The Moneychanger
Weekly Commentary
Friday, 2 August a.d. 2013 Browse the commentary archive
Here's the weekly scorecard:
  26-Jul-13 2-Aug-13 Change % Change
Silver, cents/oz. 1,976.50 1,990.30 13.80 0.7
Gold, dollars/oz. 1,321.50 1,310.60 -10.90 -0.8
Gold/silver ratio 66.861 65.849 -1.010 -1.5
Silver/gold ratio 0.0150 0.0152 0.0002 1.5
Dow in Gold Dollars (DIG$) 243.38 246.98 3.59 1.5
Dow in gold ounces 11.77 11.95 0.17 1.5
Dow in Silver ounces 787.19 786.73 -0.46 -0.1
Dow Industrials 15,558.83 15,658.36 99.53 0.6
S&P500 1,691.65 1,709.67 18.02 1.1
US dollar index 81.63 81.90 0.27 0.3
Platinum 1,421.90 1,450.60 28.70 2.0
Palladium 723.10 728.80 5.70 0.8

I'm not going to lower myself to discuss the government's latest changes to Gross Domestic Product accounting, published yesterday. There are lies, damned lies, and damned lying government statistics. Every few years they change the rules to make themselves and the economy look good, like hiding the mirrors in a Home For Really Ugly People. All by itself chronic inflation makes economic calculation nearly impossible for businesses and misdirects & lays waste vast stores of capital. To this bewilderment the government adds lying statistics, changing the yardsticks every few years so nothing in history can be evenly compared to present performance. The US has sunk to Soviet style reporting to bolster its government -- too despicable for me to talk about.

This week gold lost ground but still held on above $1,300 support. Silver gained a bit on the week, but without crossing any milestones. Stocks didn't like the jobs report today, and neither did the US dollar. Stocks made new all time highs this week while the dollar turned up from its 200 day moving average. Platinum & palladium keep steadily rising.

Until way up late in the day stocks were underwater, disgruntled by the jobs report. Came in at 162,000 new jobs (if you can believe government numbers, & you can't unless you're a member of the North Korean Communist party) about 20% lower than expected. Dig into those numbers & the employment picture darkens further -- more part time jobs, fewer hours. Obamacare is doing its job, discouraging businesses from hiring new workers.

But then about 3:00 p.m. buyers entered the market. Dow ended up 3034 (0.19%) at 15,658.36. S&P500 also made a new high by the same path, up 2.8 or 0.16%.

Stock watchers ought to be aware that the Dow & S&P500 are about to hit the top line of a 16 year Broadening Top or Jaws of Death formation -- about 16,000 on the Dow. S&P500 has already hit it. The collapse out of those jaws will devastate stocks.

Here's a meaningful oracle: although stocks made new highs today, the Dow in gold and the Dow in silver did not. Dow in gold was flat at +.2%, 11.947 oz (G$247.03). Dow in silver in fact fell 1.3% or 10 oz. to 786.73.

Both these indicators are warning that stocks are about to lose value against metals. That implies metals have already put in their lows.

The US DOLLAR INDEX gained 0.68% yesterday, but today lost 0.58% (44.8 basis points) to end at 81.901. Yield on the 10 year treasury note (a proxy for US interest rates) fell 4.44% to 2.602%, after rising about that much yesterday. That yield remains above its 20 day moving average (2.580%). It seems stubbornly intent on rising. As the interest rate is the primer determinant of exchange rates, falling rates sent the dollar down. Still, the dollar hit its 200 DMA (81.50) this week and bounced up. That probably marked the low for this move.

Euro closed at $1.3282, up 0.55% after yesterday's tumble. It mattereth not, since the euro has broken its uptrend line. Twill plummet.

Yen rose 0.6% to 101.08 cents/Y100. The yen remains in a uptrend since mid-May, and broke out of an even-sided triangle upside in Early August, and in the last two days gave back all those gains. The yen, like a rabid bobcat, is nothing I want to own.

Today the metals gainsaid each other. Gold lost 40 cents [sic] while silver rose 28.8 cents (1.4%) to 1990.3. Looking a little closer, that's not so bad.

Gold managed to remain this week above $1,300 support/resistance. What was most interesting? Overnight the mysterious "they" slammed gold, driving it down from $1,305 to $1,285. that marks a new low for the move, but gold closed only 40 cents lower for the day. In New York trading about 9:00 a.m. gold gapped up from $1,291 clean to $1,314. Explanation? Some deep pockets view gold as terribly underpriced at $1,291.

