The Moneychanger
Weekly Commentary
Thursday, 14 February a.d. 2013 Browse the commentary archive
Here's the weekly scorecard:
  8-Feb-13 14-Feb-13 Change % Change
Silver, cents/oz. 3,142.50 3,034.30 -108.20 -3.4
Gold, dollars/oz. 1,666.00 1,634.70 -31.30 -1.9
Gold/silver ratio 53.015 53.874 0.860 1.6
Silver/gold ratio 0.0189 0.0186 -0.0003 -1.6
Dow in Gold Dollars (DIG$) 173.63 176.70 3.08 1.8
Dow in gold ounces 8.40 8.55 0.15 1.8
Dow in Silver ounces 445.28 460.51 15.23 3.4
Dow Industrials 13,992.97 13,973.39 -19.58 -0.1
S&P500 1,517.93 1,521.38 3.45 0.2
US dollar index 80.26 80.39 0.13 0.2
Platinum 1,713.50 1,709.80 -3.70 -0.2
Palladium 751.10 763.65 12.55 1.7

Yet again we are treated to an exhibition of how government & central bank interference in the economy "stabilize" markets. The Gang of 20 nations are meeting this weekend. Now y'all and I & any other rational, sane person knows that like a sow wallowing in the mire, they will keep on wallowing in their Keynesianism, their stimulus programs, and most of all, inflation. Therefore, the chance of anything earth-shaking, any real change, coming out of this meeting is a little less than the chance of your winning the Power Ball Lottery & 30 seconds later being struck by a meteor. They will meet, they will swill & swallow at public expense, they will posture & issue verbose statements carefully bleached of meaning, & then they will go home to feed off their respective nations again. But the mere threat of a "government surprise party" coming out of this weekend has paralyzed some markets & sent others in odd directions as gamblers lay bets on what the Assembled Poo-Bahs and Virtually Important People might do.

So markets are skewed. I have learned, however, that markets can remain skewed and illogical longer than your pockets are deep. That's why I make no short term investments, no day trades, but rather stay with the primary trend. Unsexy & stodgy though that be, it beats panhandling after losing all your money in the futures market.

Silver & gold, contrary to what the chart screamed in August & September, and even through most of this correction, have not yet made good on the rally promised by their August breakout through the downtrend line from the 2011 highs. Today because markets fear some statement (don't even say "action") from the toothless G20 discouraging currency wars, short term traders are selling silver & gold, buying dollars & yen, selling euros, & shunning stocks.

Listen, I'm used to people calling me "fool" and "stupid," so it doesn't much bother me. I've been doing this too long. I've learned not to tote up scores too early. I was there in October & November 2008 when from March highs gold lost 30% and silver lost 105% [sic] of its preceding rise, puking in my wastebasket every morning. Tales of great cliffs for gold and silver just past Sunday don't panic me, since I am not selling now anyhow. And if they drop, so much the better, because I'll buy some more cheaper. I was also there at the 2011 peaks, when silver reached 6 times its 2008 low and gold 2.7 times. Truth is the daughter of time.

And it ain't over yet. Banks are still stuffed with rotten assets, governments have reached the limit of borrowing capacity, every central bank in the world is inflating, AND THEY WILL KEEP ON DOING IT TILL THEY BUST. The cause hasn't been removed, so the effect will continue. They continue to inflate, so silver & gold will continue to rise.

I'm content to wait, and be called "wrong" for a long time.

US dollar index rose today to 80.394, up 32.3 basis points (0.42%), probably because it's viewed as the safest bet before the Gang of 20 meeting. Euro fell to $1.3356 (0.69%), probably on the bet that a high exchange rate hurts the puking-sick European economy & therefore must be brought down. Likewise the yen rose to 107.69 (up 0.39%) most likely on the bet that the other central banks won't stand for more currency warfare from the Japanese & will require them to give back some of their gains.

The looming G20 meeting discomfited stock markets around the globe, & confused them. The S&P500 & the Russell 2000 rose while the Dow & all the Nasdaq averages fell. Other world markets fell.

S&P500 gained 1.05 (0.07%) to 1,521.38 but the Dow wouldn't keep it company. It fell 9.52 (0.07%) to 13,973.39. I very much doubt the stocks' rally has ended, & expect a wild rise before it does. Likely that rally will end as March expires, but it might stretch out a little longer. Might reach 15,000 amidst government, central bank, & media announcements of a "New Era." It won't be.

