The Moneychanger
Daily Commentary
Wednesday, 2 October a.d. 2013 Browse the commentary archive

A couple of items before I start today:

1. I will never again voluntarily fly on American Airlines. They change flights without proper notice, and even if you have booked 6 months in advance won't cancel the flight or want to give you a voucher. That's it, I've had it. Be warned American Airlines will do the same to you. Can't trust 'em.

2. BEWARE NUMISMATIC COIN DEALERS. There are indeed honest numismatic coin dealers (I know some) & collecting coins is a wonderful pastime. However, numismatic coins are generally very poor investments as gold & silver, because they UNDERperform simple bullion items. Beware especially large firms, firms that advertise heavily, firms that use boiler room salesmen, firms that advertise their religion, and salesmen who push numismatics as protection against gold confiscation (will never happen, this is not 1934) or tell you numismatics are "not reportable." These people mark up coins 45% or more over wholesale so they can pay the salesman a 25% commission. When you buy, you are behind the eight ball because gold has to rise at least 35% for you to break even. With bullion items you pay a 3-1/2% to 1.5% commission, and your entire transaction cost is covered when silver or gold rise only 10%. I have seen too many innocent people robbed by these numismatic firms, so you'd better watch out for yourselves.

Now to today's markets.

US dollar index finally broke 80 today, and ended down 27.7 basis points (0.36%) at 79.903, near the day's low. News reports had a picture of ECB head criminal Mario Draghi smirking like a jailhouse rat with numbers under his chin. ECB equivalent of the FOMC voted to keep the refinancing rate unchanged, and Draghi commented that he would use all sorts of measure to "battle weak growth & high unemployment." This boils down virtually to guaranteeing that the ECB will inflate more & further depreciate the euro, but illogical as it is, the euro rose 0.43% to $1.3585. It gets worse: deeper you dig, the more corpses you find buried in Euroland. Hard as it is to fathom, their banks are even rottener than US banks. Yen rose 0.72% to 102.74 cents/Y100.

Y'all remember this about markets: sudden reversals, especially sudden reversals back to back, mean something. Your job is to figure out what.

Dow in Gold & Dow in Silver reversed sharply upward yesterday, then today reversed just as sharply down. Message? 'Tain't strong enough to make good on the threat.

Stocks weren't as dramatic in nominal terms as they were in metal terms, but they couldn't make good on yesterday's rise, either. Dow gave back 58.56 (0.39%) to 15,133.14, while the S&P500 scraped off 1.13 (0.7%) to 1693.87. They aim to drop further.

Today silver & gold reversed yesterday's downward reversal. I would chortle and gloat and grin, but y'all would see the crow feathers between my teeth left there from having to eat so much crow so often before. Just leave it as "my suspicions of strength in silver and gold yesterday were confirmed today."

HOWEVER, both metals need to improve today's gains immediately. No jacking around, coughing & dilly-dallying, get moving.

Gold re-took $34.60 & jumped through 2 resistance levels to close at $1,320.60. Silver bounced 72.2 cents & closed at 2184.6c.

These closes take both metals barely back above their short term uptrend lines. Silver touched its 50 DMA but closed below it, gold is still reaching for its 20 DMA ($1,338.63), which flashed the bad juju of crossing below the 50 DMA two days ago. A lot of weight is pushing against silver & gold, but there are whispers of better things to come soon, not the least of those today's strong reversals. Y'all recall that you saw similar action (sharp reversal) at the June lows. Also, gold posted the first half of a key reversal today -- break into new low territory for the move with a higher close on the day -- but must confirm that tomorrow with a higher close. Now THAT would be a strong sign.

Y'all be patient. Two of the world's most powerful forces, the Federal Reserve & the yankee government, are on gold and silver's side, and are bound to keep on driving 'em higher.

On 2 October 1980 my third son (of 5) and fourth child (of 7) was born, Wright -- all thanks & praise to God.

On 2 October 1835 the first battle of the Texas Revolution took place near the Guadalupe River when Texicans defeated a Mexican cavalry unit. I don't know how many Tennesseans were among 'em, but there were several, I don't doubt.,

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
2-Oct-13 Price Change % Change
Gold, $/oz 1,320.60 34.60 2.69%
Silver, $/oz 21.85 0.72 3.42%
Gold/Silver Ratio 60.450 -0.428 -0.70%
Silver/Gold Ratio 0.0165 0.0001 0.71%
Platinum 1,389.80 8.10 0.59%
Palladium 720.20 2.30 0.32%
S&P 500 1,693.87 -1.13 -0.07%
Dow 15,133.14 -58.56 -0.39%
Dow in GOLD $s 236.88 -7.31 -3.00%
Dow in GOLD oz 11.46 -0.35 -3.00%
Dow in SILVER oz 692.72 -26.45 -3.68%
US Dollar Index 79.90 -0.28 -0.35%
IMPORTANT NOTE: The following are wholesale, not retail, prices. To figure our retail selling price, multiply the "ask" price by 1.035. To figure our retail buying price, multiple the "bid" price by 0.97. Lower commissions apply to larger orders, higher commissions to very small orders.
SPOT GOLD: 1,317.20      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,350.13 1,360.01 1,360.01
1/2 AE 0.50 671.26 693.84 1,387.67
1/4 AE 0.25 335.63 353.50 1,414.01
1/10 AE 0.10 138.20 144.23 1,442.33
Aust. 100 corona 0.98 1,284.66 1,294.66 1,320.82
British sovereign 0.24 311.93 323.93 1,376.08
French 20 franc 0.19 245.92 252.92 1,354.69
Krugerrand 1.00 1,338.28 1,349.28 1,349.28
Maple Leaf 1.00 1,332.20 1,347.20 1,347.20
1/2 Maple Leaf 0.50 757.39 691.53 1,383.06
1/4 Maple Leaf 0.25 335.89 352.35 1,409.40
1/10 Maple Leaf 0.10 139.62 143.57 1,435.75
Mexican 50 peso 1.21 1,580.08 1,591.15 1,319.69
.9999 bar 1.00 1,321.81 1,332.81 1,332.81
SPOT SILVER: 21.72      
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 16,133.98 16,383.98 22.91
US 40% silver 1/2s 0.30 6,214.18 6,364.18 21.57
100 oz .999 bar 100.00 2,161.50 2,241.50 22.42
10 oz .999 bar 10.00 222.15 223.15 22.32
1 oz .999 round 1.00 21.82 22.62 22.62
Am Eagle, 200 oz Min 1.00 22.97 24.52 24.52
SPOT PLATINUM: 1,389.80      
PLATINUM Fine Tr.Oz. BID ASK $/oz
Plat. Platypus 1.00 1,414.80 1,454.80 1,454.80
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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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