The Moneychanger
Daily Commentary
Tuesday, 19 February a.d. 2013 Browse the commentary archive

I can patiently & cheerfully abide questioning & criticism from sincere people, but I have news for cowards and whiners who don't want to take responsibility for their own actions: I ain't the federal government & I won't bail you out. I have no gun to hold to your head to force you to buy silver or gold or anything else, & if you aren't man enough to take responsibility for your own decisions, don't come whining and blaming me. Moreover, I will not tolerate bad manners. You internet cowards who at a safe electronic distance think to insult me would not do it in my presence, because I would slap your jaws. Be advised that I have a delete key, and as soon as I see the f-word in any communication, trashmouth, my itching trigger finger deletes it.

Any questions?

As I suspected, the G20 meeting issued a verbose statement bleached of all meaning. However, a lot was written between the lines. Whenever they say, "We will refrain from competitive devaluation," it means that behind the scenes there's an eye-gouging, ear-biting, nose-slitting bar-fight behind the scenes over that very thing. What hypocrisy! Every single central bank is depreciating its currency as fast as possible, they simply don't want any other country to leave them behind. "We're all depreciating, but we must depreciate in step." As I suspected, the silver & gold bull market is safe because once again central banks & governments have affirmed that they will continue to supply the one force that drives silver & gold up: inflation.

Why, you may ask, if all that's true, did silver & gold drop today? One mistake people make is to assume that causes have their outworking in markets immediately. Markets are pushed around by fads like any other human undertaking, but sooner or later causes will have effects.

The Japanese escaped the G20 meeting without the whipping they deserved if the G20 really were enforcing a ban on competitive devaluation ("currency war"). Yen may finally have stopped falling after a 105.86c intraday low six days ago. It has gently curved up, and closed today at 106.87c/Y100, but hasn't flashed the first sign of a reversal by crossing above its 20 DMA (108.6).

US Dollar index benefitted not at all from the G20 summit. Trading now at 80.357, about where it ended last Thursday. However, dollar index stands above its 20 & 50 DMAs, & has established a clear if sluggish uptrend. Well, call it a short term uptrend in its crablike range. Needs to climb above 80.90 even to merit suspicion of a rally, and above 81.50 to confirm it.

The euro meanwhile remains in what is either a correction or broken uptrend. Closed today up 0.19% at $1.3387, but won't prove a trend change until it closes below $1.3150 or above $1.3711.

US$1=Y93.57=E0.7470+0.033999 oz Ag=0.000624 oz Au.

Stocks ground out another little rise today. Dow added 53.91 to close above 14,000 at 14,035.67 (up 0.39%0. S&P500 ground side by side, up 11.15 (0.73%) to 1,530.94. Trend remains up.

Silver lost 42.6 cents today to end at 2941.3c. Gold gave back $5.30 off Friday's close to end at $1,603.60. Okay, Moneychanger, explain why that DOESN'T mean silver & gold are broken.

Lacking a crystal ball, I don't know whether they are broken or not, but I can list the votes for and against & you can weigh them and tote them up yourself.

On a five day chart gold put in bottoms just above $1,600 on Friday and today. Is that a double bottom marking the end of the decline? Beats me, but there it sits, hollering, & if gold rises from here & doesn't later fall below that level, y'all will look back & say, "Why, shucks, that WAS a double bottom after all."

Gold's low today came at $1,601.61, but it couldn't climb higher than $1,614.47. It's late for me as I write this (nearly 9:00 p.m. against my usual 5:30 p.m.) and the aftermarket has climbed up to Friday's close, $1,603.70.

On a four month chart gold has fallen to the downtrend line from the August 2011 high, which ought to, and better, offer support. More: in the last two days it has traded outside the bottom Bollinger Band. That measures variability, and to punch through that bottom line implies gold is very much oversold & due an immediate rebound. Seldom happens that a market breaks that bottom line and continues to fall without a rebound In gold's case, over the last 2-1/2 years it has never pierced the bottom B-band & kept on falling. Rather, it has always rebounded at least a little, most of the time a lot. Only once has it kept on skidding along the bottom line for several weeks.

Gold's waterfall over the last week also brings it to that downtrend line from the 2011 high. After the August breakout through & above that line to $1,800, that completes a correction back to the line for a final kiss good-bye, often seen in breakouts.

