The Moneychanger
Weekly Commentary
Friday, 28 June a.d. 2013 Browse the commentary archive
Here's the weekly scorecard:
  21-Jun-13 28-Jun-13 Change % Change
Silver, cents/oz. 1,995.80 1,945.10 -50.70 -2.5
Gold, dollars/oz. 1,291.60 1,223.80 -67.80 -5.2
Gold/silver ratio 64.716 62.917 -1.800 -2.8
Silver/gold ratio 0.0155 0.0159 0.0004 2.9
Dow in Gold Dollars (DIG$) 236.20 251.85 15.64 6.6
Dow in gold ounces 11.43 12.18 0.76 6.6
Dow in Silver ounces 739.47 766.52 27.05 3.7
Dow Industrials 14,758.32 14,909.60 151.28 1.0
S&P500 1,592.43 1,606.28 13.85 0.9
US dollar index 82.31 83.17 0.86 1.0
Platinum 1,362.50 1,336.90 -25.60 -1.9
Palladium 673.25 659.50 -13.75 -2.0

Yo-ho! June's over, and I'm as glad to see it go as to see the back of an IRS agent about to step into the LaBrea Tar Pit.

A surprise move today brought silver & gold back from the dead, but not until silver had lost 2.5% and gold 5.2%. Stocks tried to rally, made it, then lost it. US dollar index gained a large 1%. Good-bye, June.

An old friend wrote me saying, "Looking more and more like 1980." He meant gold and silver, of course.

Not really. Decline after 1980 top was sharp and immediate. Not so today, not even from 2011. And sentiment is way too bearish today. Even the gold websites are publishing bearish predictions!

Finally Bernanke ain't Volcker. He's still inflating, and he's trapped. Even a hint he would halt bond buying IF the economy improved tanked markets. He must keep on inflating. And who's waiting in the wings to replace him? Janet Yellen, even more the inflationist.

No, this isn't 1980, it's a bull market shaking off riders. If you're looking for a comparison, it's 1976, not 1980.

I was wondering yesterday whether stocks were rallying or foolin', & today it seems they were fooling. Dow puked back 114.89 points of yesterday's 114.35 point gain and closed at 14,909.60, up 0.76%. S&P500 gave back less, down 6.92 (0.43%) to 1,606.28. Stocks need to climb above 15,075 or continue to fall to 14,000.

Silver & gold surged today, sending the Dow in Gold & the Dow in Silver tumbling. Dow in gold ended at 12.183 oz, down 1.8% (G$251.85 gold dollars). Dow in silver fell 44.17 oz to 76.52 oz, a whopping 5.4% stumble.

On a weekly chart, the Dow in Gold has been overbought since April, the Dow in Silver since February. Does that happen in nature?

Improbable as it sounds, like "tortoise shells make good suction cups," the US dollar index has risen ten out of the last ten days. Does that happen in nature? Today it finally crossed over -- no, not finally, as we all might devoutly wish -- 83 to rise 21.6 basis points (0.28%) to 83.17. It has at least 85.50 in this move, maybe 86.

While the paper dollar flies, the yen and euro are tunneling toward the earth's core. Euro lost 0.16 5oday & ended at $1.3015, flirting with 1.3000 and a real plunge. Yen fell 0.92% to 100.57.

Bernanke may have pricked his own bond bubble with his June 19th performance. Bond mutual funds lost a record $61.7 billion this month through 24 June. Yield on 10 year Treasury has exploded 105 basis points (a basis point is 1/100th of a percentage point) from May lows at 1.618% to this week's high at 2.667%. (When yields rise, bond prices fall.) Bernanke's Zero Interest Rate Policy had send investors crowding into US treasuries. Why take any risk when the yield is so low. Trouble is, the door out of that market, like every other, becomes very narrow when everybody wants out.

Silver & gold finally popped back today. Silver, which has been very reluctant to fall further lately, jumped up 91.8 cents (5%) to end at 1945.1 Gold jumped $12.40, 1%, to end at $1,223.80. In the aftermarket silver added another 12 cents and gold another 11 bucks.

