The Moneychanger
Weekly Commentary
Friday, 20 September a.d. 2013 Browse the commentary archive
Here's the weekly scorecard:
  13-Sep-13 20-Sep-13 Change % Change
Silver, cents/oz. 2,167.00 2,187.60 20.60 1.0
Gold, dollars/oz. 1,308.40 1,332.50 24.10 1.8
Gold/silver ratio 60.378 60.912 0.530 0.9
Silver/gold ratio 0.0166 0.0164 -0.0001 -0.9
Dow in Gold Dollars (DIG$) 242.93 239.70 -3.23 -1.3
Dow in gold ounces 11.75 11.60 -0.16 -1.3
Dow in Silver ounces 709.56 706.30 -3.25 -0.5
Dow Industrials 15,376.06 15,451.09 75.03 0.5
S&P500 1,687.99 1,709.91 21.92 1.3
US dollar index 81.47 80.45 -1.02 -1.2
Platinum 1,443.60 1,432.10 -11.50 -0.8
Palladium 697.50 720.30 22.80 3.3

For a week that wore so hard on the nerves & posted such big jumps Wednesday, it showed little difference in the end. For the week gold & silver, which starved my ego today and fed my humility, in fact ended higher by 1% and 1.8%. Yes, higher. Stocks rose, but the Dow rose only one-half percent and the S&P500 1.3%. The white metals, platinum & palladium, gainsaid each other, platinum lower & palladium higher. Biggest loser was the dollar index, where a 1.2% loss is a big move, and punctured long established support.

How'd y'all like that taste of Federal Reserve stability this week? Right, the Fed stabilizes like a tornado. Wednesday the markets that supposedly thrive on a weak dollar soared on the FOMC's announcement they would not be tapering any time soon, say, before the 21st century ends. Think of it this way: yesterday Ben Bernanke sent a personal note to you, me, and everybody in the US reading, "We are going to keep on creating money -- lots of money."

Wherefore, burn this bottom line into your brain: gold and silver will rise. After this indecision ends, probably by the time October expires, gold & silver will begin a rally that will reach far higher, and move faster, than anything you've seen so far. You have Ben Bernanke's word on it.

Stocks stumbled badly today. Dow lost 185.44 (1.19%) to 15,451.09 while the S&P500 gave up 12.43 (0.72%) to 1,709.91. This leaves a really stinking Big Bird footprint on the chart: bit jump Wednesday, little toe of a fall yesterday, big fall today taking them below where they started. Feels very toppy and sets up stocks for visit to 50 day moving averages (15,305 & 1679).

After yesterday's sharp fall, the Dow in Gold & Dow in Silver rose a bit today, but remain firmly in a downtrend from the June Highs. Odd -- the Dow in gold is above its 50 DMA (11.42 oz) but the Dow in Silver remains below its 50 DMA (710.57 oz). Dow in gold today rose 1.5% to 11.596 oz (G$239.70 gold dollars). Gaining 5%, the Dow in silver added 33.36 oz to end at 706.30.

US Dollar Index gained 11.1 basis points (0.14%) today but did nothing to prettify its hair-raising chart. Wednesday's fall dragged the dollar index under water. It punctured support that had held since May 2011. Dollar index has a chance of catching at 79.50, but beneath that it will fly like an anvil pushed out of a 747 Jumbo Jet.

Wednesday the euro punched through resistance stretching back to February of this year, poked its head around, and fell back to that line. Today the euro lost a piddling 0.08% to end at $1.3523. Should the euro not fall back through that resistance, 'twill point toward $1.3700.

Japanese yen keeps trading sideways, carefully managed, I reckon, by the Japanese Nice Government Men. Gained 0.14% today to 100.68 cents/Y100.

Gold & silver acted just like the stock market today, giving up most of the gains from Wednesday. Silver gained 8% yesterday, and gave up 5.9% or 136.6 cents today to close Comex at 2187.6 cents. Gold gained 4.7% yesterday, and lost 2.7% today, or $36.90 closing at $1,332.50.

I am tempted to say gold's failure to hold above $1,350 support dooms it to a large fall. That was terrible behavior. Then I look at the chart. Last low hit $1,291.50. Support lies at $1,325 & just above $1,300. I stared longer. Last three days might mark the beginning of a long down leg that runs to $1,240 or even lower. But then again, it might be only the bottom of the first leg up in a new upleg. The former is more likely, but the latter is possible. MACD & RSI are neutral. Gold also stands below its 50 DMA ($1,342.56), another negative.

Silver, on the other hand, at 2187.6c stands above its 2170c 50 DMA. If I were silver & filling out an upside down head and shoulders, I'd do exactly what silver has done. But if silver closes below the last low at 2126, that formation will be ruled out.

In the end, both silver & gold stand at the same crossroads. If gold falls through $1,291.50 and silver through 2125c, they will drop toward $1,240 and 1900c. If they break not those marks, they will turn & climb.

Come to think of it, the present debt ceiling war between Bernard O'Bama & the Lilliputian congress might provide enough hot air to draft gold up.

First two days of next week are critical. If silver & gold hold, they'll rally. If not, they could decline into an October low.

On 20 September 1869 Jay Gould and James Fisk began cornering the gold market on the New York Gold Exchange. Gould had recruited President Grant's brother-in-law, Abel Corben, who got Grant to appoint Daniel Butterfield assistant Treasurer. Butterfield would tip Gould & Fisk off when the government intended to sell Gold. When Grant sobered up long enough to find out what was happening, he ordered the sale of $4 million worth of gold, sending the gold price plummeting.

In other words, it was business as usual in Washington, DC, even back then.

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
20-Sep-13 Price Change % Change
Gold, $/oz 1,332.50 -36.50 -2.7
Silver, $/oz 21.88 -1.36 -5.9
Gold/Silver Ratio 60.912 -1.630 -2.6
Silver/Gold Ratio 0.0164 -0.0010 -5.8
Platinum 1,432.10 -40.30 -2.7
Palladium 720.30 -16.25 -2.2
S&P 500 1,709.91 -12.43 -0.7
Dow 15,451.09 -185.44 -1.2
Dow in GOLD $s 239.70 3.62 1.5
Dow in GOLD oz 11.60 0.17 1.5
Dow in SILVER oz 706.30 33.36 5.0
US Dollar Index 80.45 0.11 0.1
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GOLD Fine Tr.Oz. BID ASK $/oz
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British sovereign 0.24 314.63 326.63 1,387.55
French 20 franc 0.19 248.05 255.05 1,366.09
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US 40% silver 1/2s 0.30 6,223.03 6,373.03 21.60
100 oz .999 bar 100.00 2,164.50 2,244.50 22.45
10 oz .999 bar 10.00 222.45 223.45 22.35
1 oz .999 round 1.00 21.85 22.65 22.65
Am Eagle, 200 oz Min 1.00 23.00 24.55 24.55
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PLATINUM Fine Tr.Oz. BID ASK $/oz
Platinum Platypus 1.00 1,457.10 1,497.10 1,497.10
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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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