Could gold still drop to $1,525 and shake out all the weak holders, & scare the rest of us to death? Yep, but not without first breaking this $1,600 level. In any event, gut-wrenching & stomach-churning as it is, here is exactly the sort of place where you have to screw up your courage & buy. May prove the wrong move, but if it's right, 'twill be spectacularly right.

Unlike gold silver made a lower low than Friday, falling to 2929c today. After a fast waterfall about 10:30 that low came about 1:15. Rest of the day silver held steady & now is at 2961c.

Silver has reached not its downtrend line from the April 2011 high, but has just about matched its 4 January 2013 low at 2924c. And it has punched through the bottom B-band two days running, a bullish sign. (By the way, those Bollinger bands work just the same in reverse at tops.)

Does any cosmic law state that silver won't return to the 2615c bottoms of last year? Nope.

Worst feature on both silver & gold charts is that both have broken the uptrend line from the May/June lows. A spike through the line is permissible, lingering is not. Both will have to pick up sharply and close above $1,630 & 3100 cents very soon, or drop further.

Nerve wracking as these long corrections may be, they don't gainsay the primary uptrend in silver & gold. What drives that? Central bank inflation. This past weekend the central banks just confirmed again, in case you have been deaf, dumb, blind, & locked in the basement since 2006, that they will continue to inflate. Cause remains, effect will continue.

On 19 February 1807 former US vice president Aaron Burr was arrested in Alabama on a charge of treason. He had been conspiring to establish an independent republic out of territory in Louisiana. Although he in fact had conspired, he was acquitted because he had not committed any "overt act" required to sustain a guilty verdict for treason.

On 19 February 1906 weird William Kellogg established the Battle Creek Toasted Cornflake Company to manufacture & sell breakfast cereals. Many food nuts before Kellogg, including Graham of the eponymous cracker, had promised salvation by food, but few had combined it with Kellogg's tireless talent for hucksterism and self-promotion. For a hilarious history of Kellogg, see the 1993 movie, "The Road to Wellville" with Anthony Hopkins as Kellogg. Not a movie for children.

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
19-Feb-13 Price Change % Change
Gold, $/oz 1,603.60 -5.20 -0.32%
Silver, $/oz 29.41 -0.43 -1.43%
Gold/Silver Ratio 54.520 0.604 1.12%
Silver/Gold Ratio 0.0183 -0.0002 -1.11%
Platinum 1,696.40 19.80 1.18%
Palladium 763.75 11.00 1.46%
S&P 500 1,530.94 11.15 0.73%
Dow 14,035.67 53.91 0.39%
Dow in GOLD $s 180.93 7.50 4.32%
Dow in GOLD oz 8.75 0.36 4.32%
Dow in SILVER oz 477.19 8.62 1.84%
US Dollar Index 80.36 -0.16 -0.19%
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: 1,608.70      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,650.53 1,662.59 1,662.59
1/2 AE 0.50 819.93 847.38 1,694.77
1/4 AE 0.25 409.96 431.73 1,726.94
1/10 AE 0.10 168.81 176.15 1,761.53
Aust. 100 corona 0.98 1,568.96 1,582.96 1,614.94
British sovereign 0.24 380.96 390.96 1,660.83
French 20 franc 0.19 302.15 307.85 1,648.92
Krugerrand 1.00 1,636.05 1,651.05 1,651.05
Maple Leaf 1.00 1,618.70 1,633.70 1,633.70
1/2 Maple Leaf 0.50 925.00 844.57 1,689.14
1/4 Maple Leaf 0.25 410.22 430.33 1,721.31
1/10 Maple Leaf 0.10 170.52 175.35 1,753.48
Mexican 50 peso 1.21 1,929.75 1,946.75 1,614.62
.9999 bar 1.00 1,614.33 1,625.33 1,625.33
SPOT SILVER: 29.61      
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 21,743.15 22,072.15 30.87
US 40% silver 1/2s 0.30 8,690.70 8,765.70 29.71
100 oz .999 bar 100.00 2,961.00 3,001.00 30.01
10 oz .999 bar 10.00 301.10 303.60 30.36
1 oz .999 round 1.00 29.71 30.16 30.16
Am Eagle, 200 oz Min 1.00 30.86 31.86 31.86
SPOT PLATINUM: 1,696.40      
Plat. Platypus 1.00 1,721.40 1,761.40 1,761.40
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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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