The Moneychanger
Daily Commentary
Tuesday, 1 October a.d. 2013 Browse the commentary archive

It's amusing to watch Obama ply the Law of Peremptory Accusation against the Republicans. That's the law kids use that says you always accuse the other person of doing what you are doing before he has the chance to accuse you. Obama is accusing the Republicans of shutting down the government, while all they want to do is shut off Obamacare, which far less than half the people want. Amazing how tyrants don't care anything about much exalted "democracy" or "majority rule" when they don't get their way.

WARNING: This statement is not to be taken as an endorsement of the Republican Party. They're as shamelessly self-promoting as the Democrats, they just happen to be right on this one thing.

Today was complicated. I'll explain.

Stocks have been withering under the pressure of the approaching government shutdown, but when it in fact arrived, they rose. Huh? Buy the rumor, sell the news, or vice versa. The event has taken place, the world didn't end, buy stocks again.

Dow rose 62.03 or 0.41% to 15,191.70. S&P500 added 13.45 or 0.8% to end at 1,695. These are not big gains but were big enough to pull the Dow back toward its 20 & 50 DMAs above, and the S&P500 above its 50 DMA. That well could mark the end of stocks' decline since mid-September, but they need to confirm that with a couple of days' higher trading.

A sharp down day for metals with higher stock prices meant that the Dow & Gold & Dow in Silver rose. Dow in gold moved up 3.57% to 11.813 oz (G$244.20). Dow in Silver gained 2.94% to 719.17 oz.

Those closes took both above their 50 day moving averages, so momentum is firmly up. Put this into perspective. DiG's June high was 12.51 oz; DiS's was 816.77 oz. After a sharp drop like August's, markets normally rebound, so there's nothing too surprising above this. And this correction does not change the reversal to a downtrend.

US Dollar index keeps grinding toward 80 & a rendezvous with destiny. Today it lost another 3.5 basis points (0.05%) for an 80.189 close. That smells a little bogus to me -- there's a whiff of Nice Government Men there, just a tiny sulfurous whiff. In the midst of the government shutdown, dollar has barley moved down a few basis points a day. Last two days the euro has barely moved, and closed today at $1.3527 -- despite a close through an upper channel line that should have sent it running up like a bunny. That suggests the European NGM have been busy helping the US NGM to prevent any sort of panic from the dollar into the euro. Yen paid no attention and closed at 102.11 cents/Y100, up 0.33% but merely lazily trending up,.

Silver & gold dropped today, but as I said, it's complicated.

Gold broke $1,325 support about 11:00 and fell clean through $1,300 quickly, with a low at $1,282.40. The $1,286 close was near the low.

Here's where it gets complicated. Silver's break & low took it below 2100c to 2063cents, but it refused to stay there & climbed back above 2100c and closed barely above an internal support line. Still, it broke the downtrend line from the August low. See the chart at

Gold formed an upside down head & shoulders & harrowing as today's outcome was, it only took gold back to the neckline. Look here at the chart,

More complication: the gold/silver ratio today FELL from 61.253 yesterday to 60.879 today. That gainsays gold's weakness. When metals are weak, the ratio usually rises, because silver, the smaller & more volatile market, tends to be weaker than gold. When metals are strong & rising, the ratio drops. Only one day's performance, but in the teeth of gold's fainting spell, silver bounced back & the ratio rose, & that says something.

Everything seems to be pointing to lower silver & gold, but these non-confirmations remain a burr under that saddle. Markets like to surprise, maybe silver & gold will this time. If not, gold could drop to $1,280, or even lower, toward that June low. Silver finds support at 2050c.

Just in case, I bought a little gold today.

Here's a warning for y'all: remember the lemming. Normally a sensible rodent, he lives out his life in the frozen north, gnawing on vegetation & living a sensible life. Suddenly the whole lot of 'em takes a notion to go, someplace, anyplace, & they migrate in herds, dying by the thousands along the way.

Today's performance is bound to cast down normally sensible silver & gold investors, even those with a firm grasp of the market's realities -- that the Fed & government will keep borrowing, spending, creating new dollars & gutting its value, sending silver & gold higher -- and send them crawling off into their beds to sob themselves to sleep because they don't belong to the herd of migrating lemmings who trust their central bank & government to do the impossible.

Me, I don't want to be no lemming. Them nasty things have fleas & jump off cliffs.

On 1 October 1908 the Ford Model T first went on sale for $850 (about $22,000 today, thanks to inflation). Eventually Ford sold over 15 million Model Ts, all of them black. The Model T was the beginning of the end.

On 1 October 1867 Karl Marx big book (I can't bring myself to call it his "masterwork," it's too silly), Das Kapital, was published. It contained Marx' critique of capitalism & his predictions that capitalism's inherent contradictions would bring it down and through the dictatorship of the proletariat hasten the end of history when the state would wither away. Today, except in universities (where many thick people yet dwell), communism has withered away, finance capitalism has us all by the throat, capitalists own the government, & free enterprise is dead as a hammer. Marx didn't get much right. And he was NOT related to Groucho or Harpo.

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
1-Oct-13 Price Change % Change
Gold, $/oz 1,286.00 -40.50 -3.05%
Silver, $/oz 21.12 -0.53 -2.46%
Gold/Silver Ratio 60.879 -0.375 -0.61%
Silver/Gold Ratio 0.0164 0.0001 0.62%
Platinum 1,381.70 -26.40 -1.87%
Palladium 717.90 -8.25 -1.14%
S&P 500 1,695.00 13.45 0.80%
Dow 15,191.70 62.03 0.41%
Dow in GOLD $s 244.20 8.42 3.57%
Dow in GOLD oz 11.81 0.41 3.57%
Dow in SILVER oz 719.17 20.53 2.94%
US Dollar Index 80.19 -0.04 -0.04%
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GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,320.65 1,331.62 1,331.62
1/2 AE 0.50 657.24 679.35 1,358.70
1/4 AE 0.25 328.62 346.12 1,384.49
1/10 AE 0.10 135.31 141.22 1,412.22
Aust. 100 corona 0.98 1,257.84 1,267.84 1,293.45
British sovereign 0.24 305.42 317.42 1,348.42
French 20 franc 0.19 240.79 247.79 1,327.19
Krugerrand 1.00 1,310.34 1,321.34 1,321.34
Maple Leaf 1.00 1,304.70 1,319.70 1,319.70
1/2 Maple Leaf 0.50 741.58 677.09 1,354.19
1/4 Maple Leaf 0.25 328.87 344.99 1,379.98
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Mexican 50 peso 1.21 1,545.53 1,557.99 1,292.19
.9999 bar 1.00 1,294.21 1,305.21 1,305.21
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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 15,701.40 15,951.40 22.31
US 40% silver 1/2s 0.30 6,035.70 6,185.70 20.97
100 oz .999 bar 100.00 2,101.00 2,181.00 21.81
10 oz .999 bar 10.00 216.10 217.10 21.71
1 oz .999 round 1.00 21.21 22.01 22.01
Am Eagle, 200 oz Min 1.00 22.36 23.91 23.91
SPOT PLATINUM: 1,381.70      
Plat. Platypus 1.00 1,406.70 1,446.70 1,446.70
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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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