The Moneychanger
Weekly Commentary
Friday, 18 October a.d. 2013 Browse the commentary archive
Here's the weekly scorecard:
  11-Oct-13 18-Oct-13 Change % Change
Silver, cents/oz. 2,121.50 2,186.90 65.40 3.1
Gold, dollars/oz. 1,268.00 1,314.40 46.40 3.7
Gold/silver ratio 59.769 60.103 0.330 0.6
Silver/gold ratio 0.0167 0.0166 -0.0001 -0.6
Dow in Gold Dollars (DIG$) 248.41 242.19 -6.21 -2.5
Dow in gold ounces 12.02 11.72 -0.30 -2.5
Dow in Silver ounces 718.22 704.18 -14.05 -2.0
Dow Industrials 15,237.11 15,399.65 162.54 1.1
S&P500 1,703.20 1,744.50 41.30 2.4
US dollar index 80.43 79.63 -0.79 -1.0
Platinum 1,372.90 1,434.80 61.90 4.5
Palladium 713.05 739.65 26.60 3.7

Sure enough, when the cloud of the debt-ceiling kerfuffle passed over the market, stocks rose and the dollar fell. Surprising the Great & Mighty, silver & gold took that news quite well, thank you very much. By the way, the debt-ceiling deal changed nothing, reformed nothing, cured nothing. Federal government spending remains out of control, and federal debt has grown so large it will never be paid. Default is certain, only the date is uncertain. The yankee government will either repudiate the debt outright or inflate it away. Right now, they're inflating it away, & that will continue. If you think "This will never happen -- the dollar is the world's reserve currency!" or "America has the world's strongest economy," well, you just keep thinking that, and wait for reality to catch up with your error.

Stocks indices argued yesterday but got in line today. Dow gained 28 (0.18%) for a 15,399.65 close. S&P500 rose 11.35 (0.65%) to 1,744.50. S&P500 gapped up & made another all -time high, punching barely through the overhead trend line. Dow remains 300 points below its overhead trendline.

S&P500 could spurt further still, but odds are against much more rise here. It has formed a rising wedge from which it will most likely fall down. Right now it's going higher because -- its price is rising. In other words, it's a mania. I looked at Google today, which just rose above $1,000/share. It's price/earnings ratio is 29.15, another way of saying it would pay back your principle in 29.15 years. Or it pays a 0.25% return roughly. Whoa! That's not "dividend yield," because Google pays NO dividend.

This is a greater fool market -- "Buy because prices are rising."

By the way, some folks believe that inflation will also help stocks. Constantino Bresciani-Turroni wrote The Economics of Inflation examining the German hyperinflation. He found that stocks did not keep pace with inflation.

Dow in gold and Dow in silver both fell for the week, but rose a tiny bit today. Dow in silver ended the week at 704.18 oz, down 2% for the week. Dow in gold closed 11.716, down 2.5% this week. Both indicators are still locked in a downtrend, good news for silver & gold investors. Need to see them close below their 20 DMAs, now at 699.74 oz & 11.60.

US dollar index is flirting with the 79.60-ish area that forms the lip of a cliff. Should it fall over that, it won't land before 73. Lost 0.7% today, 5.1 basis points, to 79.634.

Euro rose slightly, 0.85 to $1.3687. Put yourself in the place of the European Nice Government Men, manipulating the euro. Would you really want your currency to rise against the dollar, pricing your goods out of markets around the world and opening the door to cheaper US goods? Maybe the deal's been struck with the US NGM to let the euro rise and dollar fall, but why? Sooner or later that tight shoe will begin to pinch.

Yen rose 0.16 today to 102.32. Nipponese NGM doing their best to keep it steady, regardless what the dollar does.

All this explains why I wouldn't buy any scrofulous fiat currencies even with y'all's money. Game is wholly rigged, & they're playing "competitive devaluation."

Gold gave back $8.30 of yesterday's dramatic $40 .70 gain & closed Comex at $1,314.40. Silver coughed up 3.4 cents of yesterday's 58.3 cent gain for a 2186.9c close. Still, yesterday's gains powerfully confirmed the Key Reversal on Tuesday and left both silver & gold above their 20 day moving averages, first tripwire of upward momentum.

