The Moneychanger
Weekly Commentary
Friday, 16 August a.d. 2013 Browse the commentary archive
Here's the weekly scorecard:
  9-Aug-13 16-Aug-13 Change % Change
Silver, cents/oz. 2,039.90 2,331.70 291.80 14.3
Gold, dollars/oz. 1,312.90 1,371.70 58.80 4.5
Gold/silver ratio 64.361 58.828 -5.530 -8.6
Silver/gold ratio 0.0155 0.0170 0.0015 9.4
Dow in Gold Dollars (DIG$) 242.88 227.31 -15.57 -6.4
Dow in gold ounces 11.75 11.00 -0.75 -6.4
Dow in Silver ounces 756.19 646.87 -109.32 -14.5
Dow Industrials 15,425.51 15,083.16 -342.35 -2.2
S&P500 1,691.42 1,655.83 -35.59 -2.1
US dollar index 81.12 81.28 0.16 0.2
Platinum 1,499.00 1,526.70 27.70 1.8
Palladium 740.65 762.15 21.50 2.9

The scoreboard never lies. Been a while since I could write, "Silver rose 14.3% [sic] this week and gold 4.4%." Gold/silver ratio dropped a massive 8.6%. Stocks took a mean whipping with a big stick, down over 2%. US dollar index stayed flat, like a central banker's head. Platinum & palladium gained, but nothing like silver & gold.

I'm enjoying the rally, but after the leaps this week witnessed, probably is time to start pondering a small reaction in silver & gold to digest these gains. Gold rose $10.10 (0.7%) today & closed Comex at $1,371.70. Silver gained another 38.8 cents (1.7%) to 2331.7c, after gaining 5.27% yesterday, and today smashed through 2300c resistance.

Problem is, Silver's Relative Strength Index (RSI) has crossed over into overbought territory, as has the Dow in Silver. Still, overbought can get more overbought, and I still expect silver has 2450 - 2500 cents targeted for this second leg of this rally. (I believe the first ended at that 2059c high on 22 July). Volume tapered off today but overall is rising. Rate of change indicators are all headed up without any break. All the same, eight up-days stretches any market. Time for a breather soon.

Gold closed at $1,371.70 today, but its feet are still tangled in that resistance around $1,350. RSI not yet overbought, as silver's is. Time for gold to play catch-up with silver. Next high hurdle is $1,425, then gold will have to stare down $1,500. Close above $1,550 confirms beyond argument that gold & silver's long correction has ended.

Time to stop waiting and buy silver & gold.

Sobering thought is, What is gold telling us about the future?

Stocks had their most miserable week this year. Today the Dow gave up 29.03 (0.19%) to 15,083.16. S&P500 lost 5.49 (0.33%) & drew even with the Dow by also closing below its 50 day moving average.

Incase this moving average talk remains cloudy to you, think about this. A moving average averages the last X days, and on the next day drops the oldest number & picks up the newest, thus "moving." A market above its MAs has upward momentum, a market below downward momentum. Never underestimate the power of inertia.

Dow is probably targeting support from the April & June lows, now about 14,600. Like support for the S&P500 stands now about 1,585, & rising.

For the week the Dow in Silver plunged -- listen to this -- 14.5%! Closed today down another 12.21 oz (1.9%) at 646.87 oz. Dow in Gold fell 6.4% this week, and lost 0.9% today to close at 10.996 oz (G$227.31 gold dollars).

The long term (ca. 14 year) downtrend line for the Dow in Gold stands right now about 10.50 oz & for silver about 610 oz. Once these indicators fall back below those downtrend lines we will have our final confirmation that stocks' rally against metals has well, truly, & permanently ended.

Long term targets are one to two ounces for the DiG and 32 to 16 oz for the Dow in Silver.

US dollar index did not close the week down, but behaved wretchedly anyway. Today it gained 0.14% to 81.281, up 10.9 basis points. Watching these currencies makes me feel like a schizophrenic at a tennis match -- way up one day, way down the next. Euro reversed yesterday's gains today with a 0.9% drop to $1.3335. I think its uptrend hath shattered on a double top. Yen's rise yesterday only filled in a spacious gap left behind when it fell on Tuesday. Lost 0.24% today to 102,.49 cents/Y100.

I am still nonplussed: why would anybody buy these scrofulous, nasty fiat currencies when they could buy silver or gold?

The situation which has been shrouded in murky clouds since before April has now cleared. The massive money creation IVs which have lifted stocks against the primary downtrend is now wearing off. Maybe stocks reach one more high later this year, but the trend is broken, as witness the Dow in Gold and Dow in Silver. After the concentrated attack on silver & gold in April, they bottomed June 27 when they completed the 2011-2013 correction. A very small chance remains metals might plunge once more, but it diminisheth the closer gold gets to $1,550. A close above that negates it altogether.

Time to climb back into silver & gold and OUT of stocks & bonds.

Zut alors! On 16 August 1777 France declared bankruptcy. The continuing insolvency led directly to the widespread loss of respect and esteem for the government and to the bloody revolution. America, take note.

On 16 August 1896 gold was discovered at Bonanza Creek in Alaska. Man! Those people had to be tough just to reach the Klondike, walking most of the way, never mind living there and mining gold.

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
16-Aug-13 Price Change % Change
Gold, $/oz 1,371.70 10.10 0.7
Silver, $/oz 23.32 0.39 1.7
Gold/Silver Ratio 58.828 0.423 0.7
Silver/Gold Ratio 0.0170 0.0003 1.7
Platinum 1,526.70 -4.70 -0.3
Palladium 762.15 6.20 0.8
S&P 500 1,655.83 -5.49 -0.3
Dow 15,083.16 -29.03 -0.2
Dow in GOLD $s 227.31 -2.10 -0.9
Dow in GOLD oz 11.00 -0.10 -0.9
Dow in SILVER oz 646.87 -12.21 -1.9
US Dollar Index 81.28 0.11 0.1
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SPOT GOLD: 1,375.40      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,407.03 1,420.10 1,420.10
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1/4 AE 0.25 350.47 369.12 1,476.49
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British sovereign 0.24 325.71 337.71 1,434.63
French 20 franc 0.19 256.79 263.79 1,412.89
Krugerrand 1.00 1,394.66 1,406.66 1,406.66
Maple Leaf 1.00 1,390.40 1,405.40 1,405.40
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SILVER Fine Tr.Oz. BID ASK $/oz
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VG+ Peace dollar 0.77 21.50 25.00 32.68
90% silver coin bags 0.72 17,978.68 18,328.68 25.63
US 40% silver 1/2s 0.30 6,665.53 6,815.53 23.10
100 oz .999 bar 100.00 2,334.50 2,399.50 24.00
10 oz .999 bar 10.00 233.45 239.95 24.00
1 oz .999 round 1.00 23.35 24.10 24.10
Am Eagle, 200 oz Min 1.00 24.50 26.25 26.25
SPOT PLATINUM: 1,526.70      
PLATINUM Fine Tr.Oz. BID ASK $/oz
Platinum Platypus 1.00 1,536.70 1,566.70 1,566.70
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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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