The Moneychanger
Daily Commentary
Thursday, 17 October a.d. 2013 Browse the commentary archive

Y'all ever been around a married couple who were always contradicting each other? She no more than opens her mouth to say something than he corrects her. He starts to say something & she nay-says it. Doesn't take much of that to make you start looking for the exits, because this is gonna end in a scrap and maybe even a cutting.

So it is when markets that ought to agree -- "confirm" -- instead gainsay. Behold, that happened loudly in stocks today when the S&P500 closed at a new all-time-since-the-cosmos- was-formed high at $1,733.15 (up 11.61 or 0.67%) but the Dow closed d-o-w-n 2.18 (0.01%) at 15,371.65, below its 18 September 2013 all-time high by 305.29. This is not the stuff from which beautiful marriages --or rallies -- are built.

But shucks, what do I know? I'm just a natural born fool from Tennessee.

Today's big jumps in silver & gold brought down the Dow in Gold & Dow in Silver once again. Both stand a gnat's eyebrow from falling through their 20 DMAs. Dow in gold today closed down 3.09% at 11.621 oz (20 DMA is 11.60 oz). Dow in silver lost 2.68% or 19.29 oz and closed at 701.81 oz. 20 DMA standeth at 699.85 oz. Relative Strength Index & MACD have also turned down. Unless the DiG & DiS suddenly reverse & shoot sunward, this lower peak of the last 10 days confirms the reversal downward in June.

S&P500 today hit & slightly punctured its overhead trendline. It gained 0.67% or 11.61 for a 1,733.15 close. Dow closed down 2.18 at 15,371.65, nowhere near its last high. It appears the debt-ceiling driven rally yesterday was a classic case of "sell the news."

US dollar index slammed down 1.1% or 85.5 basis points to 79.613. To give you an idea what that means, the last low was 79.72. If the dollar falls past that mark, it could flutter through the air all the way to 73.

Euro finally worked up enough courage to close unequivocally higher. It gapped up and ended at $1.3676, 1.07% higher. Minimum target is probably at least $1.3710, the last high. Yen gapped up, too, but not as enthusiastically. Oh, it was enough to jump over the 20 & 50 DMA's, but just to the middle of the last nine weeks trading range. Ended at 102.15, up 0.88%.

Oh, I want to crow really hard, but I'm choking it back. In the aftermath of the debt-ceiling deal, gold jumped $40.70 (3.2%) to $1,322.70. That leaves the impression that the $1,251 intraday low on Tuesday was THE low for this move & the start of a new rally. That needs to be confirmed by gold closing over $1,330.80, the October high, followed by more higher prices.

Gold did more. Today it closed above its 20 DMA at 1,309.33. 50 DMA hovers above at $1,342.76. A close above $1,375 will send the bears scurrying for their dens & the security of a government lunch.

For the time being, absent a close below $1,272, today's movement confirms that the upside down head & shoulders we've been watching really is at work. Gold will hit the overhead neckline about $1,410. A breakout through that point turns all forces in gold's favor.

Here's a little more icing: on the weekly chart, gold closed today above its 18 week moving average (1,318.32). Barely, but above. That upside-down H&S targets $1,675.

Blast! I nearly forgot. Gold also broke out of its falling wedge formation. That bullish formation, remember, usually resolves with an upside breakout.

Silver proved that EoD chart key reversal on Tuesday by jumping 2.7% today or 58.3 cents to 2190.3 -- comfortably above the 20 DMA at 21.70, & within clipping distance of the 50 DMA at 22.42.

Silver also escaped its falling wedge. The neckline of silver's upside down H&S stands about 2490c, & it could make that jump lightning fast.

Unless we see closes below $1,272 & 2090c, silver & gold have again begun rallying. In the next few days they need to advance sharply to confirm that.

The debt-ceiling farce forespoke the future loud & clear: spending by inflation will continue and grow. Reform is impossible and default inevitable, whether outright or by inflation. I asked a friend today why people can't understand that. He answered, "Because the consequences are too devastating." Too devastating for most people even to ponder. Let him who has ears to hear, hear.

On 17 October 1781 Lord Cornwallis, bottled up at Yorktown with French & American forces in front and a French fleet behind, asks for capitulation terms. The surrender ceremony took place on 19 October but Cornwallis missed it, claiming to be ill. American forces captured over 7,000 British soldiers, and the victory at Yorktown marked the victorious end of the American Revolution. The unthinkable had in fact happened.

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
17-Oct-13 Price Change % Change
Gold, $/oz 1,322.70 40.70 3.17%
Silver, $/oz 21.90 0.58 2.73%
Gold/Silver Ratio 60.389 0.258 0.43%
Silver/Gold Ratio 0.0166 -0.0001 -0.43%
Platinum 1,431.90 36.70 2.63%
Palladium 736.80 24.25 3.40%
S&P 500 1,733.15 11.61 0.67%
Dow 15,371.65 -2.18 -0.01%
Dow in GOLD $s 240.24 -7.66 -3.09%
Dow in GOLD oz 11.62 -0.37 -3.09%
Dow in SILVER oz 701.81 -19.29 -2.68%
US Dollar Index 79.61 -0.86 -1.06%
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: 1,319.10      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,356.03 1,361.97 1,361.97
1/2 AE 0.50 672.23 694.84 1,389.67
1/4 AE 0.25 336.12 354.01 1,416.05
1/10 AE 0.10 138.40 144.44 1,444.41
Aust. 100 corona 0.98 1,286.52 1,296.52 1,322.71
British sovereign 0.24 312.38 324.38 1,377.99
French 20 franc 0.19 246.28 253.28 1,356.59
Krugerrand 1.00 1,342.84 1,353.84 1,353.84
Maple Leaf 1.00 1,334.10 1,349.10 1,349.10
1/2 Maple Leaf 0.50 758.48 692.53 1,385.06
1/4 Maple Leaf 0.25 336.37 352.86 1,411.44
1/10 Maple Leaf 0.10 139.82 143.78 1,437.82
Mexican 50 peso 1.21 1,582.36 1,593.44 1,321.59
.9999 bar 1.00 1,323.72 1,334.72 1,334.72
SPOT SILVER: 21.78      
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 16,284.13 16,534.13 23.12
US 40% silver 1/2s 0.30 6,231.88 6,381.88 21.63
100 oz .999 bar 100.00 2,167.50 2,247.50 22.48
10 oz .999 bar 10.00 222.75 223.75 22.38
1 oz .999 round 1.00 21.88 22.68 22.68
Am Eagle, 200 oz Min 1.00 23.03 24.58 24.58
SPOT PLATINUM: 1,431.90      
Plat. Platypus 1.00 1,456.90 1,496.90 1,496.90
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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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