The Moneychanger
Daily Commentary
Thursday, 21 November a.d. 2013 Browse the commentary archive

Things really are becoming comical. Today a US senate committee approved Janet "My-Middle-Name-Is-Inflation" Yellen to succeed Bubble Ben Bernanke as Head Criminal at the Federal Reserve. Not surprisingly, big (as in too big to fail) bank stocks led the Dow higher, and it closed above 16,000. Lo, why wouldn't they? After all, Yellen is touted to continue Bernanke's policies and then some, & all Bernanke's deeds have been aimed to bail out & feed the banks. Consider, for instance, his donation to banks by paying 0.25% interest on their reserves held at the Fed. For JP Morgan, with $550 billion in Fed reserves, that's a clean $1.4 billion a year for doing absolutely nothing & taking zero risk. It's always easy to figure out the cause: simply follow the money.

The Dow made a new high today and closed above 16,000, specifically it rose 109.17 (0.69%) to 16,009.99. Wait, I'll have more to say about that. S&P500 rose 14.48 or 0.81%, but made not a new high with its 1,795.85 close.

Because I have been suckered more times than Carter's has pills by markets that appear to recover, I offer these observations.

(1) Markets often top with Two highs about the same place.

(2) Trickier still, the second top is often higher than the first.

(3) As anvils do not spontaneously levitate into the stratosphere, so markets do not forever get more & more overbought. Markets making new highs day after day lie far closer to the end of their move than an extension.

(4) Dow actually made a lower intraday high today at 16,016.04, than it did on the last new all time high, namely, 16,030.38. Picture painted on the chart is lower highs & lower lows -- beginning a downtrend? S&P500 rose today, but to a lower high than the intraday high when the Dow made its last high & other indices refused to confirm.

(5) Despite all that, markets can keep becoming more overbought than you have money to put up shorting them, so stocks can go higher still.

Dow in Gold rose 0.71% today to 12.89 oz (G$266.46), a new high since June's 12.514 oz. Dow in silver rose 0.11% to 802.3 oz, still below the June 816.77 high.

Ten year note yield fell today to 2.784%, probably on news that Big Janet is coming & will continue Big Ben's Zero Interest Rate Policy. However, interest rates broke out to the upside in June, corrected September - October, & now are rising again,. The bond market smells a rat, & that rat might be rising interest rates that overcome the Fed's ZIRP (Egad! Where DO they get these acronyms?)

US Dollar Index rose a little today, 0.4% to 81.08, three basis points, but is trading below 81 now. Trying to break out skyward. Maybe this turkey can fly.

Yen gave up today with a gap down, losing 1.14% to end on its lows at 98.85 & gasping for breath. Looks to be shooting for 96.4 cents per 100 yen or less.

The euro, on the other hand, rose 0,33% to $1.3483. I keep asking myself why it might rise, but on the chart I can find no reason.

The Gold Silver Ratio chart left a spike up behind yesterday from its 62.738 high, then fell today to end at 62.400. That is the most hopeful sign I see in silver & gold because it appears to be a definite reversal, wanting only one more confirmation.

When I quote the gold low to y'all you're going to think it dropped a lot today, but it's only the drop from yesterday's close at $1,257.90. Fell $14.40 to $1,243.50 on Comex, but most of that fall happened yesterday after the Comex close, & it's trading about where it was this time yesterday. 'Twas an extraordinarily quiet day bounded by a low at $1,235.80 & a high at $1,243.60.

I went back & checked the indicators at the June gold low. The low occurred 27 June, but the MACD didn't turn up until 8 July. Didn't climb through the 20 DMA till 11 July. Rate of change didn't go positive until 12 July. Gold Silver Ratio peaked on 26 June, reversed on 27, & gapped down on 28.

Your point, Moneychanger? Simply that watching gold on 27 June 2013 gave you no clue that it had turned up, OTHER THAN a key reversal beginning that day, confirmed the next day. Other indicators were all thumbs down.

Silver lost 12.2 cents today for a 1992.8c close. Range was narrow, from 2005c to 1970c. However, if you look at an End of Day chart & not Comex, the first half of a key reversal -- break into new low ground with a higher close for the day. Silver must confirm that with a higher close tomorrow.

Gold, on the other hand, offers no such comfort. End of day chart shows it making a new low for the day, but closing about where it ended yesterday. Speaks with forked tongue.

So far, no big waterfall other than yesterday. Longer silver & gold hang here without breaking down, less the likelihood they will break down. However, no positive sign of turnaround shows yet, other than the Gold Silver Ratio & silver's fist half Key Reversal. Both those need still to be confirmed.

We wait. We watch. We are patient, know that a Really Big Inflator is taking the tiller from Bernanke, raising giant waves of new money for silver & gold to surf on.

On 21 November 1967 American General Wm. Westmoreland told news reporters, "I am absolutely certain that whereas in 1965 the enemy was winning, today he is certainly losing." That declaration of victory may have been premature.

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
21-Nov-13 Price Change % Change
Gold, $/oz 1,243.50 -14.40 -1.14%
Silver, $/oz 19.93 -0.12 -0.61%
Gold/Silver Ratio 62.400 -0.339 -0.54%
Silver/Gold Ratio 0.0160 0.0001 0.54%
Platinum 1,389.90 -7.90 -0.57%
Palladium 713.10 -0.55 -0.08%
S&P 500 1,795.85 14.48 0.81%
Dow 16,009.99 109.17 0.69%
Dow in GOLD $s 266.15 4.84 1.85%
Dow in GOLD oz 12.87 0.23 1.85%
Dow in SILVER oz 803.39 10.33 1.30%
US Dollar Index 81.08 0.03 0.04%
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SPOT GOLD: 1,242.10      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,278.12 1,285.57 1,285.57
1/2 AE 0.50 632.96 655.21 1,310.42
1/4 AE 0.25 330.44 333.81 1,335.26
1/10 AE 0.10 131.56 136.63 1,366.31
Aust. 100 corona 0.98 1,207.77 1,217.77 1,242.37
British sovereign 0.24 294.14 306.14 1,300.53
French 20 franc 0.19 233.64 236.70 1,267.81
Krugerrand 1.00 1,264.46 1,275.46 1,275.46
Maple Leaf 1.00 1,257.10 1,272.10 1,272.10
1/2 Maple Leaf 0.50 714.21 652.10 1,304.21
1/4 Maple Leaf 0.25 316.74 332.26 1,329.05
1/10 Maple Leaf 0.10 131.66 135.39 1,353.89
Mexican 50 peso 1.21 1,485.50 1,500.60 1,244.59
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SILVER Fine Tr.Oz. BID ASK $/oz
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US 40% silver 1/2s 0.30 5,692.03 5,842.03 19.80
100 oz .999 bar 100.00 1,984.50 2,054.50 20.55
10 oz .999 bar 10.00 204.45 205.45 20.55
1 oz .999 round 1.00 20.05 20.60 20.60
Am Eagle, 200 oz Min 1.00 21.70 22.95 22.95
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Plat. Platypus 1.00 1,414.90 1,454.90 1,454.90
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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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