The Moneychanger
Daily Commentary
Wednesday, 7 August a.d. 2013 Browse the commentary archive

Bank of England governor Mark Carney (not "carnie," as "one who works in a carnival," but -- well, never mind. That may be accurate after all) who moved from the Bank of Canada to the Bank of England, took his cues from Ben the Beneficent today & announced that the BoE would keep rates at 0.5% until unemployment drops to 7%. Markets didn't believe him as interest rates on UK government bonds rose. Central bankers are the Rodney Dangerfields of the financial world -- they just can't get no respect. After promising so much, printing so much, & delivering so little in economic improvement, the world may be starting to recognize that central bankers are merely wet cardboard cut-outs -- poke your finger at 'em and it pokes right through.

US dollar index stepped into a manhole today. Lost 32.8 basis points (0.42%) and ended well below 81.50 support at 81.292. This probably inaugurates another nosedive for the dollar, down to long term support at 80.75 or so. I remind y'all that Bernanke the Bumbling has set up another bubble, this time in US bonds, by his Zero Interest Rate Policy. Interest rates broke out upside in June, signaling definitively that markets are rejecting the Bumbler's claim to omnipotence in interest rates. As rates move higher & bonds move lower (rates & bonds move opposite each other), plentiful opportunity for panic out of bonds & the dollar aboundeth.

Today, though, US interest rates fell, and the dollar with them.

Y'all ought to know I do not welcome or gloat in any of this. It grieves my soul that greed & corruption -- I do not say "stupidity" because that stretches credulity -- could so devastate this land. Sooner or later, it will all hit the wall.

While the poor US dollar index was scraping bottom & knocking the bottom out of the barrel, the euro & yen were rising. Euro rose 0.27% to $1.3341. Yen impressed more with a gap up, gaining 1.39% to 103.75. Jumping from the dollar to the yen is like winos pitching away their cans of Sterno & going straight for the wood alcohol.

For the last three days stocks have followed the same pattern: drop on open with a flattish recovery through the day ending with a lower close. Look! There, on the anchor rope! The rats are leaving the ship!

Dow Jones Industrial average closed the day at 15,470.67, down 48.07 (0.31%). No laggard, the S&P500 lost 6.46 (0.38%) to 1,690.91.

Look thou at the chart, yea, gaze thereon. Both have broken down through, yea, pierced & penetrated, the bottom boundary of the rising trend channel. Yep, that means they are now headed down instead of up. I still expect a wilder-yet blowoff top, but for the nonce stocks are in correction gear.

One of the most frustrating, wearing formations is the broadening top, especially in stocks. They take a long while to unfold. What we have in the Dow in Gold & Dow in Silver is not precisely a broadening top, but is unfolding with the same mind-changing frustration. I'd rather shop shop for shoes with my wife. Today, however, they rewarded patience with lower closes, showing they are gaining against stocks. Dow in Gold ended at 12.029 oz (G$248.66 gold dollars), down 0.53%. Dow in Silver lost 0.22% or 1.77 oz to close at 793.45 oz. Still rolling over to the downside.

Gold & silver gainsaid each other today. Silver fell 1.7 cents to 1949.8 while gold rose $2.90 to $1,286.10.

Gold's low today at $1,274.35 came a little higher than yesterday's, but this was not a day of great revelations. Gold traded in a narrow $13.45 range, from $1,274.35 to $1,287.80, and closed near the top of that range. That leaves us with a POSSIBLE rounding bottom from yesterday and today. If so, tomorrow gold will trade all day above today's low, and most likely higher. Any break below that low should take gold lower. It bothers me that gold remains below its 20 day moving average ($1,305.16). However, gold is now stretched the farthest from its 200 and 300 day moving averages that it has seen since 2008. Add to that similar bullishness from commitments of traders. Those things argue against another sharp gold plunge.

Silver traded as low as 1929.2 today, offering a double bottom with last Friday's law at 1918c. More, silver traded into a V-bottom today, and ended the day about where it ended yesterday. Silver has to confirm any V-bottom by trading higher tomorrow.

Here's a small thing, but watch it. Technically both silver & gold made the first half of a key reversal today, trading into new low ground for the move but ending the day higher. (Only the silver end-of-day chart shows that, but there 'tis.) Follow through with higher closes tomorrow would confirm a reversal.

Silver & gold markets are suffering from a massive lack of interest. Dealers & wholesalers around the country report snore-some days. Beware of seemingly dead markets. They can be spring-loaded for big jumps up or down, simply because they are thinly attended.

On 7 August 1782 George Washington created the Order of the Purple Heart for soldiers wounded in combat.

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
7-Aug-13 Price Change % Change
Gold, $/oz 1,286.10 2.90 0.23%
Silver, $/oz 19.50 -0.02 -0.09%
Gold/Silver Ratio 65.961 0.206 0.31%
Silver/Gold Ratio 0.0152 -0.0000 -0.31%
Platinum 1,437.40 10.50 0.74%
Palladium 722.25 0.35 0.05%
S&P 500 1,690.91 -6.46 -0.38%
Dow 15,470.67 -48.07 -0.31%
Dow in GOLD $s 248.66 -1.34 -0.53%
Dow in GOLD oz 12.03 -0.06 -0.53%
Dow in SILVER oz 793.45 -1.77 -0.22%
US Dollar Index 81.29 -0.33 -0.40%
IMPORTANT NOTE: The following are wholesale, not retail, prices. To figure our retail selling price, multiply the "ask" price by 1.035. To figure our retail buying price, multiple the "bid" price by 0.97. Lower commissions apply to larger orders, higher commissions to very small orders.
SPOT GOLD: 1,288.00      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,316.34 1,329.86 1,329.86
1/2 AE 0.50 656.37 678.45 1,356.91
1/4 AE 0.25 328.19 345.67 1,382.67
1/10 AE 0.10 135.14 141.04 1,410.36
Aust. 100 corona 0.98 1,256.19 1,267.19 1,292.78
British sovereign 0.24 305.01 317.01 1,346.71
French 20 franc 0.19 240.47 247.47 1,325.49
Krugerrand 1.00 1,308.61 1,320.61 1,320.61
Maple Leaf 1.00 1,303.00 1,318.00 1,318.00
1/2 Maple Leaf 0.50 740.60 676.20 1,352.40
1/4 Maple Leaf 0.25 328.44 344.54 1,378.16
1/10 Maple Leaf 0.10 136.53 140.39 1,403.92
Mexican 50 peso 1.21 1,541.94 1,555.94 1,290.49
.9999 bar 1.00 1,292.51 1,303.51 1,303.51
SPOT SILVER: 19.58      
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 15,751.45 16,101.45 22.52
US 40% silver 1/2s 0.30 5,584.35 5,734.35 19.44
100 oz .999 bar 100.00 1,968.00 2,033.00 20.33
10 oz .999 bar 10.00 196.80 203.30 20.33
1 oz .999 round 1.00 19.68 20.43 20.43
Am Eagle, 200 oz Min 1.00 20.83 22.58 22.58
SPOT PLATINUM: 1,437.40      
Plat. Platypus 1.00 1,447.40 1,477.40 1,477.40
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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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