That action is not, but narrowly resembles, a key reversal -- break to a new low with a higher close. While this is not that first half of a key reversal, gold certainly shows strength by popping back so smartly from a new low. Add to that silver gaining 28.8 cents today and snuggling back up to 2000c resistance.

Trouble with both silver & gold, however, is that the last three days' sideways trading has taken them thru and outside the uptrend line, exposing them to gravity's pull. Which will it be, up or down? As long as gold holds on above $1,300, it will continue moving up, as frustrating as all this sideways backing and filling is.

Last week the Gold/Silver ratio posted a slightly higher high at 67.324, & has since backed down. If you ever intend to swap gold for silver, now is the time. For swapping back into gold we are targeting a ratio of 32 or lower, which at today's 65.489 ratio implies roughly a doubling of your ounces. Another sign you ought to swap silver for gold is that some UBS analyst published a report today calling for the ratio at 70 by year end. Makes me purely feel like just a natural born fool from Tennessee. I got to buy me some of them shiny, pointy-toe shoes.

WHERE ARE WE? Even after the April battering silver & gold took, they remain in a primary uptrend (bull market). The corrections that began in April 2011 & August 2011 have already posted their lows on 27 June or will before summer endeth. Loony as it sounds right now, the BEST part of the bull market, the biggest gains, lie ahead.

On 2 August 1972 Gold hit an all-time record high of $70/oz in London. It had been about one year since Nixon had taken the US off the gold standard.

On 2 August 1887 Rowell Hodge patented barbed wire. Probably none of y'all knew his name, although every one of you has benefitted from his barbed wire. It's the hit in tatoo parlors across the land.

Proving that revolutions always come full circle to dictatorship, on 2 August 1802 the French Senate, after a plebiscite, proclaimed Napoleon Bonaparte Consul for Life.

On 2 August 1776 the delegates to the Continental Congress began adding their signatures to the Declaration of Independence. Each signer knew that he was also signing his own death warrant for high treason, should the states lose their war for independence. Wonder who would sign today, knowing that?

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
2-Aug-13 Price Change % Change
Gold, $/oz 1,310.60 -0.40 -0.0
Silver, $/oz 19.90 0.29 1.5
Gold/Silver Ratio 65.849 -0.030 -0.0
Silver/Gold Ratio 0.0152 0.0002 1.5
Platinum 1,450.60 7.70 0.5
Palladium 728.80 -2.65 -0.4
S&P 500 1,709.67 2.80 0.2
Dow 15,658.36 30.34 0.2
Dow in GOLD $s 246.98 0.58 0.2
Dow in GOLD oz 11.95 0.03 0.2
Dow in SILVER oz 786.73 -10.00 -1.3
US Dollar Index 81.90 -0.45 -0.5
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SPOT GOLD: 1,309.70      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,337.20 1,352.27 1,352.27
1/2 AE 0.50 667.44 689.88 1,379.77
1/4 AE 0.25 333.72 351.49 1,405.96
1/10 AE 0.10 137.41 143.41 1,434.12
Aust. 100 corona 0.98 1,277.35 1,288.35 1,314.37
British sovereign 0.24 310.15 322.15 1,368.54
French 20 franc 0.19 244.52 251.52 1,347.19
Krugerrand 1.00 1,326.73 1,338.73 1,338.73
Maple Leaf 1.00 1,324.70 1,339.70 1,339.70
1/2 Maple Leaf 0.50 753.08 687.59 1,375.19
1/4 Maple Leaf 0.25 333.97 350.34 1,401.38
1/10 Maple Leaf 0.10 138.83 142.76 1,427.57
Mexican 50 peso 1.21 1,571.08 1,582.11 1,312.19
.9999 bar 1.00 1,314.28 1,325.28 1,325.28
SPOT SILVER: 19.86      
SILVER Fine Tr.Oz. BID ASK $/oz
VG+ Morgan $B4 1905 0.77 25.50 28.00 36.60
VG+ Peace dollar 0.77 21.50 25.00 32.68
90% silver coin bags 0.72 15,951.65 16,326.65 22.83
US 40% silver 1/2s 0.30 5,666.95 5,816.95 19.72
100 oz .999 bar 100.00 1,996.00 2,061.00 20.61
10 oz .999 bar 10.00 199.60 206.10 20.61
1 oz .999 round 1.00 19.96 20.71 20.71
Am Eagle, 200 oz Min 1.00 21.11 22.86 22.86
SPOT PLATINUM: 1,450.60      
Platinum Platypus 1.00 1,460.60 1,490.60 1,490.60
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© 2015 Little Mountain Corporation, d.b.a. The Moneychanger. All rights reserved. May not be republished in any form, including electronically, without our express permission.

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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