The Moneychanger
Daily Commentary
Monday, 17 June a.d. 2013 Browse the commentary archive

Here's a little article I wrote some time ago, but it's pertinent to the spy scandal today: "The Paranoia Industry,"

It's not precisely clear what stocks have in mind. Friday the Dow lost 105.90, today gained 109.67. Either they are burning up buying power on the way to lower prices, or they are turning up again.

Today the Dow rose 109.67 (0.73%) to 15,179.85. S&P 500 rose a little more, 0.76% (12.31) to 1,639.04. The S&P500 stands a bit above its downtrend line & today pierced but closed not above the 20 day moving average (1,640.74) [Someone asked me why I watch the 20 DMA. Because it's the first tripwire of a turn.] Industrials did the same. Remember both are bouncing off touching their 50 DMA, which might have completed their little correction.

Dow in Gold & Dow in Silver moved sideways in the same vexing range. Dow in Gold ended at 10.978 oz (G$226.93), up 1.06%. Dow in silver climbed 11.22 oz to 697.7 oz, up 1.64%. Just wait. It's like an anvil you throw up in the air. It rises & rises, then slows down, seems to hesitate, & drops right back on your face -- unless you're quick enough to jump out from under it.

The Federal Reserve Open Market Committee meets this week and makes an announcement on Wednesday. Now think -- does Bodacious Ben REALLY want to announce they are curtailing inflation & so hammer a giant wooden stake in the stock market's rising heart? Or would he rather mumble Greenspanese that will at least sound like he will print more money, while saving face lest he be accused of fomenting hyperinflation. Y'all tell me what he'll do. I'll tell y'all that speculators are buying Portuguese & Irish bonds, which are only a tad better than Paraguayan defense bonds, anticipating the Fed will announce more inflation, 'cause more dollar inflation will make even the euro and Portuguese & Irish bonds look good.

I must have been holding that US dollar index chart the wrong way. I held it upside down today & noticed an evident and lethal broadening top. Owch. Dollar index closed down ANOTHER 16.6 basis points (0.21%) today to 80.617, it's sixth lower closing in a row. Any close lower than 80.50 leaves the dollar index below the broadening top's bottom boundary & pointing to 79.5 very quickly.

On the other hand, momentum in the yen & euro seems to be slowing. Both have formed rising wedges in the last two weeks. "Rising wedge" is usually preceded by "bearish" because it regularly resolves by breaking out downward. Yen fell 0.54% to 105.84 cents/Y100 while the Euro rose 0.145 to $1.3365.

Before we talk about gold and silver, let's look at the gold/silver ratio. Chart is here, You'll see it has formed a rising wedge -- "bearish," because it usually breaks down. And a FALLING gold/silver ratio means RISING silver & gold prices. More, the ratio is working off an extremely overbought condition earlier this month.

That's just one witness that is making me very nervous about expecting lower silver & gold prices. Sentiment indicators and Commitments of traders are at historic lows, the levels from which rallies begin, not avalanches. That divergence might persist a while, but not forever, and not long.

Silver & gold themselves are shuffling down the hall with the valium droop, meandering back & forth in the same small range. Gold gained $9.70 Friday, then lost $4.50 today to end at $1,382.80. Silver added 37.1 cents on Friday, lost 19.6 today, & wound up at 2175.7c. Today silver had a 22.3 cent range. Yo! Somebody put a mirror under silver's nostrils to see if it fogs.

Wait a minute! What's that on the silver chart? I believe that is a "bullish" falling wedge. If 'tis, twould forespeak a silver rally.

Markets love to do the opposite of what everybody expects. With most of the known universe (& most of their relatives) negative now on silver & gold, at the season Nobody expects silver & gold to rally, what would catch more people by surprise than a rally? Whether that happens or not, I can't see silver or gold falling much further. In fact, until the price gainsays it, I will continue to assume that the price lows came back in April.

Today was not a great day in history. On 17 June 1789 the French Third Estate declared itself a national assembly and began working on a constitution which would eventually drain the blood of France and kill millions by war and internal Terror. On 17 June 1856 the Republican Party opened its first convention in Philadelphia. They loosed an ideological war on the South looting, raping, robbing, killing, & burning, & I can't see how they've changed much since. The Democratic Party, which in 1856 differed greatly, today is indistinguishable from the Republicans. Both are unanimous in their hatred of individual liberty and local self-government. Finally, on 17 June 1864 President Jefferson Davis made one of his biggest mistakes of the war, replacing Genl. Joe Johnston with John B Hood, who would eventually destroy the noble Army of Tennessee that Johnston has used so successfully. He was a delayer, but that was his job.

On a lighter note, on 17 June 1972 five men were arrested after the second burglary of the Democratic National Headquarters at the Watergate.

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
17-Jun-13 Price Change % Change
Gold, $/oz 1,382.80 -4.50 -0.32%
Silver, $/oz 21.76 -0.20 -0.89%
Gold/Silver Ratio 63.557 0.362 0.57%
Silver/Gold Ratio 0.0157 -0.0001 -0.57%
Platinum 1,434.10 -12.40 -0.86%
Palladium 716.30 -13.50 -1.85%
S&P 500 1,639.04 12.31 0.76%
Dow 15,179.85 109.67 0.73%
Dow in GOLD $s 226.93 2.37 1.06%
Dow in GOLD oz 10.98 0.11 1.06%
Dow in SILVER oz 697.70 11.22 1.64%
US Dollar Index 80.62 -0.17 -0.21%
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SPOT GOLD: 1,385.60      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,425.78 1,432.02 1,432.02
1/2 AE 0.50 709.61 732.64 1,465.27
1/4 AE 0.25 358.27 373.25 1,492.98
1/10 AE 0.10 145.38 152.07 1,520.70
Aust. 100 corona 0.98 1,348.66 1,362.66 1,390.18
British sovereign 0.24 328.13 338.13 1,436.39
French 20 franc 0.19 258.69 261.69 1,401.67
Krugerrand 1.00 1,402.23 1,415.23 1,415.23
Maple Leaf 1.00 1,400.60 1,415.60 1,415.60
1/2 Maple Leaf 0.50 796.72 727.44 1,454.88
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Mexican 50 peso 1.21 1,662.13 1,676.62 1,390.58
.9999 bar 1.00 1,390.45 1,401.45 1,401.45
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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
90% silver coin bags 0.72 16,659.50 17,017.00 23.80
US 40% silver 1/2s 0.30 6,062.25 6,432.25 21.80
100 oz .999 bar 100.00 2,180.00 2,255.00 22.55
10 oz .999 bar 10.00 223.00 224.00 22.40
1 oz .999 round 1.00 21.90 22.65 22.65
Am Eagle, 200 oz Min 1.00 23.05 24.45 24.45
SPOT PLATINUM: 1,434.10      
Plat. Platypus 1.00 1,459.10 1,499.10 1,499.10
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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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