The Moneychanger
Daily Commentary
Tuesday, 11 June a.d. 2013 Browse the commentary archive

America must have the highest "goofs per capita" rating of any nation outside Antarctica. Americans seem actually to believe that all this spying on Americans is new. Where have they been? More than 20 years ago a policeman friend in a major city police force was telling me about surveillance devices they were getting from the yankee government that could listen to your conversation through an apartment wall 200 yards away. It would take me the better part of an hour to list all the other surveillance tricks they use that I know about, and I'm ignorant as a toad (but have fewer warts). Did anybody really believe that if government were given such such power they wouldn't use it -- on us?

Those who live by inflation will die by inflation. Stocks have been roaring & soaring on quantitative easing, a.k.a., printing money, from central banks around the globe, but yesterday the Japanese equivalent of the Fed's Open Market Committee met and didn't do anything, specifically, nothing about the rising interest rate on Japanese government bonds. Whoo! Investors thought, No more inflation, no more rising stock market -- I'd better sell my stocks. Japanese Nikkei stock index went poured over the edge, falling 1.45%. That set off a cascading waterfall of stocks that followed the rising sun around the earth-ball. Hong Kong fell 1.2%, European markets fell 0.9 to 1.4%, and investors everywhere reached for their wastebaskets for a nice, comforting puke.

In the US, the Dow Jones Industrial Average splashed down the rocks 116.57 (0.76%) to 15,122.02. S&P500 poured out 16.68 (1.02%) to end at 1,626.13. Today brings both indices back near or slap on their bottom trading channel line of support, and near their 50 day moving averages. S&P500 might fall to 1,540, Dow to 14,500. Let me make clear that I don't believe we have yet seen the ultimate peak for stocks. That should come later this year. Most important for y'all to remember is that stocks remain in a primary downtrend (bear market) & this is a bear market rally only. Worse yet, it's the peak of a 300 year cycle. Think John Law, Mississippi Bubble, & 1720.

Dow in gold slid today to touch its 20 DMA & lost 0.1% to 10.982 oz (G$227.02 gold dollars). Dow in Silver rose 0.5% (3.48 oz) to 698.64 oz. Gravity continues to make its influence felt.

Y'all have got to admit this "they-will-inflate/they-won't- inflate" daisy the central bankers have the public pulling is pretty clever. They are pushing markets around without any work at all. Fact is, they have climbed on an inflation tiger, and now they can't climb off without taking a mauling, chewing, & clawing.

US dollar index fell 0.77% or 59.7 basis points to cling by its fingernails to a ledge just above 81.00, namely, 81.092. Dollar index has now reached the point of no return. Either it must hold at 81.00 & turn up, or it will sink much, much further. This 81.07 level is also the 200 DMA, and this makes the third time the dollar index has tapped on it. Odds are right strong the dollar will fall through.

Yen was the chief beneficiary of the Bank of Japan's inaction. It rose 2.9% to 104.15 cents/Y100. It reversed a previous key reversal, a very rare event & more proof that nobody should every trade currencies because there's just no telling what governments or central banks might do.

The euro picked 0.42% out of the dollar's pocket & closed at $1.3313. 'Pears set to strike $1.3500.

Silver & gold remain locked in a short term downtrend. Silver lost 27.6 cents (1.26%) today to close at 2164.5c. Gold lost $9.20 (0.66%) to $1,377.

Silver & gold are following the same pattern with this little short breakout above the downtrend (from April) line that they followed on a larger scale with the 2012 breakout above the major downtrend line. They broke out, then instead of following higher through slid down the downtrend line.

I am mildly curious because they didn't both fall immediately further after Friday's drop. That suggests a small number of sellers. I want to say, "Expect lower prices," but then I look at the Bollinger Bands & see both metals at the bottom of the range. That comes with no guarantee they won't fall further, of course, but does say that they're oversold for the range they've been trading in lately.

