The Moneychanger
Weekly Commentary
Monday, 22 April a.d. 2013 Browse the commentary archive
Here's the weekly scorecard:
  12-Apr-13 22-Apr-13 Change % Change
Silver, cents/oz. 2,632.20 2,332.00 -300.20 -11.4
Gold, dollars/oz. 1,501.00 1,421.00 -80.00 -5.3
Gold/silver ratio 57.025 60.935 3.910 6.9
Silver/gold ratio 0.0175 0.0164 -0.0011 -6.4
Dow in Gold Dollars (DIG$) 204.72 211.91 7.19 3.5
Dow in gold ounces 9.90 10.25 0.35 3.5
Dow in Silver ounces 564.74 624.66 59.93 10.6
Dow Industrials 14,865.06 14,567.17 -297.89 -2.0
S&P500 1,588.85 1,562.50 -26.35 -1.7
US dollar index 82.12 82.65 0.53 0.6
Platinum 1,495.30 1,435.80 -59.50 -4.0
Palladium 707.95 680.75 -27.20 -3.8

Above are the prices from Friday a week ago until today. That misses the deepest lows for silver & gold which came last Monday ($1,360.96 gold low) and Tuesday (silver low 2255.6 cents). While silver & gold took their worst beating since 1980, maybe nobody noticed stocks rolling over. US dollar remains equivocal, may be turning up.

Will Rogers said, "You can't break a man that don't borrow." That's why I never recommend leverage. If you have bought physical silver or gold and paid for it fully, these declines are painful, but not fatal. While I completely missed anticipating this big break, it would not have changed my recommendations because trading in and out has never been my strategy. In hindsight, of course, the "sell the peaks buy the lows" idea looks pretty obvious, but it never does while unfolding. Thus you sell what you THINK is the peak, only to see the market shoot upward away from you. Or you sell a low expecting it to go lower, and it reverses.

Rather, a strategy that follows the primary uptrend (bull market) buys and holds for the final peak. That one we have targeted for a 16:1 gold/silver ratio and 2 oz or less of gold to buy the Dow.

Big question torturing every gold & silver owner right now: HAS THE BULL MARKET ENDED? No, for several reasons.

1. Manner of decline. Bull markets end in a blow-off top, travelling straight up with ridiculous gains day to day. In 1980, gold gained 265% from 22 January 1979 to the peak on 21 January 1980; 113% in the last two months before the peak, and 74% in the last month. The following two years built no declining flat-bottomed triangle on the chart, but plunged, leaving a dramatic peak behind.

2. Price & Time. Last bull market gold rose 24.3 times its beginning price, silver rose 38-2/3 times. That bull market lasted about 20 years. This one is barely 12 years old, and highest gains so far have been about 6 times. Possible that would fulfill a primary trend, but not likely.

3. Cause unchanged. The cause of a bull market in silver & gold -- inflation -- has not abated. In fact, all the major central banks have embarked on unlimited inflation. Maybe they can tame that, but if they do they will have reversed cause and effect. They believe they are Masters of the Universe; I don't.

All the same, the waterfalls last week deeply wounded morale in silver & gold. They will need a while, maybe a long while, to recover. Gold fell nearly to a 50% correction of its 2008 - 2011 move; silver a little past 61.8%. Bad, but not fatal. Indeed, that could mark the limits of the fall, but there's no sign of that yet.

Does that mean I am ready to leap in and buy with both hands now? Nope, not yet. One last plunge is possible, but not certain -- possible enough to require proof of a reversal.

My mind is still nagging at the why -- why have commodities dropped across the board? Stocks are ailing, too. What are markets pointing at, a repeat of 2008, or something worse? The question hangs in the air, unanswered.


Stocks rose a tad today, but peaked way back on 11 April & have been trending lower every since, lower even than their reversal-tripwire 20 day moving average. S&P500 closed up 0.47% (7.25) today at 1,562.50, Dow rose 0.14% (19.66) to 14,567.17.

Here's what may faze you: the Dow in Gold and Dow in Silver, even through last week's terrible metals' cascade, have topped & kept on falling. Don't take my word for it, look at it here and here

Wait! I forgot to mention that both were stopped around long term downtrend lines. For now, both are screaming that stocks have topped against silver & gold.

