The Moneychanger
Daily Commentary
Wednesday, 26 June a.d. 2013 Browse the commentary archive

A friend pointed out to me to day that at the end of the calendar quarter, fund managers buy what has gone up and sell what's gone down, making themselves appear clairvoyant. Might be that they are unloading positions. Sounds more rational than most of the stuff I've heard.

Silver & gold fell overnight, beginning with big drops in Asia. Nice Government Men must be staying up late nights.

Here's another example of how irrational markets are behaving, & how irrationally the media interpret their irrationality. Stocks rose today -- allegedly -- on a downward revision of US GDP numbers from 2.4% to 1.8% Speaking of rationality, let's just muse a moment on how reliable ANY government numbers are. How could they miss GDP by 33%? "Oh, shucks! We left out New York, Montana, & Texas! Y'all go back & refigure that GDP, right now! Shame on you!"

How rational is it to base anything on numbers like that, when you know also the government regularly LIES?

Anyhow, when this news got to the stock market, according to media reports, stock investors concluded that lower economic performance means more Fed inflation (a.k.a., "easing"), so stocks jumped up. Why? Because they believe stocks' performance is tied to continued Fed easing. Perversely, that's true, since stocks are not reacting so much to economic fundamentals as they are to the rising tide of inflation from the Fed. Yet it's also NOT true, sine the inflation will only make the economic problems worse over the long run.

That brings us to the NEXT irrationality. If inflation is good for stocks, why isn't it good for silver & gold? In this case I feel qualified to say that ONLY inflation drives the prices of silver & gold. So how is it good for stocks but bad for silver & gold? Nuts. Insane.

But while they might be suppressed for a while by investor ignorance, manias, or government manipulations, eventually the fundamentals will wreak their vengeance. Watch for it.

Dow added 149.83 (1.02% today to 14,910.14. S&P500 augmented 15.23 (0.96%) to 1,603.26. This brings both indices back to the top of their downtrend channel. Significantly higher price would say the downtrend has ended, but they are more likely to bounce off that top trend line downward.

Dow in gold & Dow in silver both hit new highs today. Dow in gold closed 12.126 oz, up 0.547 oz or 4.73%. Dow in silver rose 46.25 oz (6.12%) to 802.18 oz.

US dollar index rose 28 basis points (0.36%) today to 82.955. Yen remains fairly flat against the dollar, closing up 0.05% at 102.27. Euro, on the other hand, closed below its 200 DMA today and is free falling. Lost 0.54% today & closed at $1.3012.

If gold and silver were both sleeping yesterday, they fell out of bed overnight. Gold tumbled $45.20 (3.55%) to $1,229.60 & silver lost 93.9 cents (4.81%) to 1858.7c.

Tumble took place before midnight this morning. Both silver & gold were basically flat all day. What I saw in gold was a $10 range, in silver 25 cents.

Silver has already lost more from its peak (68.2%) than it lost in 2008 (57.4%) Next support lies about 1750c. So has gold, 35% versus 30%. Following the seasonal pattern, if silver & gold don't stop here at the end of June or early July, it will be fall before they bottom.

People keep asking me where this will stop. I don't know where, I don't know when, I only know it will, unless the law of cause & effect has been repealed. Meantime, I sit &try to wax philosophical while bleeding. This looks more and more like 1974-1976, when gold lost 52%, then came back in the next four years to rise 8 times, and silver over 12 times.

History doesn't repeat, but it sure echoes.

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
26-Jun-13 Price Change % Change
Gold, $/oz 1,229.60 -45.20 -3.55%
Silver, $/oz 18.59 -0.94 -4.81%
Gold/Silver Ratio 66.154 0.866 1.33%
Silver/Gold Ratio 0.0151 -0.0002 -1.31%
Platinum 1,303.70 21.40 1.67%
Palladium 631.70 11.05 1.78%
S&P 500 1,603.26 15.23 0.96%
Dow 14,910.14 149.83 1.02%
Dow in GOLD $s 250.67 11.32 4.73%
Dow in GOLD oz 12.13 0.55 4.73%
Dow in SILVER oz 802.18 46.25 6.12%
US Dollar Index 82.54 -0.08 -0.09%
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SPOT GOLD: 1,223.60      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,259.08 1,263.37 1,263.37
1/2 AE 0.50 623.53 644.53 1,289.06
1/4 AE 0.25 311.76 328.38 1,313.53
1/10 AE 0.10 128.37 133.98 1,339.84
Aust. 100 corona 0.98 1,189.78 1,200.78 1,225.03
British sovereign 0.24 289.76 299.76 1,273.42
French 20 franc 0.19 228.45 235.45 1,261.09
Krugerrand 1.00 1,234.61 1,246.61 1,246.61
Maple Leaf 1.00 1,238.60 1,253.60 1,253.60
1/2 Maple Leaf 0.50 703.57 642.39 1,284.78
1/4 Maple Leaf 0.25 312.02 327.31 1,309.25
1/10 Maple Leaf 0.10 129.70 133.37 1,333.72
Mexican 50 peso 1.21 1,467.80 1,478.29 1,226.09
.9999 bar 1.00 1,227.88 1,238.88 1,238.88
SPOT SILVER: 18.42      
SILVER Fine Tr.Oz. BID ASK $/oz
VG+ Morgan $B4 1905 0.77 26.00 29.00 37.91
VG+ Peace dollar 0.77 24.00 27.00 35.29
90% silver coin bags 0.72 14,957.80 15,315.30 21.42
US 40% silver 1/2s 0.30 5,065.15 5,435.15 18.42
100 oz .999 bar 100.00 1,832.00 1,912.00 19.12
10 oz .999 bar 10.00 189.20 190.20 19.02
1 oz .999 round 1.00 18.52 19.17 19.17
Am Eagle, 200 oz Min 1.00 19.67 21.22 21.22
SPOT PLATINUM: 1,303.70      
Plat. Platypus 1.00 1,328.70 1,368.70 1,368.70
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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.
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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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