The Moneychanger
Daily Commentary
Wednesday, 30 October a.d. 2013 Browse the commentary archive

Travelling on 9 October, the day it was announced, I missed commenting on Janet Yellen's nomination to be Head Criminal at the Federal Reserve. My first, well- reasoned response was, "Oh, ****!" But then, it comes as no surprise after Bernanke's unprecedented money creation spree that O'Bama would appoint the most rabid inflationist around to serve as Co-ordinator of National & International Looting & Lying.

What doth this mean for us peasants? That the best friend gold & silver have is about to become Fed Head. Why best friend? Because only one thing drives a silver & gold bull market: Monetary Demand. And Monetary Demand is driven by central bank money printing, and the Printer in Chief is about to take charge.

Speaking of the Federal Reserve, the midgets of the FOMC met today and took their shaky hands off the controls. "We ain't doing a THING!" they said, wary lest the shatter fragile markets. "We're just a-gonna keep on creating $85 billion a month."

As expected, the news announcement hit stocks upside the head & made 'em stumble. Gold rose going into the FOMC, but then fell off after the announcement. That, of course, makes no more sense than buying a tuxedo for a hog, but let's ignore rational fastidiousness & look closer.

Now I don't know a blasted thing, being just a barefoot natural born fool from Tennessee (& I tell y'all truly I have an attorney from Alabama who walked around in the courtroom in his stocking feet), but if I owned stocks I'd be puking in my wastebasket or sell it all. First, there's that peaking margin debt, highest since 2007. Next are all those rising wedges on every index chart. Third, following the example of the S&P500, the Nasdaq Comp, Nasdaq 100, Russell 200, & Wilshire 5000 have all "thrown over" their upper trendline, and today backed off sharply.

At the very least, this leg has ended & stocks are in for a correction. Most indices posted first half of a Key Reversal today with a break into new high territory and a lower close. Another lower close tomorrow pounds nails into the coffin.

Dow dropped 61.59 (0.39%) to 15,618.76 while the S&P500 lost 8.64 (0.49%) to 1,763.31. Both Dow in Gold & Dow in Silver dropped below their 20 day moving averages.

Meanwhile, violating once again all reason & the law of cause & effect, the US dollar rose on the FOMC's news that it intends to keep on depreciating the dollar for the foreseeable future. Gained 15.9 basis points to end at 79.767, up 0.2%. Gapped up on the news, by the way. Both the competitors, Yen & Euro, fell. Yen ended at 101.47 cents (-0.38%) while the euro lost only 0.06% to $1.3738.

Looking at a longer term chart, if the Dollar breaks 79.00, nothing stands ready to catch it before 73. But it appears to have made a little V-bottom with a low at 79.06, and has risen up to the trend line it last broke. That makes it "fish or cut bait" time for the dollar: it needs to rise through that line. More, it needs to prove it can get through 81 to offer any ground to believe it is not about to plunge.

Silver & gold rose sharply, anticipating the FOMC's decision to continue gutting the US dollar. This was rational, and accorded with cause-and-effect. Silver closed up 49 cents to 2294.6 while gold rose $3.80 to $1,349. Gold actually hit $1,357, but then as soon as the FOMC announced, it fell to $1,343 ish and silver to 2268c. This was irrational.

No doubt 0.8 nanoseconds after the Fed's announcement SOMEbody sold 2,500 futures contracts in silver & gold. No need even to look.

But forget all that -- the fall may even have been natural. Much more important is the new low close for the move by the Gold/Silver Ratio at 58.790.

Behold! Gold remains above its $1,341.74 50 DMA and silver above its 2251c DMA. Lo! The MACD for both points up. Rate of Change for both is up and trending up.

Gold keeps grinding stubbornly toward that $1,400 neckline and silver toward 2500c.

Yet people are afraid to buy. I reckon they want to wait for confirmation at $1,400 ($50 higher) or $1,550 ($200 higher). Me, I'm already biting at them.

On 30 October 1534 the English Parliament passed the Act of Supremacy making King Henry VIII head of the English Church over against the Pope. It began an irrevocable split between England and the papacy.

On 30 October 1890 the US congress passed the Sherman Silver Purchase act. Since the Crime of 1873 when silver had been surreptitiously demonetized, worsening the post-war deflation, farmers and miners had been agitating for unlimited coinage of silver. This act, however, didn't grant that. It increased how much silver the government purchased, and that did that with Treasury Coin notes redeemable in either silver or gold. People cashed the notes for gold, threatening the government's gold reserve, so in 1893 the act was repealed. That's why it's fairly easy to find the Morgan silver dollars with dates from 1878 to 1892, but the 1893s are nearly impossible to find.

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
30-Oct-13 Price Change % Change
Gold, $/oz 1,349.00 3.80 0.28%
Silver, $/oz 22.95 0.49 2.18%
Gold/Silver Ratio 58.790 -1.114 -1.86%
Silver/Gold Ratio 0.0170 0.0003 1.89%
Platinum 1,477.40 18.00 1.23%
Palladium 748.95 2.45 0.33%
S&P 500 1,763.31 -8.64 -0.49%
Dow 15,618.76 -61.59 -0.39%
Dow in GOLD $s 239.34 -1.62 -0.67%
Dow in GOLD oz 11.58 -0.08 -0.67%
Dow in SILVER oz 680.67 -17.60 -2.52%
US Dollar Index 79.77 0.16 0.20%
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: 1,343.00      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,379.26 1,390.01 1,390.01
1/2 AE 0.50 684.42 708.43 1,416.87
1/4 AE 0.25 357.31 360.93 1,443.73
1/10 AE 0.10 142.25 147.73 1,477.30
Aust. 100 corona 0.98 1,309.83 1,319.83 1,346.49
British sovereign 0.24 318.04 330.04 1,402.04
French 20 franc 0.19 252.62 255.54 1,368.71
Krugerrand 1.00 1,365.83 1,376.83 1,376.83
Maple Leaf 1.00 1,358.00 1,373.00 1,373.00
1/2 Maple Leaf 0.50 772.23 705.08 1,410.15
1/4 Maple Leaf 0.25 342.47 359.25 1,437.01
1/10 Maple Leaf 0.10 142.36 146.39 1,463.87
Mexican 50 peso 1.21 1,611.03 1,622.26 1,345.49
.9999 bar 1.00 1,347.70 1,359.00 1,359.00
SPOT SILVER: 22.68      
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 16,788.20 17,038.20 23.83
US 40% silver 1/2s 0.30 6,498.85 6,648.85 22.54
100 oz .999 bar 100.00 2,258.00 2,328.00 23.28
10 oz .999 bar 10.00 231.80 232.80 23.28
1 oz .999 round 1.00 22.78 23.33 23.33
Am Eagle, 200 oz Min 1.00 24.43 25.18 25.18
SPOT PLATINUM: 1,477.40      
PLATINUM Fine Tr.Oz. BID ASK $/oz
Plat. Platypus 1.00 1,502.40 1,542.40 1,542.40
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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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