The Moneychanger
Daily Commentary
Thursday, 26 September a.d. 2013 Browse the commentary archive

Questioning my urgent encouragement yesterday to get out of debt, one reader wrote, "I thought it's good to be a borrower during periods of high inflation. I was thinking of keeping a modest mortgage on this place."

Logic here is that you will repay in dollars cheaper than you borrowed. While that is abstractly true, there's no guarantee that those cheaper dollars will come easier to you than today's dollars. Suppose your wages don't keep pace with inflation, as they never do.

Ignoring also the larceny that dwells in that logic, my get-out-of-debt warning springs from a far deeper motive: you can't break a man that don't borrow. Debt makes you vulnerable because unlike the yankee government, you can't print dollars. You must earn dollars to make payments on the debt, or lose the collateral, maybe even go bankrupt. Problem with a "modest" mortgage is that debt, like whiskey, intoxicates. We take on a little, it makes us feel richer, stronger, braver, better looking, smarter, so we keep adding modest amounts until we're debt-drunk & have sold ourselves into lifetime debt slavery.

Getting out of debt won't deliver you entirely from our lunatic financial & economic system, but it will extricate you from the banks, & put your feet on your own, owned dirt, small and lowly tho it be. You'll be that rarest of creatures today: a debtl-free man.

To me that outweighs the delicious pleasure of cheating a cheater, i.e., paying a bank back with cheaper dollars.

Up one day, down the next, back & forth but without the order or purpose of a pendulum. That's the markets.

Stocks rose because . . .they've been falling for 5 days? Dow hit its 50 day moving average, so we can credit that with the bounce. I suspect buyers are holding off waiting for the government goofs to do something about the debt ceiling.

Dow rose 0.36% (55.04) to 15,328.30. S&P500 rose 5.9 (0.35%) to 1,698.67. May be forming a bullish falling wedge, which would reverse the market upward.

Dow in gold rose slightly, 1.29% to 11.581 oz (G$239.40 gold dollars). Dow in silver gained 0.35% (5.9 oz) to 705.72 oz. Downtrends remain unbroken.

US dollar index rose 20.3 basis points or 0.26%. Unless the dollar can climb above 81.50, it remains in peril of falling through 79.50 & jumping off the Empire State Building.

The timid euro can't pull away from resistance line around $1.3500. Lost 0.27% today to $1.3488. One expects that a punch through resistance as it did about a week ago would carry it higher, but it hasn't. That signals weakness. RSI has rolled over. Surely the euro is set in slippery places.

Yen remains in the downtrend that began in early August. Lost 0.51% today to end at 101.05 cents/Y100 and again below its 50 DMA.

Silver backed off 11.8 cents to 2172c. Gold crawfished $12.30, dropping to $1,323.60.

Looking at yesterday and today, gold may have made an island reversal downward. Yesterday it gapped up from about $1,325 to $1,336, traded sideways above $1,332 yesterday and today, then today from $1,332 gapped down to $1,321.60. Clearly it had not yet strength enough to poke through resistance above $1,337, but was strong enough to hold on above $1,320. Gold's as confused as other markets.

So is silver, yet both gold and silver have established a short term uptrend that began with the low on 18 September. Gold's rise has been blocked by $1,340 and silver's by 2200c, but both have been making higher lows. The pattern is a rising flat-topped triangle, a form that usually breaks out upside.

Both metals remain in suspense. My assumption continues unbroken that the low for the 2011-2013 correction was posted on 27 June 2013.

Milestones of American Culture: On 26 September 1962 "The Beverly Hillbillies" premiered on ABC-TV.

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
26-Sep-13 Price Change % Change
Gold, $/oz 1,323.60 -12.30 -0.92%
Silver, $/oz 21.72 -0.12 -0.54%
Gold/Silver Ratio 60.939 -0.234 -0.38%
Silver/Gold Ratio 0.0164 0.0001 0.38%
Platinum 1,410.20 -18.10 -1.27%
Palladium 722.15 -2.05 -0.28%
S&P 500 1,698.67 5.90 0.35%
Dow 15,328.30 55.04 0.36%
Dow in GOLD $s 239.40 3.06 1.29%
Dow in GOLD oz 11.58 0.15 1.29%
Dow in SILVER oz 705.72 6.33 0.91%
US Dollar Index 80.55 0.20 0.25%
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SPOT GOLD: 1,324.25      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,356.03 1,367.29 1,367.29
1/2 AE 0.50 674.86 697.55 1,395.10
1/4 AE 0.25 337.43 355.40 1,421.58
1/10 AE 0.10 138.94 145.01 1,450.05
Aust. 100 corona 0.98 1,291.54 1,301.54 1,327.83
British sovereign 0.24 313.60 325.60 1,383.17
French 20 franc 0.19 247.24 254.24 1,361.74
Krugerrand 1.00 1,342.79 1,353.79 1,353.79
Maple Leaf 1.00 1,339.25 1,354.25 1,354.25
1/2 Maple Leaf 0.50 761.44 695.23 1,390.46
1/4 Maple Leaf 0.25 337.68 354.24 1,416.95
1/10 Maple Leaf 0.10 140.37 144.34 1,443.43
Mexican 50 peso 1.21 1,585.34 1,599.65 1,326.74
.9999 bar 1.00 1,328.88 1,339.88 1,339.88
SPOT SILVER: 21.74      
SILVER Fine Tr.Oz. BID ASK $/oz
VG+ Morgan $B4 1905 0.77 26.00 29.00 37.91
VG+ Peace dollar 0.77 24.00 27.00 35.29
90% silver coin bags 0.72 16,187.60 16,437.60 22.99
US 40% silver 1/2s 0.30 6,221.55 6,371.55 21.60
100 oz .999 bar 100.00 2,164.00 2,244.00 22.44
10 oz .999 bar 10.00 222.40 223.40 22.34
1 oz .999 round 1.00 21.84 22.64 22.64
Am Eagle, 200 oz Min 1.00 22.99 24.54 24.54
SPOT PLATINUM: 1,410.20      
Plat. Platypus 1.00 1,435.20 1,475.20 1,475.20
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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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