The Moneychanger
Daily Commentary
Thursday, 2 May a.d. 2013 Browse the commentary archive

Super Banker Mario Draghi gave us another lesson today in how central banks help stabilize markets. For the ECB's benchmark interest rate setting council he announced that "Zero ain't low enough!"

That's right. They lowered the benchmark rate from 0.75% to 0.5%, and threatened to take the deposit rate below zero if need be. Y'all understand this? Below Zero interest means you will be paying the bank to hold your money.

No surprise to anybody with an IQ higher than a possum's that the Euro fell like a lump in a churn and gold shot up. Gold critics are ever wont to point out that gold payeth no interest, so the "opportunity cost" of holding gold is the interest rate income you forgo. (For a moment just let alone that the "realized & not hypothetical cost" of holding fiat money is that it depreciates everyday, sort of an innate negative interest rate). However, with interest rates at, near, or below zero, it costs no interest income at all to hold gold.

Euro fell from a high yesterday at $1.3243 on the open today at $1.3200, then wilted like lettuce in a blast furnace. Dropped through and closed below its 20 DMA ($1.3069). Ended down 0.92% at $1.3064. All that's needed is a close below $1.2974 to nail that coffin shut. Yen fell back 0.63% to 102.04, but clinging on above its 20 DMA.

Mario Draghi boosted the dollar today, up 56.2 basis points (0.72%) to 82.21. That breaks through the rounding formation on the chart, and if confirmed breaks out skyward.

I don't know why stocks react to anything, or what they'll react to, other than trillions of dollars of Quantitative Easing & a timely goose from the Nice Government Men. Today they rose, after falling sharply yesterday.

S&P500 waxed 0.94% (14.89 points) to 1,597.59, a new high by 0.07. Dow mounted 130.63 points (0.89%) & ended 14,831.58. Odd thing is that over the last four days both indices have stopped cold at the same spot. That doesn't promise happiness & chintz curtains tomorrow.

Dow in gold opened lower, below the 20 DMA, but climbed to close 0.21% higher than yesterday at 10.11 oz. (G$208.99 gold dollars). Remains in a downtrend -- do I sound like a broken record?

Dow in silver put in the same performance, rising only 0.08% (about half an ounce) to 622.39 oz. Once again, the downtrend trendeth yet down.

Here's another reason I believe the worst has passed in the silver market, even though I expect to see a double bottom yet, or a slightly lower low. The Gold/Silver ratio peaked two weeks ago. Pretty solidly. Appears to have no desire to move up further. The ratio doesn't always peak at the price bottom of both metals, but a ratio trending down promises higher silver & gold prices.

Draghi's announcement that the ECB would not limit lending to banks and would lower interest rates below zero put STP in gold's gas tank. It shot up $21.40 (1.48%) to $1,467.70. Passing gold, silver clambered up 48.5 cents (2.08%) to 2379c.

This is good, this is grand, this warms the heart, but look here. Gold's high yesterday was $1,475.00, and today 1,471.88. A lower high. Silver's high yesterday was 2432c, today 2421c. Gold did close above its 20 DMA ($1,465.31) but silver closed still way below its 20 DMA (24.66). Over the past 5-6 days silver & gold have established a downtrend -- lower highs, lower lows -- and must close above 2480c and $1,484.80 to gainsay that.

Stay calm, possess your soul in patience. Gold and silver must provide us with hard proof they have reversed. That will come before too long.

On 2 May 1611 the Authorized Version (commonly called King James Version) of the Bible was first published. Like it or not, it formed the English language. It was the product of a committee of learned scholars, but unlike most committees, this one was wise enough to build only lightly on the foundation handed them by Coverdale, Tyndale, and the Geneva Bible. Newly risen to the throne, James wanted to replace the Geneva Bible with its marginal notes hostile to the divine right of kings with another version. It still took nearly 50 years for the AV to push out the Geneva. James was only following the thinking of his predecessors like Henry VIII, who was horrified at the thought of every man being able to read the Bible. Why, he said, it would be anarchy! (Or words to that effect). Well, it wasn't anarchy, but it did eventually ground the English & American revolutions for self-government. Yes, I know the English still have a monarch, but the 1689 Glorious Revolution pretty well placed parliament above the monarch, except for signing the bills. By the way, in spite of the so-called archaic language, I've heard the AV scores 85% on the readability index, higher even than later versions.

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
2-May-13 Price Change % Change
Gold, $/oz 1,467.70 21.40 1.48%
Silver, $/oz 23.79 0.49 2.08%
Gold/Silver Ratio 61.694 -0.366 -0.59%
Silver/Gold Ratio 0.0162 0.0001 0.59%
Platinum 1,497.70 32.00 2.18%
Palladium 691.40 8.55 1.25%
S&P 500 1,597.59 14.89 0.94%
Dow 14,831.58 130.63 0.89%
Dow in GOLD $s 208.90 7.50 3.72%
Dow in GOLD oz 10.11 0.36 3.72%
Dow in SILVER oz 623.44 -7.37 -1.17%
US Dollar Index 82.21 0.56 0.69%
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: 1,466.20      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,513.12 1,518.98 1,518.98
1/2 AE 0.50 750.92 775.25 1,550.51
1/4 AE 0.25 379.12 394.96 1,579.83
1/10 AE 0.10 160.44 168.61 1,686.13
Aust. 100 corona 0.98 1,428.55 1,442.55 1,471.69
British sovereign 0.24 347.21 357.21 1,517.48
French 20 franc 0.19 273.74 276.74 1,482.27
Krugerrand 1.00 1,496.99 1,511.99 1,511.99
Maple Leaf 1.00 1,476.20 1,491.20 1,491.20
1/2 Maple Leaf 0.50 843.07 769.76 1,539.51
1/4 Maple Leaf 0.25 373.88 392.21 1,568.83
1/10 Maple Leaf 0.10 155.42 159.82 1,598.16
Mexican 50 peso 1.21 1,757.04 1,773.04 1,470.55
.9999 bar 1.00 1,471.33 1,482.33 1,482.33
SPOT SILVER: 23.74      
SILVER Fine Tr.Oz. BID ASK $/oz
VG+ Morgan $B4 1905 0.77 28.50 32.00 41.83
VG+ Peace dollar 0.77 25.50 29.00 37.91
90% silver coin bags 0.72 19,369.35 19,869.35 27.79
US 40% silver 1/2s 0.30 6,634.55 7,004.55 23.74
100 oz .999 bar 100.00 2,374.00 2,449.00 24.49
10 oz .999 bar 10.00 242.40 247.40 24.74
1 oz .999 round 1.00 23.84 24.74 24.74
Am Eagle, 200 oz Min 1.00 24.99 28.24 28.24
SPOT PLATINUM: 1,497.70      
PLATINUM Fine Tr.Oz. BID ASK $/oz
Plat. Platypus 1.00 1,522.70 1,562.70 1,562.70
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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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