The Moneychanger
Daily Commentary
Thursday, 9 May a.d. 2013 Browse the commentary archive

Here's a quotation from Ian McAvity who writes "Deliberations" & has forgotten more about technical analysis than most people will ever know: "[T]he elites running the western world still ignore the elephant in the room, excessive debt overhang & creation of new debt to kick the can down the road. That's the deflationary wall their reflation efforts are running against. The Fed money printing is refueling financial markets but not Jane & Joe Sixpack, US consumers who spend in the real world. . . In my view it's a Bernanke-driven financial bubble largely aimed at re-loading the banking system, rather than stimulating the job growth & consumer consumption objectives they profess." ($225/18 issues from Box 182, Adelaide St. Stn., Toronto, Ont M5V 2J1)

Meanwhile the yen & euro lost the election for homecoming queen today. The US dollar broke 100c/Y100 and fell 1.66% to Y99.36. That sent shorts & hedgers scurrying to cover. Can you imagine how many stop orders were sitting around 100?

Meanwhile in Euroland, where all the economy is pretty and every country above average, except the ones who are not, a Spanish government debt auction brought less than expected (=interest rate rose) which seemed to remind some of the mindless that Spain, as well as Portugal, Italy, Ireland, Greece, & Cyprus still might have a few sovereign debt problems. Or, to speak with much greater exactitude, the banks holding their bad paper have a problem, for, LO! An economy doth not live by bread alone, but must have banks! That's graven in stone someplace -- ain't it?

Euro sank 0.9% back to support at $1.3038. Closed below its 20 DMA ($1.3079) & hit its 50 DMA ($1.3012) AND closed below its trendline. Honey, this currency ain't even gonna make the homecoming court! Face it: the euro is no longer cool.

US dollar index rose 1.06% or 82.5 basis points, a meaty gain, to close at 82.74. By my reading that cracks the shell on that rounding top the dollar had formed and breaks the dollar out upside (also above its 50 & 20 day moving averages). Now there ruleth a false orthodoxy that believeth a falling dollar benefiteth stocks & the economy. This, y'all will remember, is why the Zimbabwean economy is the envy of the world. Thus a rising dollar today may have been one of those forces weighing on stocks.

On the other hand, stocks have plenty weighing on them without a rising dollar. This "pokey-pokey" trying to punch to a new high typifies tops. Also, the Dow made the first half of a key reversal today (break into new high ground with a close lower than yesterday's). Owch. So did the S&P500. I long ago gave up trying to call a top in a mania/bubble, but today might be one. Then again, might not.

Dow yielded 22.5 (0.15%) to close at 15,082.62. S&P500 misplaced 6.02 (0.37%) to 1,626.67. Both have formed rising wedges, both could fall, but a mania in a bubble driven by inflation can't be forecast.

Dow in gold fidgeted up a bit, up 0.026 oz to 10.269 oz (G$212.27 gold dollars). Needs to drop further below its 20 DMA (10.28 oz) to keep that downtrend running.

Dow in silver also rose, 2.25 oz (0.36%) to 635.06 oz. Still trending down.

Gold answered yesterday's questions by stumbling again today, $5.10 lower at $1,468.80. Silver turned phlegmatic and scraped off a mere 1.3 cents to 2387.9c.

First, gold day before yesterday broke through the downtrend line that had supported its rise from the $1,321.50 low on 15 April. Next, gold follows through lower today. However, it remains above its 20 DMA ($1,443.59). It has tee-tiny support at $1,440, but more at $1,425, & lots at $1,400. At $1,375 monkeys in the trees will be buying.

What's eating at me is this: It is logical, if you watch markets, to expect gold to test that 15 April low, probably with a higher low around $1,375 - $1,400. Sounds simple, don't it? Yep, so everybody in the world is probably waiting for the same event, leaving just one hitch: markets seldom do what everybody expects. Besides, when everybody expects it, they tend to act to prevent it -- or might. Thus we do not all live on the Riviera, eating snails & sipping single malt Scotch.

So how would gold MOST surprise markets? By running to $1,500, fiddling there, then blasting through $1,525 & never slowing down. Now I don't reckon that is terribly likely, but it might happen. However, it would need a new crisis suddenly to emerge to propel it there. Shucks, that ain't no problem! Why, the world financial system has more skeleton crises in its closets than a coon hound has ticks & fleas!

