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Daily Commentary
Tuesday, 18 June a.d. 2013 Browse the commentary archive

Stocks answered yesterday's question by rising strongly today. Evidently most of the market shares my conviction that Bodacious Ben isn't about to pound a wooden stake into the stock market's heart by announcing Wednesday any slowing of inflation (a.k.a., bond buying).

Dow Industrials levitated 138.38 (0.91%) to close 15,318.23. S&P 500 wasn't quite as perky, up only 0.78% (12.77) to 1,651.81.

By crossing decisively above the downtrend line today, and closing above 20 day moving averages, both indices are set up to mount higher. However, should Bernanke not peep & mutter exactly what the market wants to hear, everything might change. That's the problem with making a market dependent on newly created money: very quickly everybody figures out what's driving it, and if you stop inflating, you stop the market. Riding a tiger is never easy.

Gold's faint today combined with stocks spurt took the Dow in Gold higher, up 2.11% to 11.209 oz. (G$231.71 gold dollars). Continues to move in a frustrating, drawn out broadening top. Only a close above 11.353 oz. followed by higher prices would gainsay that.

Odd thing about today's trading was that silver & gold disagreed, that is, silver refused tumble with gold. Dow in silver closed 706.69 oz., up 1.29%, up 9 oz. Here, too, there's a broadening top, vexing us waiting for its resolution.

US dollar index did today what you'd expect on the day before a potentially direction-changing FOMC announcement: it went flat. Oh, it gained 0.6 basis point to 80.639. Touching a support line, the bottom boundary of a broadening top, it has held just above 80.50. But nobody wants to bet on a rally or plunge on the day before the Fed messes with markets. Must hold 80.50 or fall to 79.25 and lower.

Yen and euro couldn't agree today, either. Yen fell down out of a nearly two week rising wedge, closing down 0.92% at 104.78 cents per Y100 -- not yet a decisive break of the uptrend. Euro rose 0.23% to $1.3396 and remains within the nose cone of a like rising wedge. Odds of that breaking out to the upside seem mighty slim. Expect rather a breakdown on any news from the Fed.

Clearly silver & gold are waiting on the Fed announcement, too. Today's trading wrung out both. Oddly, they didn't quite agree. Silver dropped 8.1 cents (0.37%) to 2167.6 cents although gold buckled $16.20 (1.17%) to $1,366.60.

Until 11:15 a.m. New York time gold traded above $1,373, but then gapped down to $1,366.30 and closed on that low. Today takes gold back near the bottom line of an even-sided triangle it has sketched out since April's $1,321.50 low. That line stands now about $1,340.

Gold's performance tomorrow will decide much. If it can recover and rally, then maybe it can break out to that triangle's upside. That needs a close over $1,380. On the other hand, a close below $1,340 will take it lower, to $1,321 or further. It's sitting now at the bottom of its recent trading range, as defined by Bollinger Bands.

Silver's day ranged between 2188.8 and 2162c -- 26.2 cents, for heaven's sake. Why didn't they just take a day off today? Did silver fall less than gold today because it's stronger, or simply sluggish?

Here are the boundaries of the falling wedge on silver's chart (most of the time falling wedges break upside, but they also break out downside just often enough to bankrupt anyone who depends on them breaking out upside every time): Above, 2225c; below, 2100c.

This deadness frustrates me as much as it does y'all, but we just have to wait it out. Try comforting yourself with knowing that silver and gold usually make significant lows in June, and move higher the rest of the year. Remember also that their refusal to drop sharply lower so far indicates a lack of investor interest, that is, the sellers have gone to richer pastures. Commitments of traders reports reflect that. And silver lies moldering at the bottom of its recent trading range.

Meanwhile we wait, seething more than soothing.

Finally, there's a cloud on Bodacious Ben's horizon, no bigger than a man's hand, but a very black cloud: interest rates have turned up. Keystone of Bernanke's capitalism-killing strategy is to keep interest rates at zero. They bottomed a year ago May, and have steadily but gently declined since then. In May this year, they broke out upward. Recall, too, that when interest rates fall, so does the dollar, and so do bond prices.