Both metals bounced up off their bottom channel lines. Whether it's more than that, whether more downside is coming, we see from how they act next week. Even to begin confirming a bottom, gold must rise steadily & close above $1,350. Silver must do the same and jump over 2000c & 2100c.

I think at least it's time to start nibbling at them, although there's still plenty of potential for more downside. Looking over my shoulder, though, at that seasonal pattern that posts bottoms for both metals in June. Both silver & gold are extremely oversold, so some rally is predictable. Question is, whether it turns the long correction around or not.

One interesting thing about this last week: retail buying was very heavy compared to recent weeks. Over 30 years I've learned that my customers are often more clever than I am. (I know, I know, no news in that.) In any event, I don't expect a lot more downside in silver or gold. I am simply watching.

UNINTENDED CONSEQUENCES: USDA is about to begin again issuing permits for horse slaughtering facilities. All the animal folks couldn't stand the idea of horses being slaughtered for either human or animal food, but when the slaughterhouses were closed, horse prices cascaded. After all, their bottom line, back-up value was "price per pound." People were giving away horses. Well-trained draft horses plummeted to $800 & less. I hope 100 new horse slaughterers open up. And don't write me smoking emails about how mean I am to want Trigger slaughtered. I have draft horses, Percherons, of my own. But a horse is not Bambi. In fact, not even Bambi is Bambi.

On 28 June 1914 a Serb nationalist assassinated the Austrian Archduke Francis Ferdinand and his wife, Sofia. That triggered World War I. Hard for us today to imagine nations and national leaders so stultified, so arrogant, that they would plunge their countries into a bloody war that ended not only in millions of deaths & devastation without description, but also with the overthrow of most of them, notably the Austrian Emperor, the German Emperor, and the Russian Tsar, to name a few. Whoops, don't forget the war paved the way for statism & totalitarianism on a scale never before seen, and an even bloodier war.

Of course, our leaders today would never act so stupidly.

What's that? Syria? What about Syria?

Y'all enjoy your weekend!

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
28-Jun-13 Price Change % Change
Gold, $/oz 1,223.80 12.40 1.0
Silver, $/oz 19.45 0.92 5.0
Gold/Silver Ratio 62.917 0.608 1.0
Silver/Gold Ratio 0.0159 0.0007 4.9
Platinum 1,336.90 11.70 0.9
Palladium 659.20 10.05 1.5
S&P 500 1,606.28 -6.92 -0.4
Dow 14,909.60 -114.89 -0.8
Dow in GOLD $s 251.85 -4.51 -1.8
Dow in GOLD oz 12.18 -0.22 -1.8
Dow in SILVER oz 766.52 -44.17 -5.4
US Dollar Index 83.17 0.22 0.3
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SPOT GOLD: 1,234.90      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,268.24 1,275.03 1,275.03
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British sovereign 0.24 292.44 302.44 1,284.79
French 20 franc 0.19 230.56 237.56 1,272.39
Krugerrand 1.00 1,247.25 1,259.25 1,259.25
Maple Leaf 1.00 1,249.90 1,264.90 1,264.90
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SILVER Fine Tr.Oz. BID ASK $/oz
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VG+ Peace dollar 0.77 24.00 27.00 35.29
90% silver coin bags 0.72 15,497.63 15,997.63 22.37
US 40% silver 1/2s 0.30 5,582.88 5,732.88 19.43
100 oz .999 bar 100.00 1,947.50 2,027.50 20.28
10 oz .999 bar 10.00 200.75 201.75 20.18
1 oz .999 round 1.00 19.68 20.48 20.48
Am Eagle, 200 oz Min 1.00 20.83 22.38 22.38
SPOT PLATINUM: 1,336.90      
PLATINUM Fine Tr.Oz. BID ASK $/oz
Platinum Platypus 1.00 1,361.90 1,401.90 1,401.90
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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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