Meanwhile, we keep waiting for a test of the low, along with everybody else.

Silver, normally as volatile as nitroglycerin, has gone into a coma and all we hear from it is snoring. It has built an uptrend, and didn't fall out of that uptrend today. More, it has built an even-sided triangle it might break out of either way, up or down. But it can't seem to push past that 20 DMA (2395c today), a sure enough black mark.

Add another ingredient to the mystery: the Gold/Silver Ratio. If silver & gold intended to fall further, it seems they would telegraph that by a rising ratio, but it riseth not. In fact, it appears to have topped out with a spike. See http://bit.ly/11nRE9B

Now pour in some low sentiment numbers that loudly whisper in a contrarian voice that silver & gold have been way oversold.

None of that bakes a cake for grievously lower prices or another plunge, so I just keep watching to see how silver & gold will resolve, & gathering up cash so I'll have plenty when it comes time to buy.

On 9 May 1864 Union General John Sedgwick was shot & killed by a Confederate sharpshooter during fighting at Spotsylvania. His last words were, "They couldn't hit an elephant at this dist---"

On 9 May 1457 B.C. occurred the Battle of Megiddo between the Egyptian Pharaoh Thutmose III & a coalition of Canaanites under the King of Kadesh. It's the first battle recorded in relatively reliable detail. Well, reliable, but mighty churched-up, because it was recorded by Thutmose' lackey. Stripping out all the flattery, he led his army through an unguarded pass & was able to surprise the Canaanites, but at the risk of piecemeal destruction. His gamble paid off with hegemony over Palestine for a couple of centuries. Thutmose required the defeated kings to send their sons to live at his court, so when they grew up they returned to rule their lands as converted Egyptians. Sort of like sending your kids to college.

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
9-May-13 Price Change % Change
Gold, $/oz 1,468.80 -5.90 -0.40%
Silver, $/oz 23.88 -0.01 -0.05%
Gold/Silver Ratio 61.510 -0.213 -0.35%
Silver/Gold Ratio 0.0163 0.0001 0.35%
Platinum 1,516.50 -11.10 -0.73%
Palladium 713.65 16.50 2.37%
S&P 500 1,626.67 -6.02 -0.37%
Dow 15,082.62 -22.50 -0.15%
Dow in GOLD $s 212.27 0.53 0.25%
Dow in GOLD oz 10.27 0.03 0.25%
Dow in SILVER oz 631.63 -0.60 -0.09%
US Dollar Index 82.74 -0.83 -0.99%
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SPOT GOLD: 1,464.50      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,506.97 1,517.22 1,517.22
1/2 AE 0.50 750.04 774.35 1,548.71
1/4 AE 0.25 378.68 394.50 1,578.00
1/10 AE 0.10 160.25 168.42 1,684.18
Aust. 100 corona 0.98 1,428.33 1,442.33 1,471.46
British sovereign 0.24 346.81 356.81 1,515.77
French 20 franc 0.19 273.42 276.42 1,480.57
Krugerrand 1.00 1,495.25 1,510.25 1,510.25
Maple Leaf 1.00 1,474.50 1,489.50 1,489.50
1/2 Maple Leaf 0.50 842.09 768.86 1,537.73
1/4 Maple Leaf 0.25 373.45 391.75 1,567.02
1/10 Maple Leaf 0.10 155.24 159.63 1,596.31
Mexican 50 peso 1.21 1,756.77 1,772.77 1,470.33
.9999 bar 1.00 1,469.63 1,480.63 1,480.63
SPOT SILVER: 23.83      
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 18,858.13 19,358.13 27.07
US 40% silver 1/2s 0.30 6,659.63 7,029.63 23.83
100 oz .999 bar 100.00 2,382.50 2,467.50 24.68
10 oz .999 bar 10.00 243.25 248.25 24.83
1 oz .999 round 1.00 23.93 25.03 25.03
Am Eagle, 200 oz Min 1.00 25.08 28.33 28.33
SPOT PLATINUM: 1,516.50      
PLATINUM Fine Tr.Oz. BID ASK $/oz
Plat. Platypus 1.00 1,541.50 1,581.50 1,581.50
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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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