72 22,511.78 22,840.78 31.95
US 40% silver 1/2s 0.30 9,096.33 9,171.33 31.09
100 oz .999 bar 100.00 3,098.50 3,138.50 31.39
10 oz .999 bar 10.00 314.85 317.35 31.74
1 oz .999 round 1.00 31.09 31.54 31.54
Am Eagle, 200 oz Min 1.00 32.24 33.24 33.24
SPOT PLATINUM: 1,695.00      
PLATINUM Fine Tr.Oz. BID ASK $/oz
Plat. Platypus 1.00 1,720.00 1,760.00 1,760.00
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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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