The Moneychanger
Daily Commentary
Monday, 28 October a.d. 2013 Browse the commentary archive

Y'all know always to buy a rising market only, right? That must be correct because that's what everybody does, only they wait until the market has already made a huge rise to do it. It's human nature. They feel comfortable in a crowd, like lemmings.

The folks who make the money -- the ones who look for oversold markets that offer real value -- are vanishingly scarce. Human nature.

WHEREFORE, now while silver & gold, it seems, have finished their corrections, nobody wants to buy, so they will wait until gold has climbed from $1,350 to $1,900 so they can be "sure" it's going to rise.

One other item: most likely, the Fed won't taper. Not at all. None. Oh, I know they are rattling their tongues (their sharpest weapon) about tapering again, but look at that Adjusted Monetary Base chart here, Note the "hockey stick" shape. Fed took the Adjusted Monetary Base, the fuel for inflation, from about $850 billion in August 2008 to about $3.5 trillion lately. I am waiting for somebody to explain to me how, facing the present deflationary & depressionary headwinds, the fed will WITHDRAW high-powered money from the economy at all, or even taper off its monthly purchases (new money creation at an $85 bn monthly rate or $1.02 trillion yearly). More likely, in fact, is that the Fed INCREASES money creation, because they are now wed to the notion that money creation alone will fix the depression.

And while that inflation causes both poor & great to suffer, it drives silver & gold higher & higher. And it's coming. It's already baked into the cake, at least, that's what Adjusted Monetary Base says.

Last week silver & gold performed just about perfectly. They jumped through two resistance levels on Monday, backed off Tuesday to the highest resistance, and Wednesday jumped to higher levels still. Gold jumped over its 50 day moving average (DMA), as did silver. Only silver's weakness Friday marred the week.

Today both silver & gold stalled. Gold lost 40 cents to $1,352 while silver lost 10.5 cents and ended 2249.8c.

Let's realistically face the outcomes here. First, there remaineth the possibility of one further leg down, taking told toward $1,200 and silver toward $18. Seasonally both are moving out of the time when seasonality makes new lows likely. But until gold closes above its 200 DMA (now $1,432) and last peak $1,434, this possibility remains alive. Should it occur, it will mark a solid double bottom with the June low.

Second outcome is that I really am seeing upside-down head & shoulders patterns on both charts, which really are targeting $1,675 & $31.83. But first like all good runners, silver & gold must make it over the hurdles without tripping. Nearby silver must beat the 2300c mark that whipped it last week, although it has already better the last peak (2252c). I am most anxious to witness a close above 2355, then over 2512c, the August peak and the neckline. In between lies silver's 200 DMA at 2427c.

In the same rally outcome, gold needs to rise above $1,376, then $1,400. Big leap comes at the August high of $1,434 and the 200 DMA ($1,432.77). The really clench it all down hurdle is $1,550, where gold broke down in April. However, technically momentum turns upward when gold closes over the 200 DMA.

Buttressing the case for higher gold & silver are the Dow in Gold & Dow in Silver. While stocks are making new highs, both indicators are falling, revealing the relative strength in metals. Dow in gold today closed roughly unchanged at 11.515 oz (G$238.05 gold dollars). Dow in Silver rose 3.15 oz (0.46%) to 692.01 oz. Trend favors metals, 'cause it's down.

Stocks continue to levitate, but with a few bluebirds of unhappiness flying by. Dow Theory says that a new high in the Transports or Industrials needs to be confirmed by a new high in the other. Dow Industrials has stubbornly resisted making a new high while the S&P500 made daily new highs. The Dow Transports made 4 new highs in the last 5 days, while the Dow Industrials have not. Maybe the Industrials will catch up?

Dow fell 1.35 (0.01%) to 15,568.93 while the S&P500 rose 2.34 (0.13%) to a new high at 1,762.11. S&P500 has broken out above the upper trend line but the Dow laggeth onward. Meanwhile, margin debt has reached levels not seen since the 2007 peak. Does that mean anything?

