The Moneychanger
Daily Commentary
Thursday, 19 December a.d. 2013 Browse the commentary archive

Please forgive me, I got yesterday's closing price of the US dollar index wrong somehow, at 80.55 rather than 80.25 Don't know what went wrong, but my conclusion remains the same. Why should the US dollar index not drop on news that the Fed intends to keep on depreciating the dollar? Still maketh no sense.

It continued making no sense today when the dollar index gained 0.68% or 54 basis points to close right on its downtrend line at 80.79. Whatever I might think of it, the dollar index is trying to push up through that downtrend line for a rally. Moreover, the MACD flashed a buy signal today. It's nasty, but it's rallying. If it clears that downtrend line and closes above 81 then it will run toward 83. That might take some of the air out of gold's sails.

The euro lost 0.62% yesterday and another 0.16% today to close at $1.3661. It has left behind a double top with the October high a little above $1.3800. Poised above its 20 DMA ($1.3652) waiting for somebody to open the trap door and let it fall through.

Yesterday the yen fell through its May low (96.41) & today lost a small 0.03% to end at 95.94 cents per Y100. Since that May bottom was the low of a fall that began from a 5 year top at 132.18 cents/Y100 in October 2011, we have to claw back to 2008 to find the yen this low. It's headed for 90 or lower unless it gives some evidence of reversing.

Stocks behaved strangely today. By 11.11 points the Dow made a higher high than yesterday, a new all-time high at 16,179.08. Now it's not just because I mistrust stocks that I bring this up, but the S&P500 lost 1.05 (0.06%) to end at 1,809.60, and all the other indices dropped, too.

Reaching for new highs by inches makes me nervous that a market is running out of steam. What if this is a double top, one of those notoriously strong B waves that fool everyone?

Today's sharp drop in gold threw the Dow in Gold up to a new high at 13.63 oz (G$281.76 gold dollars). It has now moved into overbought territory on the RSI, but he MACD just turned up. Clearly headed up.

Once again, the Dow in Silver lags the Dow in Gold. It made a new high for the move today at 841.56 oz (up 2.62%) barely above the last high. But it, too, should move higher.

Gold plunged $41.10 (3.5%) today and silver tumbled 87.1 cents (4.4%) to 1914.3c.

The metals' delayed reaction to yesterday's FOMC announcement began about 4:00 eastern time, gapping down to just above $1,200 gold & 1915c silver. Silver traded flat most of the rest of the day. Silver's low came at 1910c & gold's at $1,186, nearly the June intraday low at $1,179.40.

If silver & gold intend to make a double bottom with the June lows, this is the place. Otherwise gold will keep sliding into the low $1,100s before it finds footing and ends this wave. If silver doesn't catch here, it could land anywhere from 1750c to 1500c.

Remain calm, be patient. A bottom could come any time between now and end of the year.

On 19 December 1562 began the French Wars of Religion between the Huguenots and the Roman Catholics with the Battle of Dreux. All of Europe descended into religious war, from the Netherland's 80 year fight for independence (1568-1648) and the 30 Years War in Germany (1618-1648) to the English Civil War which only ended really in 1662 with the Stuart restoration. The 30 Years War reduced population in some parts of Germany by 90%. Europe simply bled itself to exhaustion for 100 years, and out of that came the beginnings of the present doctrine of tolerance. Or at least the doctrine that it's not a good idea to kill people because of their religion. The ingenuity of mankind in inventing new reasons to kill each other should never be underestimated.

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
19-Dec-13 Price Change % Change
Gold, $/oz 1,195.00 -41.10 -3.32%
Silver, $/oz 19.14 -0.87 -4.35%
Gold/Silver Ratio 62.425 0.663 1.07%
Silver/Gold Ratio 0.0160 -0.0002 -1.06%
Platinum 1,318.00 -24.20 -1.80%
Palladium 695.30 -3.10 -0.44%
S&P 500 1,809.60 -1.05 -0.06%
Dow 16,179.08 11.11 0.07%
Dow in GOLD $s 279.88 9.49 3.51%
Dow in GOLD oz 13.54 0.46 3.51%
Dow in SILVER oz 845.17 37.34 4.62%
US Dollar Index 80.79 0.54 0.67%
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SPOT GOLD: 1,196.90      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,231.61 1,238.79 1,238.79
1/2 AE 0.50 609.91 631.36 1,262.73
1/4 AE 0.25 318.41 321.67 1,286.67
1/10 AE 0.10 126.77 131.66 1,316.59
Aust. 100 corona 0.98 1,167.34 1,177.34 1,201.12
British sovereign 0.24 283.44 295.44 1,255.06
French 20 franc 0.19 225.14 228.26 1,222.61
Krugerrand 1.00 1,217.25 1,228.25 1,228.25
Maple Leaf 1.00 1,211.90 1,226.90 1,226.90
1/2 Maple Leaf 0.50 688.22 628.37 1,256.75
1/4 Maple Leaf 0.25 305.21 320.17 1,280.68
1/10 Maple Leaf 0.10 126.87 130.46 1,304.62
Mexican 50 peso 1.21 1,431.44 1,446.10 1,199.39
.9999 bar 1.00 1,201.09 1,212.90 1,212.90
SPOT SILVER: 19.20      
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 14,335.75 14,585.75 20.40
US 40% silver 1/2s 0.30 5,472.25 5,622.25 19.06
100 oz .999 bar 100.00 1,910.00 1,970.00 19.70
10 oz .999 bar 10.00 197.00 198.00 19.80
1 oz .999 round 1.00 19.30 19.80 19.80
Am Eagle, 200 oz Min 1.00 20.95 22.20 22.20
SPOT PLATINUM: 1,318.00      
PLATINUM Fine Tr.Oz. BID ASK $/oz
Plat. Platypus 1.00 1,343.00 1,383.00 1,383.00
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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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