The Moneychanger
Daily Commentary
Thursday, 16 January a.d. 2014 Browse the commentary archive

Adolf Hitler wrote, "In the primitive simplicity of their minds [the broad masses of a nation] more readily fall victims to the big lie than the small lie, since they themselves often tell small lies in little matters but would be ashamed to resort to large-scale falsehoods. It would never come into their heads to fabricate colossal untruths, and they would not believe that others could have the impudence to distort the truth so infamously." This is called the Big Lie Technique.

In the news today Federal Reserve Chairman Ben Bernanke defended quantitative easing, saying it has helped the economy and shows no immediate sign of creating a bubble in assets.

These two items above are not related. No, sir. No way. Unh-unh. Nope.

Sorry I didn't send a commentary yesterday, but I took a day off & spent it with my wife, Susan. As it turned out, nothing shook the earth yesterday.

Yesterday stocks were strong, & y'all might have been thinking I am a moron for talking about stocks trending down. You might be right, too, but this is a good time to discuss corrective B waves.

When markets correct, they often trace three waves, A-down, B-up, & C-down (of course this works for declining markets as well, just reversed). Trick is that the B-wave is often strong as a garlic milkshake, & will fool you into believing there's no correction at all. Sometimes the B-wave even makes a higher high than the last peak. Then the bottom falls out. This B-wave strength shows especially in markets that have been very strong.

So I look at stocks, I see that yesterday the S&P500 made a marginal new intraday high (1,850.84 against 31 December's 1,849.44). Dow didn't do that well. Today, both sank again, the Dow by 64.93 (0.39%) to 16,417.01 & the S&P500 by 7.49 (0.13%) to 1,845.89.

Now the small downtrend we've seen since 31 December may have amounted to only a short correction. Then again, it might be the start of something bigger. RSI still trendeth down, MACD still flasheth a sell signal, both indices are at their short term trend lines. Unless stocks can advance tomorrow, substantially & not marginally above the last highs, lower prices loom.

Uncertain trumpet calls blew from the Dow measured in metals today. Dow in silver rose 0.13% to 817.38 oz, bouncing up off the 50 DMA (803.15 oz). Dow in Gold turned down, 0.47% to 13.22 oz (G$273.28), but hasn't yet reached its 50 DMA (12.96 oz). Both have been trending down since 31 December, and both are about to break down out of their uptrending channel.

US DOLLAR INDEX rose strongly yesterday, but fell 11 basis points today (0.14%) to 81.01. Yet it has lifted off those 20 & 50 day moving averages (80.73 & 80.68). Uptrend vindicated.

The euro, stitched together Franken-currency, rose 0.1% to $1.3618, but playeth footsie still with its downtrend lines and 50 DMA. Will succumb to gravity. Yen rose 0.22% to 95.82 cents/Y100, above its 20 DMA & trying to trend upward.

Ten year treasury yield fell through its uptrend line five days ago, but has now bounced off its 50 DMA. Larger uptrend remains in force, glacial though it may be.

Metals gainsaid each other today, silver down, gold up. Gold chiselled out a tiny $1.90 gain to close at a portentous $1,240. Silver lost 7.8 cents for a Comex close at 2002.5 cents.

The RSI & MACD continue to smile on gold, but it is wrestling hard to climb through that fence at the 50 DMA (1,243.07) -- the fence holding it out of an uptrend.

Gold may be tracing out an upside-down head & shoulders with the shoulder's top about $1,210. To preserve that pattern, gold must not close below $1,210, and I'd prefer it not close below the 20 DMA at $1,222.13.

Silver clings tenaciously to the uptrend begun with the second December low at 1872c. Traded as low as 1997c today, and as high as 2025c, but held on above that uptrend line. Rests only cents below the 50 DMA at 2007c.

All this feels like one of those silent movie cliff-hangers, but I believe this time it will resolve in favor of silver & gold. A close tomorrow above last Friday's close at $1,246.70 would give gold a four week winning streak

On 16 January 1883 the Pendleton Act created the basis of the yankee government's civil service system. Before that we had the "spoils" system, as in, "to the [political] victor belong the spoils." As yet in some counties in Tennessee when someone wins a seat on the county road commission his buddies all get jobs driving road graders, so back then when Joe Blow won election as president, all the old bureaucrats were ousted and his buddies installed.

This seems eminent common sense to me. Who wants entrenched, permanent bureaucrats? I say reinstall the spoils system, and let's have honest graft once more!

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
16-Jan-14 Price Change % Change
Gold, $/oz 1,240.00 1.90 0.15%
Silver, $/oz 20.03 -0.08 -0.39%
Gold/Silver Ratio 61.923 0.335 0.54%
Silver/Gold Ratio 0.0161 -0.0001 -0.54%
Platinum 1,430.00 2.90 0.20%
Palladium 743.00 -0.10 -0.01%
S&P 500 1,845.89 -7.49 -0.40%
Dow 16,417.01 -64.93 -0.39%
Dow in GOLD $s 273.68 -1.50 -0.55%
Dow in GOLD oz 13.24 -0.07 -0.55%
Dow in SILVER oz 819.83 -0.05 -0.01%
US Dollar Index 80.17 -0.33 -0.41%
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: 1,241.60      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,277.61 1,285.06 1,285.06
1/2 AE 0.50 632.71 654.94 1,309.89
1/4 AE 0.25 330.31 333.68 1,334.72
1/10 AE 0.10 131.50 136.58 1,365.76
Aust. 100 corona 0.98 1,210.93 1,219.93 1,244.57
British sovereign 0.24 294.03 306.03 1,300.03
French 20 franc 0.19 233.55 236.61 1,267.31
Krugerrand 1.00 1,262.71 1,272.71 1,272.71
Maple Leaf 1.00 1,256.60 1,271.60 1,271.60
1/2 Maple Leaf 0.50 713.92 651.84 1,303.68
1/4 Maple Leaf 0.25 316.61 332.13 1,328.51
1/10 Maple Leaf 0.10 131.61 135.33 1,353.34
Mexican 50 peso 1.21 1,489.39 1,500.39 1,244.41
.9999 bar 1.00 1,245.95 1,257.60 1,257.60
SPOT SILVER: 20.06      
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 15,018.58 15,268.58 21.35
US 40% silver 1/2s 0.30 5,724.48 5,874.48 19.91
100 oz .999 bar 100.00 1,995.50 2,055.50 20.56
10 oz .999 bar 10.00 205.55 206.55 20.66
1 oz .999 round 1.00 20.16 20.66 20.66
Am Eagle, 200 oz Min 1.00 21.81 23.06 23.06
SPOT PLATINUM: 1,430.00      
Plat. Platypus 1.00 1,455.00 1,495.00 1,495.00
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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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