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Tuesday, 27 August a.d. 2013 Browse the commentary archive

A reader asked me today if the US regime's threats to make war on Syria are driving up silver & gold. Good question. With markets, the readiness is all -- I mean, the internal readiness to rise or fall. When they are ready, any old catalyst will do. Silver & gold have already been rising for two months so US saber-rattling has little to do with the rally. However, war scares can give gold a little spurt, but in my thirty-three years experience, such scares NEVER make any permanent alteration in the gold or silver market. They blow out as quickly as they blew in.

By the way, the government's propaganda machine has really kicked into high gear suddenly, which indicates that somebody in the US wants that war. The stupidity of meddling in another nation's affairs and trying to overthrow its government, even a very naughty government, ranks right up there with the stupidity of the German, English, French, Russian, Austrian, & Serbian governments in the summer of 1914. Apparently nobody in authority has caught on: wars kill people.

If (I say, If) the threats toward Syria helped silver & gold, they poisoned stocks. Dow plunged 170.33 (1.14%) today to 14,777.13, nearing my 14,600 target. S&P500 plunged worse, down 26.3 (1.59%) to 1,630.48. S&P500 in fact gapped down. My 1,590 target draweth nearer apace.

[Long, loud Rebel Yell!] Yes today WAS the day that the Dow in Gold & Dow in Silver fell once again BELOW their long term (about 14 year) downtrend lines. Dow in gold nose-dove 3.02% to 10.401 oz (G$215.01 gold dollars). Eye is set on the 200 DMA at 9.70 oz.

Dow in silver skidded 3.71% or 23.1 oz to perch at 599.41 oz. 200 DMA is a bare 28 oz. below at 571.75.

Why make such a big deal about the 200 DMA? Think about it. In a market locked in a primary downtrend (bear market), most of its time will be spent BELOW its 200 DMA. Rallies above the 200 DMA are either passing & brief anomalies, or, more portentously, reverse the trend. Which is it? You don't know until it resolves one way or the other. The Dow in Gold & Dow in Silver are both re-affirming their downward trend.

Somebody fed the US dollar index ipecac this morning. It dropped 25.2 basis points (0.32%) to 81.139. Yes, y'all are right, that DOES lie below the intermediate uptrend line, and could point the dollar index toward 79. Not done yet, but it could.

Yen took advantage of something today to gap up and above its 20 DMA (103.2). It jumped up 1.51% to 103.08 cents per Y100. Nuts.

Euro rose only 0.16% to $1.3329, and appears to want to fall through its 20 DMA ($1.3326). Watch out.

Gold surged $27.60 or 2% to smash clean through all that resistance above $1,400 and close at $1,420.60. It ran clear to the next resistance area, and closed near the high. Silver vaulted 64.1 cents (2.7%) to 2465.1c.

All this is fine & makes us want to celebrate, but it reveals the problem with bull market rallies. They get oversold and can stay oversold for a while, and even as you are watching and know they are overdone, you haven't much of a clue when they will expire. I believe Gold will reach $1,550 at least and silver 2600c to 2700c, but I wouldn't be surprised if they stopped & fell back at any time.

Point is that most likely (I reserve a small off-chance) they bottomed in June. After the beating both took in April and May, they have a lot of re-building to do. Therefore, be patient. Inoculate yourself against any sudden drops OR sudden rises. Remember H.L. Hunt's about never getting too elated in victory or too downcast in defeat.

But for the nonce I expect silver & gold to continue rising, and six months or a year from now buying at these prices will look like investing genius. But now you have to buy with one hand and in the other hold a wastebasket to puke in.

Even a natural born fool from Tennessee knows that life ain't easy.

Durned if it ain't National Chicken Month! We are so excited here. We were scratching our heads about how best to honor National Chicken Month, & decided the best way would be to sponsor a special contest to give away a free copy of AT HOME IN DOGWOOD MUDHOLE. If you go to http://dogwoodmudhole.com/giveaway_sep2013/ you can sign up. It's free, but you have to be 13 or older. That's your chronological age, not how old you act.

By the way if I can ever get the final read-through done, Volume 2 of AHIDM will be published this fall. I have to confess, it's even funnier than Volume 1.

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
27-Aug-13 Price Change % Change
Gold, $/oz 1,420.60 27.00 1.94%
Silver, $/oz 24.65 0.64 2.67%
Gold/Silver Ratio 57.628 -0.414 -0.71%
Silver/Gold Ratio 0.0174 0.0001 0.72%
Platinum 1,531.20 -12.40 -0.80%
Palladium 749.15 3.10 0.42%
S&P 500 1,630.48 -26.30 -1.59%
Dow 14,776.13 -170.33 -1.14%
Dow in GOLD $s 215.01 -6.69 -3.02%
Dow in GOLD oz 10.40 -0.32 -3.02%
Dow in SILVER oz 599.41 -23.10 -3.71%
US Dollar Index 81.14 -0.25 -0.31%
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SPOT GOLD: 1,414.50      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,445.62 1,460.47 1,460.47
1/2 AE 0.50 720.89 745.09 1,490.18
1/4 AE 0.25 360.44 379.62 1,518.47
1/10 AE 0.10 148.42 154.89 1,548.88
Aust. 100 corona 0.98 1,379.56 1,390.56 1,418.65
British sovereign 0.24 334.97 346.97 1,473.96
French 20 franc 0.19 264.09 271.09 1,451.99
Krugerrand 1.00 1,428.65 1,440.65 1,440.65
Maple Leaf 1.00 1,429.50 1,444.50 1,444.50
1/2 Maple Leaf 0.50 813.34 742.61 1,485.23
1/4 Maple Leaf 0.25 360.70 378.38 1,513.52
1/10 Maple Leaf 0.10 149.94 154.18 1,541.81
Mexican 50 peso 1.21 1,693.38 1,706.38 1,415.26
.9999 bar 1.00 1,419.45 1,430.45 1,430.45
SPOT SILVER: 24.46      
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 18,379.08 18,879.08 26.40
US 40% silver 1/2s 0.30 7,022.48 7,172.48 24.31
100 oz .999 bar 100.00 2,455.50 2,520.50 25.21
10 oz .999 bar 10.00 245.55 252.05 25.21
1 oz .999 round 1.00 24.56 25.31 25.31
Am Eagle, 200 oz Min 1.00 25.71 27.46 27.46
SPOT PLATINUM: 1,531.20      
PLATINUM Fine Tr.Oz. BID ASK $/oz
Plat. Platypus 1.00 1,541.20 1,571.20 1,571.20
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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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