Y'all be patient, be patient. Silver & gold remain in a bull market (primary uptrend) & should put in their last low for this move in June. Don't let the central banks sucker you about their intentions: they WILL inflate, and they will inflate MORE.

From time to time people ask me what is the prospect of deflation rather than inflation. Usually they are prompted by one of Harry Dent's email offers for his newsletter. Now I am only a natural born fool from Tennessee and no economist, and Harry Dent has probably forgotten more than I will ever know, but on this point, I respectfully believe he errs.

What has been the Fed's response to financial crisis so far, and that of every other central bank? Print more money.

Bernanke fears deflation more than Harry Dent does. Read his November 2002 speech. All central banks fear deflation, like Superman fears Kryptonite & roaches fear Raid. That's why they turn on the inflation floodgates.

"Inflation" is NOT rising prices, but an increase in the money supply that usually causes prices to rise. "Deflation" is not falling prices, but a reduction in the money supply which usually causes prices to fall. Inflation and deflation are a CAUSE, rising or falling prices the EFFECT.

WHERE is the deflation?

Whoa, don't confound a collapse of debt with deflation. Even though all money today is borrowed into existence, and even though debt may collapse when many borrowers cannot pay, a collapse of debt is not deflation, because the money that debt spawned at its birth remains alive & circulating.

But I could be wrong.

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
11-Jun-13 Price Change % Change
Gold, $/oz 1,377.00 -9.20 -0.66%
Silver, $/oz 21.65 -0.28 -1.26%
Gold/Silver Ratio 63.617 0.381 0.60%
Silver/Gold Ratio 0.0157 -0.0001 -0.60%
Platinum 1,479.00 -26.70 -1.77%
Palladium 750.75 -16.90 -2.20%
S&P 500 1,626.13 -16.68 -1.02%
Dow 15,122.02 -116.57 -0.76%
Dow in GOLD $s 227.02 -0.23 -0.10%
Dow in GOLD oz 10.98 -0.01 -0.10%
Dow in SILVER oz 698.64 3.48 0.50%
US Dollar Index 81.09 -0.60 -0.73%
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: 1,377.80      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,419.13 1,423.96 1,423.96
1/2 AE 0.50 705.61 728.51 1,457.02
1/4 AE 0.25 356.25 371.14 1,484.58
1/10 AE 0.10 144.56 151.21 1,512.14
Aust. 100 corona 0.98 1,341.07 1,355.07 1,382.44
British sovereign 0.24 326.28 336.28 1,428.55
French 20 franc 0.19 257.24 260.24 1,393.87
Krugerrand 1.00 1,395.71 1,408.71 1,408.71
Maple Leaf 1.00 1,392.80 1,407.80 1,407.80
1/2 Maple Leaf 0.50 792.24 723.35 1,446.69
1/4 Maple Leaf 0.25 351.34 368.56 1,474.25
1/10 Maple Leaf 0.10 146.05 150.18 1,501.80
Mexican 50 peso 1.21 1,652.77 1,667.21 1,382.78
.9999 bar 1.00 1,382.62 1,393.62 1,393.62
SPOT SILVER: 21.59      
SILVER Fine Tr.Oz. BID ASK $/oz
VG+ Morgan $B4 1905 0.77 29.00 32.00 41.83
VG+ Peace dollar 0.77 26.00 29.00 37.91
90% silver coin bags 0.72 16,398.53 17,038.53 23.83
US 40% silver 1/2s 0.30 5,998.83 6,368.83 21.59
100 oz .999 bar 100.00 2,158.50 2,233.50 22.34
10 oz .999 bar 10.00 220.85 221.85 22.19
1 oz .999 round 1.00 21.69 22.44 22.44
Am Eagle, 200 oz Min 1.00 22.84 24.24 24.24
SPOT PLATINUM: 1,479.00      
Plat. Platypus 1.00 1,504.00 1,544.00 1,544.00
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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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