The Moneychanger
Daily Commentary
Thursday, 2 January a.d. 2014 Browse the commentary archive

Human beings are herd animals, a lot like buffalos. Every one of us wants to belong to the herd, to hear the herd's comforting mooing in our ears, to have the herd's warm approval. But like buffalos, a stampeding herd sometimes runs over a cliff.

Last year was a record-breaker for producing stomach acid in silver & gold investors. I can match y'all ulcer for ulcer, and raise you some pH paper test strips. But I still come to the conclusion that the silver & gold bull market that began in 2001 has several more years to run, & that the gains from here will mount far loftier than anything we've seen so far. Yep, I understand y'all's question, "What's your little pissant opinion held up against all those big-time gurus & analysts on Wall Street?" Not much, but the truth remains the truth even when a clod points it out. I don't mind being a clod, or even appearing stupidly wrong for a while, as long as I have the truth on my side. I'm a patient clod.

The year ended with a typical tape-painting, because so many people place big stock in a year end price, although it's just a day like any other. For three years back in the 1990s, gold ended up at the same price, plus or minus $2.00. Right. Sure. That happens in nature all the time.

But today silver & gold came roaring out of the bushes like Zulus at Isandlwana. And other markets didn't fare that well, either, now that the adults are back to chasten the thin market teenagers.

Dow & the S&P500 made frightening showing with sharp drops on the year's first trading day. Dow lost 135.31 (0.82%) to 16,441.35, while the S&P500 slid 16.38 (0.89%) to 1,831.98. This may mark a little correction, but most likely not the final blow-off top. Yet all the backdrop is set for that, but 'twill most likely get crazier & more overbought yet.

Raw stock indices doesn't command my attention like the Dow in Gold and Dow in Silver. Y'all need to remember that watching markets day by day can warp your judgment. Every once in a while you need to step back & look at weekly & monthly charts to remember what the landscape looks like.

The landscape for the DiG & DiS is most serious. In 2013 they broke out over long term downtrend lines. Does that mean that the bear market for stocks in terms of silver & gold has ended, & stocks have reversed for a years' long gain of value against metals? I doubt it, & that's why I watch these so closely, wating for fact to verify theory.

DiG dropped sharply, 2.24%, to end at 13.45 oz, and way down from 30 Dec 2014's high for the move at 13.80 oz. MACD is about to roll over with a sell signal, Rate of Change has turned down. 20 Day Moving Average, first confirming tripwire of a downward reversal, stands at 13.20 oz.

DiS after an intraday high for the move on 31 December 2013 at 853.15 closed today down 3.64$% at 822.07. 20 DMA stands at 818.41 oz, & MACD has actually given a SELL signal, announcing lower prices.

Remember, in the end we have no final, take it to the bank confirmation until the DiG & the DIS drop below their 200 day moving averages, now at 11.43 oz & 703.18 oz.

Just to drive a railroad spike through everybody's foot, the US dollar index today turned and rose through its downtrend line to 80.71, up 43 basis points or 0.54%. Not so fast, hold the phone! It also did that earlier in December, but without follow through. However, that does place the US$ index above its 20 & 50 DMAs, so maybe this time it will follow through upside. MACD gave a buy signal. US$ index closed in fact slightly above that downtrend line.

But WOE to the adolescents who bought the euro in the past few days on its thin market drive to the downtrend line. It gapped up 4 days ago, & gapped further down today, down below its 20 DMA before it skidded to a stop at the 50 DMA. Closed down 0.63% (owch!) to $1.3669. Maybe the communists at the European Central Bank have made a deal with our communists at the Fed to depreciate the euro against the dollar? Who knows?

The yen, however, rose 0.55% to 95.44 cents/Y100. Nothing about that inspires me or raises my heart rate or interests me in buying yen at all. Not one bit.

Yield on the US 10 year treasury note is knocking on 3%. Closed today down 1.35% at 2.985%, but the trend is up, like the slopes of Mount Kilimanjaro.

