The Moneychanger
Daily Commentary
Wednesday, 22 May a.d. 2013 Browse the commentary archive

Things have gotten so irrational, so senseless, that I feel like I'm trapped in a Salvador Dali painting called "Central Banks" where currencies are melting over tree-limbs and table edges. Nothing adds up.

Today, if you can believe the news reports, a questionable proposition to begin with, as Ben The Bodacious spoke to congress, all the markets swayed first one way, then the other, according as his words indicated he would create more money or less. Lo, friends! This scoots beyond Preposterous, through Absurd, & all the way to Harebrained, yet people whose drivers licenses claim they are "adults" are buying all this.

Buying what? First, the asinine & numberless-times disproved concept that a nation can inflate its way to prosperity (disproved lately by Zimbabwe). Second, that stocks will become more valuable (intrinsically) if Bernanke prints more money. Third, that once he started printing, he could ever withdraw that money or stop, let alone stop quickly, and thus drive down the prices of silver & gold. There are words for this: wacky, daft, deranged, dotty, idiotic, nuts, silly, stupid, and irrational. And loony. I left out loony.

I think the media are complicit with this. Look at the pictures they publish of Bernanke, always looking like the wise & knowing sphinx. You can't kid me -- somewhere they have pictures of him digging in his nose for the Big One, but they never publish that.

Now, to today's markets:

On balance stocks took Bernanke's on-again/off-again testimony as an unfriendly gesture. Dow peeled off 80.41 points ( -0.52%) from yesterday after reaching a new all-time intraday high. Ditto for the S&P500, which shucked 13.81 (0.83%) to close at 1,655.35.

Nor did I overlook that both posted today the first half of a key reversal (trading into new high ground with a lower close). If they close lower tomorrow, stocks will have nailed their coffin lid shut. If.

What about the Dow measured by metals? The Dow in Gold was basically unchanged today, actually a little lower if you measure it Dow close to gold close, 11.19 oz today versus 11.17 yesterday.

Dow in Silver chipped off 4.07 oz to close 681.59 oz. It will drop down through the uptrend line about 675 oz.

Currency markets took Bernanke's Blathering to mean a higher dollar. Let's see, "I'm going to continue inflating the currency" translates to a higher dollar price? Loony. Dollar rose 55.5 basis points (0.71%) climbing back above the 84 mark to 84.319. Uptrend intact. Japanese yen backed off 0.45% to 97.12 cents/Y100. Euro lost 0.43% to $1.2853. Nonetheless, an idea worth pondering is a lower dollar.

Gold today lost $10.20 to end at $1,367.60. Silver gained 1.6 cents to end at 2245.8c.

I think analysts are really unimaginative & thickheaded to blame every market move on government manipulation, but durned if today didn't smell like the Fulton Fish Market. Or maybe it was simply the Magic of the Ben. I checked gold early this morning, about 6:30 my time, and it was up over $1,400. About 10:30 it gapped down from $1,385 to $1,381, traded sideways until 2:00 p.m., then gapped from $1,370 to $1,365. Low was $1,357.36. What left my mouth gaping? That jump up this morning was consistent with Monday's reversal. More, Bernanke actually said that he was going to CONTINUE (as in "keep on") inflating the currency.

Silver played out the same steps. Climbed to 2286c early in the day, then began falling off about 11:30, then sagged badly after 2:00 to a low at 2238.7. It ended the day up a nothing 1.6 cents.

Well, step back a little and look at a longer term chart. Gold and silver remain above their Monday lows, but we still ought to beware waxing too cocksure about that double bottom. Gold needs to close above $1,550 [sic] and silver above 2700 cents, the points where they broke down in April, to confirm a double bottom. Problem is, if you wait for that confirmation to begin buying, you will have completely missed the lows.

I interviewed James Turk of GoldMoney today. He said something very interesting: "I expect gold to finish the year higher, as it did in 2008." I've known him for over 25 years, and, of course, he hasn't always gotten the market right. But he has a clear vision of the future, and if delayed sometimes, it is still sure.

I don't much care whether the government is manipulating prices lower to punish & frighten silver & gold investors, or it's a normal market correction. Makes no difference, because both gold & silver are moving much, much higher. And not even the goofs who run the central banks can stop that.,

On 22 May 1856 South Carolina Representative Preston Brooks caned Massachusetts Senator Charles Sumner on the floor of the US Senate. This was in retaliation for a speech in which Sumner attacked Brooks' uncle, Senator Andrew Butler. Brooks resigned his seat, but the people of South Carolina re-elected him. Brooks had thought about challenging Sumner to a duel, but decided that since Sumner was no gentleman, another weapon was required more suitable to the offender.

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-May-13 Price Change % Change
Gold, $/oz 1,367.60 -10.20 -0.74%
Silver, $/oz 22.46 0.02 0.07%
Gold/Silver Ratio 60.896 -0.498 -0.81%
Silver/Gold Ratio 0.0164 0.0001 0.82%
Platinum 1,469.20 10.80 0.74%
Palladium 745.80 4.05 0.55%
S&P 500 1,655.35 -13.81 -0.83%
Dow 15,307.17 -80.41 -0.52%
Dow in GOLD $s 231.37 0.51 0.22%
Dow in GOLD oz 11.19 0.02 0.22%
Dow in SILVER oz 681.59 -4.07 -0.59%
US Dollar Index 84.32 0.55 0.66%
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GOLD Fine Tr.Oz. BID ASK $/oz
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British sovereign 0.24 321.05 331.05 1,406.32
French 20 franc 0.19 253.11 256.11 1,371.77
Krugerrand 1.00 1,376.04 1,389.04 1,389.04
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SILVER Fine Tr.Oz. BID ASK $/oz
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VG+ Peace dollar 0.77 26.00 29.00 37.91
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US 40% silver 1/2s 0.30 6,187.63 6,557.63 22.23
100 oz .999 bar 100.00 2,222.50 2,297.50 22.98
10 oz .999 bar 10.00 227.25 228.25 22.83
1 oz .999 round 1.00 22.33 23.23 23.23
Am Eagle, 200 oz Min 1.00 23.48 25.23 25.23
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Plat. Platypus 1.00 1,494.20 1,534.20 1,534.20
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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.
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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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