Behold, both silver & gold have also formed bullish falling wedge patterns, & yesterday's surge released them on their own recognizance ("broke them out") of that pattern. Unless contradicted by closes below 2090 and 1872, we have to assume that silver & gold are rallying.

If they close below those points, both will revisit the June lows.

Up above, for all its pep silver has not been able to close above 2200c & stay there. Now silver must show its cards or fold, rising above 2200c and 2250c (50 DMA is at 2245c) in short order. Gold must confirm a rally by closing above $1,332 as the first step of an advance. 50 DMA awaits then at $1,343.

Gold rose 3.7% for the week, silver 3.1%. Respectable, but the weekly charts still show both below their 20 week moving averages. Gold/Silver ratio is behaving by not rising, but I would like to see silver outpacing gold.

I saw an internet dust-up today about JP Morgan Chase Bank informing its customers it would limit cash withdrawals to $50,000/month & limit overseas wires. Various voices found in this harbingers of exchange controls & other tyrannies. Might be, but I have to ask, Why would you leave your money in JPM anyway? Do you simply enjoy feeding your enemy? Why not put your money in a small bank you might be able to trust at least a little? And besides, why don't you have at least three months' cash needs in a safe place OUTside the banking system anyway? As Catherine Fitts says, "Come clean!" Stop leaving your money in the banks that are destroying you and your country.

On 18 October French King Louis XIV revoked the Edict of Nantes, granted by King Henry IV in 1598 to guarantee the Protestant Huguenots religious liberty, civil rights, and security after civil wars. By the Revocation Louis sent thousands of Huguenots -- much of France's middle class -- fleeing the country to Germany, Holland, South Africa, South Carolina, and Virginia.

On 18 October 1469 King Ferdinand of Aragon married Queen Isabella of Castile, uniting Spain into one crown under los Reyos Catholicos. They pursued the 700 year war to expel the Moors from Spain, and succeeded in 1492, the same year Isabella supported Christopher Columbus' voyage. That support brought Spain vaster wealth & empire than anyone in 1492 could have imagined.

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
18-Oct-13 Price Change % Change
Gold, $/oz 1,314.40 -8.30 -0.6
Silver, $/oz 21.87 -0.03 -0.2
Gold/Silver Ratio 60.103 -0.379 -0.6
Silver/Gold Ratio 0.0166 -0.0000 -0.1
Platinum 1,434.80 2.90 0.2
Palladium 739.65 2.85 0.4
S&P 500 1,744.50 11.35 0.7
Dow 15,399.65 28.00 0.2
Dow in GOLD $s 242.19 1.98 0.8
Dow in GOLD oz 11.72 0.10 0.8
Dow in SILVER oz 704.18 2.37 0.3
US Dollar Index 79.63 -0.05 -0.1
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SPOT GOLD: 1,315.80      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,352.64 1,361.85 1,361.85
1/2 AE 0.50 670.55 694.08 1,388.17
1/4 AE 0.25 350.07 353.62 1,414.49
1/10 AE 0.10 139.37 144.74 1,447.38
Aust. 100 corona 0.98 1,283.30 1,293.30 1,319.42
British sovereign 0.24 311.60 323.60 1,374.67
French 20 franc 0.19 245.66 252.66 1,353.29
Krugerrand 1.00 1,339.48 1,350.48 1,350.48
Maple Leaf 1.00 1,330.80 1,345.80 1,345.80
1/2 Maple Leaf 0.50 756.59 690.80 1,381.59
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1/10 Maple Leaf 0.10 139.47 143.42 1,434.22
Mexican 50 peso 1.21 1,578.40 1,589.46 1,318.29
.9999 bar 1.00 1,320.41 1,331.80 1,331.80
SPOT SILVER: 21.95      
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 16,409.25 16,659.25 23.30
US 40% silver 1/2s 0.30 6,283.50 6,433.50 21.81
100 oz .999 bar 100.00 2,185.00 2,255.00 22.55
10 oz .999 bar 10.00 224.50 225.50 22.55
1 oz .999 round 1.00 22.05 22.60 22.60
Am Eagle, 200 oz Min 1.00 23.70 24.45 24.45
SPOT PLATINUM: 1,434.80      
Platinum Platypus 1.00 1,459.80 1,499.80 1,499.80
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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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