Dow measured in silver & Dow in Gold have both broken out upside & probably will rise another 6% or so at least.

Today gold fell $9.50 to $1,634.70 & silver ran right along, losing 51.1 cents to close at 3034.3c.

These are not gigantic breakdowns, but with the last few days' breakdowns through support they force us to question how far they might fall. They will run into the downtrend lines from the 2011 highs at 2800c & $1,595. Fall through those points and it's back to last year's lows at 2610c & $1,525.

Those targets are by no means given. Next week after the Chinese holiday the Chinese will return to the market, buying, & who knows what rotten egg, positive or negative, the G20 chickens might lay. Some support for gold exists also around $1,630 & for silver between 2975c & 3000c. Might stop there.

Up above silver & gold will not trounce the bears until they close over $1,705 & 3250c.

Bottom line is, hold fast, don't panic. Keep your eyes on the primary trend & the horizon, & you'll ride out the worst storms with silver & gold.

I am sending this weekly report today because my wife is kidnapping me tomorrow & taking me to New Orleans. She's making me go. Really. So I won't be sending a commentary today or Monday, but I'll think about y'all when I'm sitting in Felix's in front of my second dozen oysters.

Today is Valentine's Day. If you haven't already bought your wife some sweet present, you'd better go find one right now.

On 14 February 1859 the Great State of Oregon was admitted to the Union. The Oregon coat of arms shows a man NOT pumping his own gas over the motto, "We never met a rule we didn't like." I love Oregon & you can live a gourmet's life there, but Mercy! They love those rules. I nearly got arrested once for chewing gum in the state aquarium. Got tailed by the security guard all the rest of my tour. I must look like "one of those people." Can y'all imagine what he might have done if I'd been dipping Skoal? If I'm lying, I'm dying. It happened.

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
14-Feb-13 Price Change % Change
Gold, $/oz 1,634.70 -9.50 -0.6
Silver, $/oz 30.34 -0.51 -1.7
Gold/Silver Ratio 53.874 -0.304 -0.6
Silver/Gold Ratio 0.0186 -0.0003 -1.7
Platinum 1,709.90 -18.80 -1.1
Palladium 765.60 -8.00 -1.0
S&P 500 1,521.38 1.05 0.1
Dow 13,973.39 -9.52 -0.1
Dow in GOLD $s 176.70 0.92 0.5
Dow in GOLD oz 8.55 0.04 0.5
Dow in SILVER oz 460.51 7.32 1.6
US Dollar Index 80.39 0.32 0.4
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SPOT GOLD: 1,633.50      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,675.97 1,688.22 1,688.22
1/2 AE 0.50 832.58 860.45 1,720.89
1/4 AE 0.25 416.29 438.39 1,753.56
1/10 AE 0.10 171.41 178.87 1,788.68
Aust. 100 corona 0.98 1,593.15 1,607.15 1,639.62
British sovereign 0.24 386.83 396.83 1,685.78
French 20 franc 0.19 306.80 312.60 1,674.34
Krugerrand 1.00 1,661.27 1,676.27 1,676.27
Maple Leaf 1.00 1,643.50 1,658.50 1,658.50
1/2 Maple Leaf 0.50 939.26 857.59 1,715.18
1/4 Maple Leaf 0.25 416.54 436.96 1,747.85
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.9999 bar 1.00 1,639.22 1,650.22 1,650.22
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SILVER Fine Tr.Oz. BID ASK $/oz
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VG+ Peace dollar 0.77 29.00 33.00 43.14
90% silver coin bags 0.72 22,068.48 22,397.48 31.33
US 40% silver 1/2s 0.30 8,913.43 8,988.43 30.47
100 oz .999 bar 100.00 3,036.50 3,076.50 30.77
10 oz .999 bar 10.00 308.65 311.15 31.12
1 oz .999 round 1.00 30.47 30.92 30.92
Am Eagle, 200 oz Min 1.00 31.62 32.62 32.62
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Platinum Platypus 1.00 1,734.90 1,774.90 1,774.90
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© 2015 Little Mountain Corporation, d.b.a. The Moneychanger. All rights reserved. May not be republished in any form, including electronically, without our express permission.

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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