Gold popped up $23.10 (1.9%) to $1,225.00. That's a stout start, but gold is still wading through a swamp of resistance from $1,218 all the way to $1,230. To confirm a rally, gold must first throw a leg over $1,240, then the last high at $1,267.50. Several indicators are positive, and volume is rising with price -- strongly. Double intraday bottoms at $1,1865 & $1,181.40 (31 Dec). Yes, y'all did notice that gold closed above its 20 DMA at $1,221.97?

Silver pulled on its Seven league Boots & stepped out smartly. Comex closed at 2009.8c, up 75.9 cents or 3.9%. High came at 2044c, just below the 50 DMA (2054c). Silver blew past the 20 DMA (1971c). MACD is positive, rate of change is positive, volume is rising with price, RSI is half a light year from overbought. All this is a right good start on 2014.

Shoot, I left out silver's triple bottoms at 1889c, 1910, & 1872c. That's fish-emulsion on a hungry begonia.

For 2014, better look out for a big stock market surprise that slices open many arteries. Watch interest rates, which can light the fuse on all that monetary C4 the Fed has been spreading around. And of course, watch the sky for that Black Swan from any direction. Personally, I would keep the least amount of money possible in banks.

But everybody knows I'm just a crazy natural born fool from Tennessee.

On 2 January 1845 Scottish factory owner & proto-socialist Robert Own bought 30,000 acres in Indiana as a site for his New Harmony utopian community. These communities proliferated like toadstools after a downpour in the 1820s & 1830s, many of them under the influence of the Second Great Awakening, some of them by utopian socialists, and all upon the basis of the perfectibility of man (a goal not yet reached, nor achieved by any of them). The Shakers were among them, whose unfortunate doctrinal prohibition of procreation pretty much guaranteed their extinction. Amana Colonies in Iowa (German pietists) lasted from 1855 to 1932. Oneida in New York lasted from 1848 to 1881. Nashoba commune was founded in 1825 outside Memphis. It lasted three years.

As always, the problem with communes is, well, communism. It just doesn't work, either for the religious or the communist.

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
31-Dec-13 Price Change % Change
Gold, $/oz 1,225.00 23.10 1.92%
Silver, $/oz 20.10 0.76 3.92%
Gold/Silver Ratio 60.951 -1.198 -1.93%
Silver/Gold Ratio 0.0164 0.0003 1.96%
Platinum 1,401.90 30.80 2.25%
Palladium 729.35 11.95 1.67%
S&P 500 1,831.98 -16.38 -0.89%
Dow 16,441.35 -135.31 -0.82%
Dow in GOLD $s 277.45 -7.66 -2.69%
Dow in GOLD oz 13.42 -0.37 -2.69%
Dow in SILVER oz 818.06 -39.10 -4.56%
US Dollar Index 80.71 0.43 0.54%
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SPOT GOLD: 1,224.40      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,257.46 1,267.25 1,267.25
1/2 AE 0.50 623.93 645.87 1,291.74
1/4 AE 0.25 325.73 329.06 1,316.23
1/10 AE 0.10 129.68 134.68 1,346.84
Aust. 100 corona 0.98 1,194.16 1,204.16 1,228.48
British sovereign 0.24 289.95 301.95 1,282.72
French 20 franc 0.19 230.31 233.40 1,250.11
Krugerrand 1.00 1,247.05 1,258.05 1,258.05
Maple Leaf 1.00 1,239.40 1,254.40 1,254.40
1/2 Maple Leaf 0.50 704.03 642.81 1,285.62
1/4 Maple Leaf 0.25 312.22 327.53 1,310.11
1/10 Maple Leaf 0.10 129.79 133.46 1,334.60
Mexican 50 peso 1.21 1,465.80 1,479.26 1,226.89
.9999 bar 1.00 1,228.69 1,240.40 1,240.40
SPOT SILVER: 20.04      
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 14,972.10 15,222.10 21.29
US 40% silver 1/2s 0.30 5,720.05 5,870.05 19.90
100 oz .999 bar 100.00 1,994.00 2,054.00 20.54
10 oz .999 bar 10.00 205.40 206.40 20.64
1 oz .999 round 1.00 20.14 20.64 20.64
Am Eagle, 200 oz Min 1.00 21.79 23.04 23.04
SPOT PLATINUM: 1,401.90      
Plat. Platypus 1.00 1,426.90 1,466.90 1,466.90
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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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