The US dollar index last week hit an internal support line at 81.80 and bounced back up. It has traced a rounding top, but if it crosses above 83.00 will break out upside with a target of 84 or higher. Dollar index closed today at 82.649, down 6.5 basis points (0.08%). Euro gained 0.11% to $1.3066, trending down now for a week and closing today on its 50 DMA. Yen flirteth yet with 100 cents to 100 yen, closing today up 0.24% at 100.74 cents/Y100.

US$1=Y99.26=E0.7653=0.042882 oz Ag=0.000704 oz Au.

Gold today climbed $25.70 to end at $1,421 while silver gained 36.5 cents to end at 2332 cents.

Gold hit $1,423.80 on Friday, & sent the shorts scattering when it gapped up from $1,400 to $1,410. Bears fought back, driving gold down enough to fill that gap, but then today it climbed sharply to $1,421.00.

Gold has been massively, grotesquely oversold but today doesn't even quite recapture 50% of its loss. How far down was it kicked? 20 DMA stands overhead at $1,517.53. Let's see how it behaves on the first reaction from this climb that lasted all but one day of last week (but that day was a killer.) MACD is trying to hook upward.

But get this clear: gold might rally up to $1,500 - $1,525 & still turn and make another, lower bottom.

Silver has been battered much worse than gold. Right now it needs to climb above 2400 cents to regain any credibility.

One trade I continue to recommend is swapping gold for silver. Ratio has now climbed nearly to 61:1, retracing 61.8% of its fall from the 2008 high at 84. With that trade comes the risk it races further to 72 or higher.

Worst face of trading is to control the panic and euphoria in your own breast. Is it bravery or foolhardiness? You have to suck in your breath & close you eyes & sell when its high and buy when its low, all the while trying to fight off the lemming inside that finds safety only with the crowd. Against that courage you have to weigh stubborn stupidity, that dares you to act blindly, or keeps you from facing facts. Maybe y'all can walk through that emotional minefield without any explosions, but I find it taxing.

Bottom line: Long term primary uptrend (bull market) in silver & gold has NOT ended. No telling yet how long metals will need to overcome this blow & exceed old highs. Somewhere here, however, lies a historical buying opportunity -- for the brave.

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
22-Apr-13 Price Change % Change
Gold, $/oz 1,421.00 25.70 1.8
Silver, $/oz 23.32 0.37 1.6
Gold/Silver Ratio 60.935 1.093 1.8
Silver/Gold Ratio 0.0164 0.0003 1.6
Platinum 1,423.30 12.50 0.9
Palladium 674.05 4.85 0.7
S&P 500 1,562.50 7.25 0.5
Dow 14,567.17 19.66 0.1
Dow in GOLD $s 211.91 -3.59 -1.7
Dow in GOLD oz 10.25 -0.17 -1.7
Dow in SILVER oz 624.66 -9.08 -1.4
US Dollar Index 82.65 -0.07 -0.1
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: 1,400.40      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,448.01 1,447.31 1,447.31
1/2 AE 0.50 717.19 740.46 1,480.92
1/4 AE 0.25 362.09 377.23 1,508.93
1/10 AE 0.10 146.94 153.69 1,536.94
Aust. 100 corona 0.98 1,367.44 1,381.44 1,409.34
British sovereign 0.24 331.63 341.63 1,451.28
French 20 franc 0.19 261.45 264.45 1,416.47
Krugerrand 1.00 1,425.61 1,440.61 1,440.61
Maple Leaf 1.00 1,410.40 1,425.40 1,425.40
1/2 Maple Leaf 0.50 805.23 735.21 1,470.42
1/4 Maple Leaf 0.25 357.10 374.61 1,498.43
1/10 Maple Leaf 0.10 148.44 152.64 1,526.44
Mexican 50 peso 1.21 1,677.35 1,693.35 1,404.45
.9999 bar 1.00 1,405.30 1,416.30 1,416.30
SPOT SILVER: 23.13      
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 18,965.38 19,965.38 27.92
US 40% silver 1/2s 0.30 6,453.13 6,823.13 23.13
100 oz .999 bar 100.00 2,312.50 2,387.50 23.88
10 oz .999 bar 10.00 236.25 237.25 23.73
1 oz .999 round 1.00 23.23 23.23 23.23
Am Eagle, 200 oz Min 1.00 24.38 26.88 26.88
SPOT PLATINUM: 1,423.30      
Platinum Platypus 1.00 1,448.30 1,488.30 1,488.30
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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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