The Moneychanger
Daily Commentary
Wednesday, 27 March a.d. 2013 Browse the commentary archive

Y'all can do me a big favor. I don't do Facebook or other social networking, but I have set up a Facebook page for my new book, At Home in Dogwood Mudhole. Would you Facebookers do me the favor of visiting http://on.fb.me/YfMj09 and then "Like" and "Share" it with you friends? Many thanks from your social-networking- challenged Moneychanger.

Banks re-open in Cyprus tomorrow. Likely 'twill not be blessed with halcyon, heart-warming scenes. Goofs running Europe, including the Germans, have gone a step too far in stealing the bank bailout money from the depositors instead of the taxpayers. They could start a world-wide bank run. Y'all better get some cash out of your bank, if only a little. Long weekend is coming, & no time governments like to throw surprise parties better than on a long holiday weekend. Best defense is to have your preparations already made before they throw the surprise party.

Friend of mine, a third generation commodity trader, loves to intone, "In the end, everything comes back to physicals."

What does he mean? That the entire futures market is pyramided on a little point of physicals, so in the end it's the availability of physicals that determines the price. Now that's been vitiated in some markets where "cash settlement" (settlement for cash at market value rather than the underlying commodity), but not in the metals, at least, not yet.

And my little tiny natural born fool's brain keeps working on the premium on US 90% silver coin. Today if I went to buy 'em I'd have to pay $1.85 an ounce at wholesale for the privilege of making them my own. Y'all stop & think now: that is the HIGHEST premium since the 2008 panic drove the premium sky-high, and before that since Y2K in 1999.

You can mumble to me all day about "anomalies," but that says to me that US 90% silver coin, which, unlike bars or silver rounds is no longer produced, is in short supply. So somebody tell me why that premium has kept on climbing since last November? Is it merely 90% holders loathe to part with their coin at these low silver prices? Or is it a signal that the futures silver price (the paper price) is being jimmied with?

I don't know. I'm just a fool watching from the sidelines.

Day before yesterday the Dow eked out a new intraday (not closing!) high at 14,563.75. Behold, an eye-catching non-confirmation. The S&P500's 2007 high hit 1,565.15, yet in spite of all the foam & froth in stocks right now, the much-broader-than-the-Dow S&P500 has only reached 1,564.91, day before yesterday. If I owned stocks, that would leave me biting my nails.

Today the Dow dropped 33.49 (0.23%) to 14,526.16. S&P didn't drop as much, only 0.92 (0.06%) to 1,562.85.

Both indices are stuck right in a sidewise range, having stuck the top boundary of a megaphone pattern. This inspireth not a happy outlook. Makes me think of gravity, and how strong it is, like when you're 11 and you swing off the garage roof on a rope, & it breaks. Knocks the breath out of you & you are pretty sure there for an instant that you will die.

Since I wrote yesterday the US dollar index has jumped 35.9 basis points (0.46%) ABOVE 83 resistance to 83.221. Crossing above that 83 resistance & hanging on speaks loudly. Somebody -- a crowd of somebodies?-- is buying dollars? Parse that with the drop in the 10 year treasury yield, and you get confirmation that scared money is dribbling into US dollars (the yield moves opposite to the bond price, so a dropping yield means a rising price).

Euro broke morale today by punching through $1.2800, ahh, well, it actually GAPPED down. Closed down 0.63% at $1.2773. Mmmm - huh! I wouldn't want to be working at the ECB tonight.

Yen has made a timid bottom and turned into an even more timid uptrend. Closed today practically flat at 105.89 cents/Y100.

US$1=Y94.44=E0.7829=0.034993 oz Ag=0.006225oz Au.

Yesterday gold flopped through $1,600 support & closed at $1,595.70, but today it rose back $10.50 to close at $1,606.20. When a market breaks to new low ground for a move, then recovers, it signals strength. However, gold's recovery blew hot & cold out of both sides of its mouth, since it only reached a high of $1,607.95. However, the chart shows that it only went down today & kissed its 20 DMA (1,591.67) before it turned around. Somebody was likely waiting there to buy.

Now all this is not cornbread & buttermilk, better than which it doth not get, but it is right promising.

