The Moneychanger
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Monday, 11 March a.d. 2013 Browse the commentary archive

Here's a timely video about how to answer agents or policemen at a checkpoint, or how NOT to answer their questions to preserve your rights. Fourteen minutes 42 seconds, & priceless. http://www.youtube.com/watch?v=u4Ku17CqdZg

In the face of the propaganda barrage & the bewildering red herrings the news constantly throws at you, you must remember one thing: monetary demand, & only monetary demand, drives bull markets in silver and gold. Everything else is mere noise: deflation scares, fiscal cliffs, sequestrations, FOMC minutes, Bernanke statements, and all the rest of it. Red herrings, false spoor. Inflation causes monetary demand, & inflation is not about to disappear.

Humans are herd animals, so they are most comfortable following the lemmings, buying when the crowd buys and selling when the crowd sells. Since the crowd maketh never no money, you must learn to conquer that urge to follow the crowd, keep your head, sell when smugly comfortable and buy when terrified.

I am constitutionally suspicious, I reckon. Why that little divergence between the Dow & the S&P500? Dow has made a new high, but S&P500 has not yet exceeded its 2007 high of 1,565.15.

Dow rose 50.22 (0.35%) to close near the high at 14,447.29, it's seventh new high in a row. Ditto the S&P500, up 5.04 today (0.32%) at 1,556.22.

Also, the charts differ. While the Dow has broken out above the top jaw of its megaphone, it still contains the S&P500.

How are stocks behaving against gold & silver? The Dow in Gold has barely inched higher, closing today at 9.16 oz (G$189.354 gold dollars). That fulfills my upside target of 9.12.

Dow in Silver has also crept up, reaching 500.72 oz today. Top here is about 510 oz.

US dollar hit 82.92 on Friday, near about fulfilling that 83 target. Looked a bit peaked today, falling off 14.5 basis points (0.2%) to 82.575. Remains in a steep & unbroken uptrend.

Yen broke down last week to a new low for the move, and today lost 0.29% to close at 103.89 cents/Y100. Appears the Japanese politicians & central bank have made a deal with the Federal Reserve (the hegemon) & its clients (ECB, etc.) to let the yen fall even further. That has taken pressure off the euro, which has cheapened against the yen, but now the Japanese are stealing a march on the Germans again.

Some things you don't see often, & one of 'em is a flat silver & gold market. For eight days they've hardly moved. Last Wednesday gold even closed unchanged!

Today gold gained $1.20 to close at $1,577.80 while silver lost 9.7 cents, ending at 2881.2 cents. Gold ranged today from $1,582.80 to $1,576.48, about the same range it's measured the last week & a day, $1,585 - $1,565. 'Twas encouraging to see gold slammed on Friday down to $1,564.30, a new low for the move, but close at $1,576.60. Apparently down around $1,565 the sellers evaporate while the buyers materialize.

Gold is flashing all the signs of a severely oversold market, with market sentiment at a 10 year extreme low as well as Commitments of Traders shorts. Friday may well have marked the low, the last test, but I reserve the possibility we could see one more down to that last low at $1,554.30.

The bears gave silver the same roughing up on Friday, but silver, too, clawed its way back. Silver, too, has ranged very narrowly in the past eight days. Today it pushed toward the top of that range at 2909, with a low at 2872.4c.

This is a waiting game. If you don't believe silver & gold have seen their lows, you wait. I am encouraged by Friday's performance when they refused to break to lower levels. However, we need some confirmation on the upside, with silver climbing above 2950c and gold over $1,600.

A top draweth nigh in stocks and a bottom in silver & gold. If you still have stocks, markets are handing you an opportunity to sell stocks & roll the proceeds into metals. Crazy? That's what the lemmings think.

On 11 March 1918 the first confirmed cases of the Spanish Flu appeared in soldiers at Fort Riley, Kansas. From 100 men, within days the sick's ranks grew to 522. It was a worldwide pandemic in 1918 and 1919. An estimated 10% to 20% of the infected died, killing as much as 3 - 6% of the world population. In it first 25 weeks it may have killed 25 million. Current estimates give 50 - 100 victims world wide. It may have killed more than the Black Death of the 14th century. The flue killed mostly young adults 20 - 40, and came in two waves, the second much more deadly.

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-Mar-13 Price Change % Change
Gold, $/oz 1,576.60 1.80 0.11%
Silver, $/oz 28.91 0.14 0.49%
Gold/Silver Ratio 54.537 -0.207 -0.38%
Silver/Gold Ratio 0.0183 0.0001 0.38%
Platinum 1,601.90 -27.00 -1.66%
Palladium 780.65 -3.55 -0.45%
S&P 500 1,541.18 -3.08 -0.20%
Dow 14,397.07 62.21 0.43%
Dow in GOLD $s 188.77 0.62 0.33%
Dow in GOLD oz 9.13 0.03 0.33%
Dow in SILVER oz 498.01 -0.30 -0.06%
US Dollar Index 82.77 0.65 0.79%
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: 1,581.70      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,624.41 1,634.69 1,634.69
1/2 AE 0.50 810.11 836.32 1,672.65
1/4 AE 0.25 409.01 426.07 1,704.28
1/10 AE 0.10 165.97 173.59 1,735.92
Aust. 100 corona 0.98 1,547.38 1,553.38 1,584.76
British sovereign 0.24 374.57 384.57 1,633.67
French 20 franc 0.19 295.30 298.30 1,597.77
Krugerrand 1.00 1,604.70 1,614.70 1,614.70
Maple Leaf 1.00 1,591.70 1,606.70 1,606.70
1/2 Maple Leaf 0.50 909.48 830.39 1,660.79
1/4 Maple Leaf 0.25 403.33 423.10 1,692.42
1/10 Maple Leaf 0.10 167.66 172.41 1,724.05
Mexican 50 peso 1.21 1,897.36 1,913.06 1,586.68
.9999 bar 1.00 1,587.24 1,598.24 1,598.24
SPOT SILVER: 29.02      
SILVER Fine Tr.Oz. BID ASK $/oz
VG+ Morgan $B4 1905 0.77 30.50 34.00 0.04
VG+ Peace dollar 0.77 28.00 31.00 0.04
90% silver coin bags 0.72 21,428.55 21,678.55 30.32
US 40% silver 1/2s 0.30 8,192.15 8,562.15 29.02
100 oz .999 bar 100.00 2,902.00 2,942.00 29.42
10 oz .999 bar 10.00 295.20 296.20 29.62
1 oz .999 round 1.00 29.12 29.57 29.57
Am Eagle, 200 oz Min 1.00 30.27 31.37 31.37
SPOT PLATINUM: 1,601.90      
PLATINUM Fine Tr.Oz. BID ASK $/oz
Plat. Platypus 1.00 1,626.90 1,666.90 1,666.90
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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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