The Moneychanger
Daily Commentary
Wednesday, 29 January a.d. 2014 Browse the commentary archive

One thing about us nacheral born fools from Tennessee, we prefer pictures to reading. Reading makes my head hurt. Y'all go look at this here picher. I believe it says something, but durned if I know what: http://bit.ly/1b8nS84

And being a nacheral born fool, I ain't crafty enough to lie when I'm caught out wrong and make out like I was saying the other thing all along. I'll just out & admit it, I was wrong. The scummy criminals at the Fed did taper after all. In the FOMC's statement today -- Bernanke's swan song -- the Fed said it would reduce its securities purchase by $10 bn total, knocking $5 bn of its present $40 bn monthly US Treasury bond buying and $5 bn from its $35 bn Mortgage Backed Securities purchases.

But the Fed also promised it would hold interest rates near zero until unemployment dipped below 6.5%, or 'till hell freezes over with Gatorade, whichever comes first (I snuck in that last part on my own. They didn't really say that). Here are the really gut-bustin' hilarious gems from the FOMC statement:

** the economy is improving.

** "The committee recognizes that inflation persistently below its 2% objective could pose risks to economic performance." (This is loony from the standpoint of protecting the dollar's purchasing power, which is why y'all don't understand it, because the Fed doesn't give 2 hoots & a holler about the dollar's purchasing power. That ain't their job. Their job is to keep all y'all BELIEVING they aim to protect the dollar. And it's genrlly working.)

** "The Committee today reaffirmed its view that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens." Translation: we are going to continue to create new money at the same rate as far as we can see into the future.

And how did the stock market take the news that the Fed is jerking the punch bowl? Not calmly. Dow plunged another 189.77 points (1.19%) to 15,738.79. Scorecard: Dow has lost 676.53 (4.1%) in the last seven trading days. S&P500 today peeled off 18.3 (1.02%) to perch on 1,774.20.

Clearly the Fed is playing "chicken" with the stock market.

Where doth that leave us? The Dow has crashed back below the upper channel line that it threw over (rose above) in November, and reached its last low (15,703.79 in December) matched with a September peak at $1,5709.58. If the Dow punctures this support, next obvious stopping point is the 200 DMA now at 15,454.71. No indicator gives a sign of an upturn yet. S&P500 looks no better.

Meanwhile the Dow in Gold is cascading over the rocks. Closed today down 2.5% at 12.42 oz (G$256.74 gold dollars). All moving averages are in downward alignment, and the next to be struck is the 200 at 11.76 (G$243.10).

Thanks to silver's recent lethargy, the Dow in Silver has not dropped as dramatically. Today it lost 2.18% to end at 798.92 oz, and stands below its 20 and 50 DMA (814.41 oz), and it's outside its upward trading channel. Gravity is calling.

Since the Fed pulled the plug on its stock support today, I reckon investor's appetite for risk has been trimmed. That showed up in rising bond prices/falling ten year T-note yield. It dropped 2.59% to 2.675%.

That reduced risk appetite also pushed up gold today. Comex closed up $11.40 (0.9%) at $1,262.20. Silver lagged badly, rising only 5 cents to 1953.3c.

Yesterday gold fell back to support at $1,250.80, & today rebounded like a trampoline champ. That validated $1,250 support. In the aftermarket gold has pushed through the $1,267.50 December high, but not enough to call it a breakout.

Gold is pounding at the door of that downtrend line from April, but pounding isn't breaking down. Strength shown so far whispers it will break through tomorrow, but if not, it can fall back as far as $1,210 without changing the outlook. All indicators I watch are pointing up, & I expect to see higher gold soon.

Silver, honey, what are you doing? Look at this chart, http://bit.ly/1dP4GvE Since early December silver has formed a rising flat topped triangle with the base or top at about 2050c, and a slowly rising hypotenuse beginning at 1889c through 1910c through 1931c and now today at a 1945c low. This line was broken only once, by the plunge on 31 December 20 1872, but that was an intraday low & silver never closed below that hypotenuse.

Silver stands below its 20 & 50 DMAs (1984 and 1992). It has dithered two months trading sideways. Two days ago the MACD flashed a Sell.

This picture must clear, or threaten gold's performance. Related markets can disagree for a day or two, but past three it begins to look like a family argument where somebody's fixin' to take out a knife & go to cuttin'.

To confirm a rally, gold must close above $1,267.50 and silver must hop aboard and climb over 2050c. It's very rare that gold will stage a rally all on its own. Possible, but infrequent.

On 29 January 1886 Karl Benz patented the first successful gasoline driven car, in Karlsruhe, Germany.

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
29-Jan-14 Price Change % Change
Gold, $/oz 1,262.20 11.40 0.91%
Silver, $/oz 19.54 0.05 0.26%
Gold/Silver Ratio 64.612 0.419 0.65%
Silver/Gold Ratio 0.0155 -0.0001 -0.65%
Platinum 1,406.40 -1.30 -0.09%
Palladium 710.25 -5.35 -0.75%
S&P 500 1,774.20 -18.30 -1.02%
Dow 15,738.79 -189.77 -1.19%
Dow in GOLD $s 257.76 -5.49 -2.08%
Dow in GOLD oz 12.47 -0.27 -2.08%
Dow in SILVER oz 805.67 -11.81 -1.44%
US Dollar Index 80.66 0.08 0.10%
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SPOT GOLD: 1,269.50      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,302.51 1,311.39 1,311.39
1/2 AE 0.50 646.94 669.03 1,338.05
1/4 AE 0.25 325.05 340.86 1,363.44
1/10 AE 0.10 133.19 139.01 1,390.10
Aust. 100 corona 0.98 1,238.14 1,247.14 1,272.33
British sovereign 0.24 300.63 312.63 1,328.09
French 20 franc 0.19 238.79 241.82 1,295.21
Krugerrand 1.00 1,288.54 1,298.54 1,298.54
Maple Leaf 1.00 1,284.50 1,299.50 1,299.50
1/2 Maple Leaf 0.50 729.96 666.49 1,332.98
1/4 Maple Leaf 0.25 323.72 339.59 1,358.37
1/10 Maple Leaf 0.10 134.57 138.38 1,383.76
Mexican 50 peso 1.21 1,518.27 1,529.27 1,268.36
.9999 bar 1.00 1,273.94 1,288.50 1,288.50
SPOT SILVER: 19.80      
SILVER Fine Tr.Oz. BID ASK $/oz
VG+ Morgan $B4 1905 0.77 23.00 25.00 32.68
VG+ Peace dollar 0.77 20.00 22.00 28.76
90% silver coin bags 0.72 14,836.25 15,086.25 21.10
US 40% silver 1/2s 0.30 5,649.25 5,799.25 19.66
100 oz .999 bar 100.00 2,480.00 2,025.00 20.25
10 oz .999 bar 10.00 198.00 204.00 20.40
1 oz .999 round 1.00 19.80 20.35 20.35
Am Eagle, 200 oz Min 1.00 21.05 22.50 22.50
SPOT PLATINUM: 1,406.40      
PLATINUM Fine Tr.Oz. BID ASK $/oz
Plat. Platypus 1.00 1,431.40 1,471.40 1,471.40
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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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