Silver must delight in torturing us. It dipped down early in the day (about 2:00 a.m. NY time), hit a low at 2813.9 (a new low for the move), but then climbed up above the bottom boundary of the longstanding range to close down only 7.2 cents at 2857.7. That whispers that somebody with deep pockets will buy gladly down around 2800c.

Now remember one must prove motive, means, & opportunity to prove a crime. With the banks on Cyprus opening tomorrow & the whole world jittery & starting to run into US dollars, the Nice Government Men around the world tasked with protecting paper money & bankdom by manipulating metals prices have motive, means, and opportunity to hit gold hard. And as always, it's easier to do that by hitting the thinner, smaller silver market first.

But mercy! I don't know sic 'em from come here. Don't listen to me.

QUOTE OF THE DAY: "Peace is that glorious moment in history when everybody stands around reloading." Attributed to Thomas Jefferson, but I doubt it.

On 27 March 2013 English King Charles II gave away Bombay to the East India Company. Time would fail me to explain the entire scheme, but using Charles II's mistress, Barbara Villiers, the crony capitalists in the East India Company got a law passed enabling them to export silver out of the kingdom. Why? Because silver traded in India at a much higher rate than gold, let's say, 12:1 instead of England's 15:1 (not the exact figures). Thus the patriotic East India Company would take shiploads of English gee-gaws & silver to India, which bought 25% more gold in India than it bought in England. Back in England they would buy more gee-gaws, bank the gold, & load up the boat with more silver bound for India. By 1697 they had so emptied England of silver that Parliament raised the standard for silverware, from 92.5% sterling to the Brittania standard, 95.8% pure. A few years later when Sir Isaac Newton "reformed" the monetary system, he put England on a de facto gold standard because so little silver was left in England.

And y'all thought corruption began with our congress. Where the corporations are, there will the vultures be also.

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
27-Mar-13 Price Change % Change
Gold, $/oz 1,606.20 10.50 0.66%
Silver, $/oz 28.58 -0.07 -0.25%
Gold/Silver Ratio 56.206 0.508 0.91%
Silver/Gold Ratio 0.0178 -0.0002 -0.90%
Platinum 1,579.80 13.80 0.88%
Palladium 767.15 6.90 0.91%
S&P 500 1,562.85 -0.92 -0.06%
Dow 14,526.16 -33.49 -0.23%
Dow in GOLD $s 186.95 7.50 4.18%
Dow in GOLD oz 9.04 0.36 4.18%
Dow in SILVER oz 508.32 0.11 0.02%
US Dollar Index 83.22 0.35 0.42%
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: 1,606.40      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,652.99 1,660.21 1,660.21
1/2 AE 0.50 822.77 849.38 1,698.77
1/4 AE 0.25 415.40 432.72 1,730.90
1/10 AE 0.10 168.57 176.30 1,763.02
Aust. 100 corona 0.98 1,562.00 1,576.00 1,607.83
British sovereign 0.24 380.42 390.42 1,658.52
French 20 franc 0.19 299.91 302.91 1,622.47
Krugerrand 1.00 1,625.68 1,640.68 1,640.68
Maple Leaf 1.00 1,616.40 1,631.40 1,631.40
1/2 Maple Leaf 0.50 923.68 843.36 1,686.72
1/4 Maple Leaf 0.25 409.63 429.71 1,718.85
1/10 Maple Leaf 0.10 170.28 175.10 1,750.98
Mexican 50 peso 1.21 1,926.99 1,942.84 1,611.38
.9999 bar 1.00 1,612.02 1,623.02 1,623.02
SPOT SILVER: 28.68      
SILVER Fine Tr.Oz. BID ASK $/oz
VG+ Morgan $B4 1905 0.77 30.50 34.00 44.44
VG+ Peace dollar 0.77 28.00 31.00 40.52
90% silver coin bags 0.72 21,507.20 21,832.20 30.53
US 40% silver 1/2s 0.30 8,091.85 8,461.85 28.68
100 oz .999 bar 100.00 2,868.00 2,908.00 29.08
10 oz .999 bar 10.00 291.80 292.80 29.28
1 oz .999 round 1.00 28.78 29.23 29.23
Am Eagle, 200 oz Min 1.00 29.93 31.03 31.03
SPOT PLATINUM: 1,579.80      
PLATINUM Fine Tr.Oz. BID ASK $/oz
Plat. Platypus 1.00 1,604.80 1,644.80 1,644.80
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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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