US dollar index remains floating above 79, refusing to follow through on its breakdown. Closed today at 79.343, up 14.2 basis points (0.18%). Euro has risen to $1.3785, higher than last week but down 0.13% today. It's only edging forward. Yen ended today at 102.38, down 0.30% & little changed in the last week.

On 28 October 1793 Eli Whitney applied for a patent for the cotton gin. Migrating from New England to seek his fortune in the South, the widow of Revolutionary War hero Gen. Nathanael Green invited him to visit her Georgia plantation. Whitney said he got the idea while watching a cat trying to pull a chicken through a fence. The gin was a drum studded with hooks that pulled cotton fibers through a mesh & left the seeds outside.

Previously removing seed from cotton was a labor intensive hand process. Suddenly, Whitney's gin made cotton profitable and re-invigorated slavery in the South. The gin transformed Southern agriculture and the national economy. Cotton exports boomed from less than 500,000 lb. in 1793 to 93 mn lb. by 1810.

Friends, Volume 2 of At Home In Dogwood Mudhole (Best Thing We Ever Did) is now available for preorder at It went to the printer today and we estimate it will be ready to ship the first week in December, in time for Christmas.

I must be crazy generous, but if you will use the discount code HOGWILD I will give you free shipping to US addresses, up to $6 (enough for 2 copies). Offer expires Sunday, 30 November 2013. Also, the PDF version will be available for sale and immediate download tomorrow, with Kindle & ePub editions coming in a few weeks.

Argentum et aurum comparanda sunt —
Silver and gold must be bought.

— Franklin Sanders, The Moneychanger

Your source for gold and silver. Read our latest reviews and testimonials.
Market Snapshot See more charts and market data
28-Oct-13 Price Change % Change
Gold, $/oz 1,352.00 -0.40 -0.03%
Silver, $/oz 22.50 -0.11 -0.46%
Gold/Silver Ratio 60.094 0.261 0.44%
Silver/Gold Ratio 0.0166 -0.0001 -0.44%
Platinum 1,470.10 17.60 1.21%
Palladium 749.45 2.55 0.34%
S&P 500 1,762.11 2.34 0.13%
Dow 15,568.93 -1.35 -0.01%
Dow in GOLD $s 238.05 0.05 0.02%
Dow in GOLD oz 11.52 0.00 0.02%
Dow in SILVER oz 692.01 3.15 0.46%
US Dollar Index 79.34 0.14 0.18%
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: 1,352.90      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,390.78 1,400.25 1,400.25
1/2 AE 0.50 689.47 713.65 1,427.31
1/4 AE 0.25 359.94 363.59 1,454.37
1/10 AE 0.10 143.30 148.82 1,488.19
Aust. 100 corona 0.98 1,319.48 1,329.48 1,356.34
British sovereign 0.24 320.38 332.38 1,411.99
French 20 franc 0.19 254.48 257.39 1,378.61
Krugerrand 1.00 1,377.25 1,388.25 1,388.25
Maple Leaf 1.00 1,367.90 1,382.90 1,382.90
1/2 Maple Leaf 0.50 777.92 710.27 1,420.55
1/4 Maple Leaf 0.25 344.99 361.90 1,447.60
1/10 Maple Leaf 0.10 143.41 147.47 1,474.66
Mexican 50 peso 1.21 1,622.90 1,634.19 1,355.39
.9999 bar 1.00 1,357.64 1,368.90 1,368.90
SPOT SILVER: 22.46      
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 16,591.58 16,841.58 23.55
US 40% silver 1/2s 0.30 6,432.48 6,582.48 22.31
100 oz .999 bar 100.00 2,235.50 2,305.50 23.06
10 oz .999 bar 10.00 229.55 230.55 23.06
1 oz .999 round 1.00 22.56 23.11 23.11
Am Eagle, 200 oz Min 1.00 24.21 24.96 24.96
SPOT PLATINUM: 1,470.10      
Plat. Platypus 1.00 1,495.10 1,535.10 1,535.10
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© 2015 Little Mountain Corporation, d.b.a. The Moneychanger. All rights reserved. May not be republished in any form, including electronically, without our express permission.

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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