The Moneychanger
Daily Commentary
Tuesday, 13 August a.d. 2013 Browse the commentary archive

Blamed if I can figure out why markets fall for the good banker/bad banker the Fed plays on 'em. One day one of those Fed goofs says they ought to "taper" tomorrow, & the market jerks. Next day another Fed gooney says, No, the Fed will keep buying bonds till US attorneys start prosecuting too big to fail banks. Did it occur to anyone that in reality the Fed has no idea what they will do or when?

Confusion danced around the room today, sowing the seeds of bewilderment. US dollar index rose 25.7 basis points to 81.736 and climbed above its 200 DMA. That has folks thinking it will rise more, which it probably will. That also has 'em thinking gold will suffer, which it probably won't.

Yen broke badly today, down 1.27% to 101.89 cents/Y100. RSI & MACD have turned down, and yen is about to cross below its 20 & 50 day moving averages. Close below 101.50 cents/Y100 opens a manhole below the yen

Euro ain't nothing to brag about, either. It has broken down with an island reversal and today ran into its 20 DMA ($1.3252). Closed $1.3265. Euro & yen are both yelling that the dollar is about to rise.

Ten year treasury not yield gapped up today 4.22% to close at 2.715%. Why, I'm not sure, other than interest rates want to rise, having been kept hugging zero by Bernanke so long. Higher rates would certainly make that ugly-as-five-miles-of-mud-road dollar look prettier.

Stocks dropped off to start the day, but recovered, climbed sharply, then let slip most of the gains. Dow gained 31.33 (0.2%) to 15,451.01 while the S&P500 gained 4.69 (0.28%) to 1,694.16. That doesn't seem like enough correction yet. Expect more downside, to the 50 day moving averages at least, say, 15,275 & 1,650.

Dow in gold rose 1.04% to 11.695 oz (G$241.75 gold dollars), but that hardly helped. Barely put the DiG above its 50 DMA (11.67 oz), but 'twill drop further.

Dow in silver was unchanged at 724.18 oz. Bigger drops coming, whether tomorrow or later. The decisive trend change has taken place, & it turned earthward.

Gold lost $13.50 to end at $1,321.20 while silver lost 4/10 of one cent to end at 2133.6c.

Got to wonder if that didn't mark the limit, not of the rally, but of the first bursting wave of it. Silver hit 2170.2 about 9:00 a.m. but couldn't hold onto those gains. Spent the rest of the day trading sideways. That might have been enough for it to catch its breath for another leg up tomorrow, but I have no conviction about that. That gap silver left yesterday looks like a breakaway gap to me, which would mean silver will rise further tomorrow. MACD & RSI are just now looking good, not toppy. But the market tells me, I don't tell the market.

Gold did no more than trade back to its breakout point for one last kiss goodbye. Remained above its 50 ($1,310.75) and 20 ($1,313.59) day moving averages. Remains above the May downtrend line. As with silver, today could have been a one day pause in a longer rise.

Nothing today gainsays my standing interpretation, namely, that silver & gold posted their bottoms for the 2011-2013 correction on 27 June, and have begun the next rally. If I'm right, when gold crosses that $1,350 a lot of shorts will begin meditating on their mortality & run for cover. That will feed the rally in both metals.

Confirming that interpretation is the plunging Gold/Silver ratio, today at 61.924 ounces of silver to one ounce of gold. It has fallen 6.1% from 65.961 five days ago. Strong witness a rally is starting, but I reckon folks will wait until silver crosses 5000c to buy, wanting to be "sure."

On 13 August 1520 the Spanish Conquistador Hernan Cortez captured Tenochtitlan, capital of the Aztec Empire (today Mexico City). How could he overcome an empire of 11 million with about a thousand Spaniards, 13 horses, and a few cannon? Simple. The Aztecs levied or captured thousands of captives for human sacrifice from their subject peoples. Cortez offered those people a chance to join him and overthrow their Aztec masters, & they did.

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
13-Aug-13 Price Change % Change
Gold, $/oz 1,321.20 -13.50 -1.01%
Silver, $/oz 21.34 0.00 0.02%
Gold/Silver Ratio 61.924 -0.644 -1.03%
Silver/Gold Ratio 0.0161 0.0002 1.04%
Platinum 1,498.80 1.00 0.07%
Palladium 738.00 1.30 0.18%
S&P 500 1,694.16 4.69 0.28%
Dow 15,451.01 3.13 0.02%
Dow in GOLD $s 241.75 2.49 1.04%
Dow in GOLD oz 11.69 0.12 1.04%
Dow in SILVER oz 724.18 0.01 0.00%
US Dollar Index 81.74 0.26 0.32%
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: 1,321.90      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,350.98 1,364.86 1,364.86
1/2 AE 0.50 673.66 696.31 1,392.62
1/4 AE 0.25 336.83 354.76 1,419.06
1/10 AE 0.10 138.69 144.75 1,447.48
Aust. 100 corona 0.98 1,289.25 1,300.25 1,326.51
British sovereign 0.24 313.04 325.04 1,380.81
French 20 franc 0.19 246.80 253.80 1,359.39
Krugerrand 1.00 1,337.76 1,349.76 1,349.76
Maple Leaf 1.00 1,336.90 1,351.90 1,351.90
1/2 Maple Leaf 0.50 760.09 694.00 1,388.00
1/4 Maple Leaf 0.25 337.08 353.61 1,414.43
1/10 Maple Leaf 0.10 140.12 144.09 1,440.87
Mexican 50 peso 1.21 1,582.53 1,596.81 1,324.39
.9999 bar 1.00 1,326.53 1,337.53 1,337.53
SPOT SILVER: 21.43      
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 16,999.13 17,349.13 24.26
US 40% silver 1/2s 0.30 6,128.63 6,278.63 21.28
100 oz .999 bar 100.00 2,152.50 2,217.50 22.18
10 oz .999 bar 10.00 215.25 221.75 22.18
1 oz .999 round 1.00 21.53 22.28 22.28
Am Eagle, 200 oz Min 1.00 22.68 24.43 24.43
SPOT PLATINUM: 1,498.80      
Plat. Platypus 1.00 1,508.80 1,538.80 1,538.80
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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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