What meaneth this meditation? Only that if Bernanke STOPS or even slows his bond purchases ("inflation"), he has a prickly tumbling dollar problem. Whoops. Did I forget to mention that as interest rates rise, the US government's financing rate rises, and it has to borrow more & its deficit grows? I am so forgetful, but I bet Ben ain't. I bet Ben sleeps nights open-eyed, staring at the dark ceiling and sweating 50 caliber MiniƩ balls.

On 18 June 1815 in present day Belgium took place the battle of Waterloo between the French emperor Napoleon I and the Seventh Coalition, consisting of UK, Netherlands, Hannoverian, Nassau, Brunswick, and Prussian forces.

Napoleon had escaped his exile at Elba and returned to France in March 1815. The Coalition was gathering on his northern border to invade, and his only hope was to beat them before they could concentrate. He met them at the Battle of Waterloo, which the British commander, the Duke of Wellington, called "the nearest-run thing you ever saw in your life."

Wellington was waiting on the best ground, but Napoleon fought a tough battle all day long. Late in the day, and in the nick of time, Prussian General Gebhart Leberecht ("Live-right") Bluecher caught the French from the east. It was all over for Napoleon. The Coalition restored the Bourbon claimant to the French throne, Louis XVIII, and exiled Napoleon to remote St. Helena Island with a strong and permanent guard. He died in 1821. Waterloo had been his last chance to hold onto power, & he lost.

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
18-Jun-13 Price Change % Change
Gold, $/oz 1,366.60 -16.20 -1.17%
Silver, $/oz 21.68 -0.08 -0.37%
Gold/Silver Ratio 63.047 -0.510 -0.80%
Silver/Gold Ratio 0.0159 0.0001 0.81%
Platinum 1,439.40 5.30 0.37%
Palladium 706.80 -9.50 -1.33%
S&P 500 1,651.81 12.77 0.78%
Dow 15,318.23 138.38 0.91%
Dow in GOLD $s 231.71 4.78 2.11%
Dow in GOLD oz 11.21 0.23 2.11%
Dow in SILVER oz 706.69 8.99 1.29%
US Dollar Index 80.64 0.01 0.01%
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SPOT GOLD: 1,367.80      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,407.47 1,413.62 1,413.62
1/2 AE 0.50 700.49 723.22 1,446.45
1/4 AE 0.25 353.66 368.45 1,473.80
1/10 AE 0.10 143.51 150.12 1,501.16
Aust. 100 corona 0.98 1,331.33 1,345.33 1,372.51
British sovereign 0.24 323.91 333.91 1,418.49
French 20 franc 0.19 255.37 258.37 1,383.87
Krugerrand 1.00 1,384.21 1,397.21 1,397.21
Maple Leaf 1.00 1,382.80 1,397.80 1,397.80
1/2 Maple Leaf 0.50 786.49 718.10 1,436.19
1/4 Maple Leaf 0.25 348.79 365.89 1,463.55
1/10 Maple Leaf 0.10 144.99 149.09 1,490.90
Mexican 50 peso 1.21 1,640.77 1,655.16 1,372.78
.9999 bar 1.00 1,372.59 1,383.59 1,383.59
SPOT SILVER: 21.67      
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 16,566.55 16,924.05 23.67
US 40% silver 1/2s 0.30 6,023.90 6,393.90 21.67
100 oz .999 bar 100.00 2,167.00 2,242.00 22.42
10 oz .999 bar 10.00 221.70 222.70 22.27
1 oz .999 round 1.00 21.77 22.52 22.52
Am Eagle, 200 oz Min 1.00 22.92 24.32 24.32
SPOT PLATINUM: 1,439.40      
Plat. Platypus 1.00 1,464.40 1,504.40 1,504.40
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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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