The Moneychanger
Daily Commentary
Monday, 3 February a.d. 2014 Browse the commentary archive

Whoa. Stocks got whupped today with a big knobbly stick. Gold & silver reversed. My, my.

Dow fell 326.05 (2.08%) to 15,372.80, below the 200 DMA (15,469.68). S&P500 lost 2.28% (40.7) to 1741.89. Too early to judge whether the January top was the ultimate -- another may come later in the year -- but for now stocks are headed firmly down, perhaps to 14,760-14,720, the September & October lows. A genuine waterfall today.

Today's stock weakness & metals strength drew the Dow measured in metals down.

Dow in gold sank 3.06% to 12.23 oz (G$252.82 gold dollars) and drew nearer the 200 dma (11.79 oz or G$243.72). It falleth ever nigher its long term downtrend line.

Dow in silver dropped 2.66% to 796.52 oz, well below the 816.54 50 DMA but still way above the 200 DMA (731.61). Rolling over, over, over.

US Dollar index fell today 24 basis points (0.3%) to 81.14, but like a pouty child still refuses to confirm any rally. Yen rose 1.04% to 99.04 & certainly is rallying. Euro at 1.3525 still looks sick as a snake-bit cur.

Gold shot up $20.30 to $1,260.4, higher by 1.6%. Silver gained 28.4 cents (1.5%) to 1938.9 cents.

But look closer. Friday gold made a tiny reversal by closing slightly higher than Thursday. Today it defended about the same low, then rocketed to the downtrend line and closed near there, above all tis moving averages except the 200 DMA. That last is now at $1,317.29, and slowly turning up, a good sign, plus this two day upward tergiversation.

Gold has now thrice beat on the door of this downtrend line, and today's reversal begs the conclusion that it will pierce that line tomorrow or the next day. Twould be extremely bad taste if it didn't, not to mention weak. Ought to run up at least $100 or so.

SILVER hath bounced off that support line left by December lows, and like gold, strengthened on Friday and closed higher today. All that said, silver remains below its 20 & 50 DMAs (now 1982c & 1977c). Must cross them, but more strategically, 2050c. All indicators pointing toward the sun today.

To escape the shadow of one last possible plunge to a new low, gold needs to close above this downtrend line from April and the resistance at $1,267.50, then jump higher to $1,361.80, the October high. How high could this rally carry gold? If the height of what I take to be an upside down head & shoulders reversal (Nov - Jan) measures the gain, then it should run at least to that $1,361.80 October high.

But first, confirmation by puncturing that downtrend line & support at $1,267.50.

On 3 February 1690 the Massachusetts Bay Colony issued America's first paper money, that freely flowing fountain of unfailing woe. The currency was issued to reward troops who had invaded Canada, unsuccessfully.

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
3-Feb-14 Price Change % Change
Gold, $/oz 1,260.40 20.30 1.64%
Silver, $/oz 19.39 0.28 1.49%
Gold/Silver Ratio 65.006 0.096 0.15%
Silver/Gold Ratio 0.0154 -0.0000 -0.15%
Platinum 1,385.00 10.90 0.79%
Palladium 702.50 -0.50 -0.07%
S&P 500 1,741.89 -11.60 -0.66%
Dow 15,372.80 -149.76 -0.96%
Dow in GOLD $s 252.13 -6.62 -2.56%
Dow in GOLD oz 12.20 -0.32 -2.56%
Dow in SILVER oz 792.86 -19.62 -2.42%
US Dollar Index 81.14 -0.24 -0.29%
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SPOT GOLD: 1,257.20      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,289.89 1,298.69 1,298.69
1/2 AE 0.50 640.66 662.54 1,325.09
1/4 AE 0.25 321.90 337.56 1,350.23
1/10 AE 0.10 131.90 137.66 1,376.63
Aust. 100 corona 0.98 1,226.15 1,235.15 1,260.10
British sovereign 0.24 297.72 309.72 1,315.72
French 20 franc 0.19 236.48 239.52 1,282.91
Krugerrand 1.00 1,276.06 1,286.06 1,286.06
Maple Leaf 1.00 1,272.20 1,287.20 1,287.20
1/2 Maple Leaf 0.50 722.89 660.03 1,320.06
1/4 Maple Leaf 0.25 320.59 336.30 1,345.20
1/10 Maple Leaf 0.10 133.26 137.03 1,370.35
Mexican 50 peso 1.21 1,505.07 1,516.07 1,257.42
.9999 bar 1.00 1,261.60 1,276.20 1,276.20
SPOT SILVER: 19.31      
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 14,593.15 14,843.15 20.76
US 40% silver 1/2s 0.30 5,504.70 5,654.70 19.17
100 oz .999 bar 100.00 2,431.00 1,976.00 19.76
10 oz .999 bar 10.00 193.10 199.10 19.91
1 oz .999 round 1.00 19.31 19.86 19.86
Am Eagle, 200 oz Min 1.00 20.56 22.01 22.01
SPOT PLATINUM: 1,385.00      
Plat. Platypus 1.00 1,410.00 1,450.00 1,450.00
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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.
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  • 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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