The Moneychanger
Daily Commentary
Wednesday, 14 August a.d. 2013 Browse the commentary archive

I'd live a year in a desert on bread & water just to get to experience one day like today: 82 degrees, light breeze, high sky piled high with clouds. Not your usual August day in Tennessee.

Picture may be worth 1,000 words, but some pictures speak louder than others. Take these two, the three year weekly chart of the Dow in Gold, and the same for the Dow in Silver,

Note, I pray ye, that the heavy blue line indicates the 12 year downtrend. Mark, too, that the DiS broke out through it upside in April, traded as high as 803.16 oz, & now stands at 702.60 oz, & that it falleth apace. Mark also that around 575 oz the DiS will fall through that downtrend line, and at 471.55 oz back under the 200 day moving average.

The Dow in Gold offers a like picture. Broke through the downtrend line in May, reached 12.48 oz, and has rolled over earthward. Will cross that downtrend line about 10.50 oz. 200 DMA is at 8.46 oz. Note on both charts the RSI this spring & summer has been EXTREMELY overbought, more so than at any time in the trend's roughly 14 year history.

What does it say? That the short term trend of metals against stocks has turned down, i.e., stocks are becoming cheaper priced in gold and silver. PROVIDED these indicators keep on falling, they tell us that the lows in metals are behind us, and no matter how much higher the Dow & S&P500 climb before their final peak later this year or early next, stocks won't outdo their already posted highs against metals.

Long term targets are less than two oz of gold to buy the Dow, and less than 64 ounces of silver.

Today the Dow in gold closed down 1.69% to 11.497 oz while the Dow in silver plunged 20 oz (2.76%) to 704.18 oz.

Stocks themselves had a right trying day. Dow lost 113.35 (0.73%) to 15,337.66. S&P500 scraped off 8.77 (0.52%) to close at 1,685.39. Minimum target is the 50 DMA, now 15,277.77 & 1,655.69.

US dollar index coughed up 5.5 basis points (down 0.7%) to 81.71. As long as it remains above its 200 day moving average (now 81.60) it is probably rallying, although it meets some stiff resistance around 82.

Yen gained 0.13% to 101.94 cents/Y100 but looks sick as a cur eating poisoned meat. Gapped down yesterday, lit on its converging 50 & 20 DMAs and perched there today. When it breaks 100.5 cents it will lose lots of friends.

Euro lost 0.7% to $1.3255. It closed below its 20 DMA and looks ready to jump out of the airplane.

Even a blind hog finds an acorn now & then, & I reckon I judged right about silver & gold yesterday -- they were only pausing before continuing, not beginning a correction.

Silver gobbled up 44.5 cents (2.1%) to close at 2178.1, knocking on the next resistance level's door (2200c). Daily chart looks like a helium balloon bumping against the ceiling, looking for a sky-light so it can fly higher. Same holds for gold's daily chart.

Silver has made a sort of flaggy pattern that implies a rise to 2450c. Scoff away, I'm just reporting the chart.

Gold yesterday touched back to its downtrend line & breakout point. It is bunching up again beneath $1,350 resistance. I need not draw y'all a picture of what will happen when gold breaches that line, do I? 'Twill be a big jump, panicking all those shorts.

Lo, this rally has WAY more room to run.

On 14 August 1941 President Franklin D. Roosevelt signed the Social Security Act, creating one of the world's largest Ponzi schemes. By denying low income Americans the use of their money to invest for retirement, they are forced to rely on Social Security. Demographics of the US population are exactly contrary of what the Ponzi needs to work, namely, shrinking younger population against a growing older population. A couple of years ago the Ponzi began paying out more than it took in. Bitter disappointment lies ahead for the nation's poor, many of whom have no other source of support. In some parts of the South, a third of the people over 65 have no other support than Social Security.

With THIS system the government replaced the former old age support system: children & families. Not an improvement so far.

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
14-Aug-13 Price Change % Change
Gold, $/oz 1,334.00 12.80 0.97%
Silver, $/oz 21.78 0.45 2.09%
Gold/Silver Ratio 61.246 -0.677 -1.09%
Silver/Gold Ratio 0.0163 0.0002 1.11%
Platinum 1,504.30 5.50 0.37%
Palladium 739.45 1.45 0.20%
S&P 500 1,685.39 -8.77 -0.52%
Dow 15,337.66 -113.35 -0.73%
Dow in GOLD $s 237.67 -4.08 -1.69%
Dow in GOLD oz 11.50 -0.20 -1.69%
Dow in SILVER oz 704.18 -20.00 -2.76%
US Dollar Index 81.71 -0.06 -0.07%
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SPOT GOLD: 1,335.10      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,364.47 1,378.49 1,378.49
1/2 AE 0.50 680.39 703.26 1,406.53
1/4 AE 0.25 340.20 358.31 1,433.23
1/10 AE 0.10 140.08 146.19 1,461.93
Aust. 100 corona 0.98 1,302.12 1,313.12 1,339.65
British sovereign 0.24 316.17 328.17 1,394.09
French 20 franc 0.19 249.26 256.26 1,372.59
Krugerrand 1.00 1,353.79 1,365.79 1,365.79
Maple Leaf 1.00 1,350.10 1,365.10 1,365.10
1/2 Maple Leaf 0.50 767.68 700.93 1,401.86
1/4 Maple Leaf 0.25 340.45 357.14 1,428.56
1/10 Maple Leaf 0.10 141.52 145.53 1,455.26
Mexican 50 peso 1.21 1,596.72 1,612.73 1,337.59
.9999 bar 1.00 1,339.77 1,350.77 1,350.77
SPOT SILVER: 21.89      
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 17,295.85 17,645.85 24.68
US 40% silver 1/2s 0.30 6,265.80 6,415.80 21.75
100 oz .999 bar 100.00 2,199.00 2,264.00 22.64
10 oz .999 bar 10.00 219.90 226.40 22.64
1 oz .999 round 1.00 21.99 22.74 22.74
Am Eagle, 200 oz Min 1.00 23.14 24.89 24.89
SPOT PLATINUM: 1,504.30      
Plat. Platypus 1.00 1,514.30 1,544.30 1,544.30
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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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