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Daily Commentary
Monday, 16 December a.d. 2013 Browse the commentary archive

At you'll find an article by Daniel Amerman, "Taper & Quantitative Easing Reality Check." I strongly recommend y'all read it.

Amerman's argument is that the folks who believe that the Fed can taper then the world will go back to normal, status quo before the last bubble burst AND the folks who believe a collapse is imminent are both short-sighted. They don't understand that the whole game has changed, that the Fed literally must continue controlling interest rates or risk a global financial panic. Nor do they understand that the era of central bank/government control has arrived, and the Fed has shown by the gigantic money creation of the last five years that it will keep on manipulating interest rates as long as it can. Long article, but quite articulate and well-reasoned.

Just as the Soviet Union used to jam radio waves from European stations, so the FOMC meeting this Tuesday-Wednesday overhangs and jams brain waves, heterodyning sane discourse this week. On Wednesday they will announce whether they will taper or not -- or is that "tapir"? I get confused. Do they mean the pig-like animal? Say, are they saying the Fed is going to the pigs?

In any event, I don't see how the Fed can stop buying bonds. That's how they manipulate interest rates, & if they stop manipulating & let nature take its course, their US treasury bond bubble will burst & the stock market will tank, and they might precipitate a global panic. Faced with those choices, the Fed governors, who are NOT chosen for courage, will hardly taper. I don't see how they can ever stop, but then, I ain't no central banker. I'm just a durned natural born fool from Tennessee.

Apparently those brain-wave-jammed investors expect the Fed NOT to taper, so they covered short positions in gold. Why? Not tapering means more inflation, & inflation feeds gold. Apparently, it feeds stocks, too, since they rose as well.

Dow jumped 0.82% or 129.21 points to $15,884.57. S&P500 came back from leaning over the brink on a rotten rope Friday to gain 11.22 (0.63%) and close at 1,786.54. 'Twas a respectable but not dispositive move. That is, they jumped up smartly, but crossed no moving averages, moved no MACD, startled no RSI. they merely ricocheted off bottom Bollinger bands and support at the last high. Tomorrow will tell if they can punch through the midline of those Bollinger Bands, which is also the 20 DMA.

Dow in Gold rose a leetle today, but not to amount to anything. DiG gained 0.65% to 12.81 oz (G$264.81 gold dollars). Rate of change is still negative, MACD still counsels "Sell." DiS in fact LOST 0.72% to 795.62 oz by day's end. Trend in both remains sturdily down, down.

US Dollar Index got as close to flat today as it could without hugging asphalt. Closed a single basis point above Friday, 80.22. Has now knocked twice on the 50 DMA (80.39) but can't get through by the hair of its chinny chin chin. Maybe if Bernanke huffs & puffs after the FOMC meeting the dollar can rise. Analysts I respect still are waiting for the buck to rise, but I can't see it. It fell this year out of the trading channel from Spring 2011. Beneath its 200, 50, & 20 day moving average. If it can't hold on at 80, or 79 at the worst, its turkey is basted.

Now we come to silver & gold. After a $9.70 jump Friday, gold jumped another $9.80 (0.8%) today & closed Comex at 1,245.50. Maybe that is just short covering ahead of the FOMC meeting, but the gold silver ratio supports an interpretation of strength. It dropped nearly a whole point today, from 63.178 on Friday to 62.123 today, almost dead on the 30 year average price.

Silver rose 49 cents to close over 2000c at 2004.9. This sets both silver & gold above their 20 DMAs (1982c & $1,242.56). However, even with other positive indicators, that doesn't mean much until they climb above the last highs at $1,267.50 & 2048c. Really, that silver needs to rise above 2100c.

Problem is, that hog-brained FOMC meeting keeps us from drawing comfortable & reliable conclusions from this price action. Those clowns could say this or that and the public interprets it in some outlandish manner idiosyncratic to people who believe government officials, watch TV, and confuse a bull market with investing genius, and our boat is sunk.

On 16 December 1773 anti-government extremist terrorists disguised as Indians boarded ships full of tea in Boston harbor and threw the tea overboard to protest the tea tax. At least, that's how the media and the administration would describe them today. Lovers of liberty called them "patriots." I reckon it depends on whose side you're on, the tea or the tea party.

On 16 December 1967 in Memphis I married Susan Askew. Best thing I ever did, God bless her!

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
13-Dec-13 Price Change % Change
Gold, $/oz 1,245.50 9.80 0.79%
Silver, $/oz 20.05 0.49 2.51%
Gold/Silver Ratio 62.123 -1.055 -1.67%
Silver/Gold Ratio 0.0161 0.0003 1.70%
Platinum 1,359.20 -2.80 -0.21%
Palladium 715.90 0.15 0.02%
S&P 500 1,786.54 11.22 0.63%
Dow 15,884.57 129.21 0.82%
Dow in GOLD $s 263.64 0.07 0.03%
Dow in GOLD oz 12.75 0.00 0.03%
Dow in SILVER oz 792.29 -13.24 -1.64%
US Dollar Index 80.22 0.02 0.03%
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SPOT GOLD: 1,243.20      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,280.50 1,286.71 1,286.71
1/2 AE 0.50 633.52 655.79 1,311.58
1/4 AE 0.25 330.74 334.11 1,336.44
1/10 AE 0.10 131.67 136.75 1,367.52
Aust. 100 corona 0.98 1,212.49 1,222.49 1,247.19
British sovereign 0.24 294.41 306.41 1,301.64
French 20 franc 0.19 233.85 236.91 1,268.91
Krugerrand 1.00 1,261.85 1,272.85 1,272.85
Maple Leaf 1.00 1,258.20 1,273.20 1,273.20
1/2 Maple Leaf 0.50 714.84 652.68 1,305.36
1/4 Maple Leaf 0.25 317.02 332.56 1,330.22
1/10 Maple Leaf 0.10 131.78 135.51 1,355.09
Mexican 50 peso 1.21 1,486.81 1,501.93 1,245.69
.9999 bar 1.00 1,247.55 1,259.20 1,259.20
SPOT SILVER: 19.99      
SILVER Fine Tr.Oz. BID ASK $/oz
VG+ Morgan $B4 1905 0.77 25.00 26.50 34.64
VG+ Peace dollar 0.77 22.00 24.25 31.70
90% silver coin bags 0.72 15,004.28 15,254.28 21.33
US 40% silver 1/2s 0.30 5,703.83 5,853.83 19.84
100 oz .999 bar 100.00 1,988.50 2,048.50 20.49
10 oz .999 bar 10.00 204.85 205.85 20.59
1 oz .999 round 1.00 20.09 20.59 20.59
Am Eagle, 200 oz Min 1.00 21.74 22.99 22.99
SPOT PLATINUM: 1,359.20      
Plat. Platypus 1.00 1,384.20 1,424.20 1,424.20
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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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