The Moneychanger
Daily Commentary
Wednesday, 19 February a.d. 2014 Browse the commentary archive

In another stunning display of a central bank's ability to promote instability in markets, the FOMC meeting minutes published today show that the Fed MIGHT back off its long standing promise to keep interest rates low until frogs fly.

Is this stupid? Let me count the ways. First, the Fed has addicted stocks to low interest rates & printing money, so whenever they breathe a hint of change, stocks tremble like they had the DTs. Second, rising interest rates normally accompany a recovering stock market. Third, low rates are devastating & will blow up pension & retirement plans and killing savers. Fourth, low rates keep money flowing to uneconomic businesses rather than cleansing the economy by cutting them off with high rates.

Is that enough?

Fed's FOMC minutes depressed stocks today. Dow plumped down 89.84 (0.56%) to 16,040.56. S&P500 sighed and sank 12.01 (0.65%) to 1,828.75.

Dow in Gold still hasn't closed below its 200 DMA (11.91 oz) yet. Today it lost only 0.42% to 12.15 oz (G$251.16 gold dollars). Dow in silver fell minutely, 0.1%, to 734.12 oz.

US DOLLAR INDEX bounced predictably off the bottom boundary of its range -- predictably but not meaningfully, up 17 basis points (0.21%) to 80.22. Everything about the dollar points lower, but who knows what might make the Nice Government Men change their minds?

Euro backed off 0.17% to $1.3736, but remains about that old uptrend line so should inch higher. Yen rose 0.03% to 97.73. Moving sideways.

After a twelve-day winning streak (less one day for gold) it wasn't surprising that silver & gold took a rest. Gold gave back $4.10 to $1,320.60. Silver lost 4.7 cents to 2184.4c.

A tiny dip like today's is no cause for worry. Bigger question is what metals will do as the correction progresses. Best if gold holds above $1,300 & silver above 2100c. Since none of us has a crystal ball, we can only buy the dips and hope. It would, however, be very unusual for any market to make a breakout as dramatic as silver's on Friday, following 2-1/2 months of range trading and coming off a six-month double bottom simply to wilt and drop. I don't expect that, but bull markets climb a wall of worry.

On 19 February 1906 W.K. Kellogg, brother to Dr. John Harvey Kellogg, founded the Battle Creek Toasted Corn Flake Company. John Harvey Kellogg was a master self-promoter and proponent of salvation by food. His Battle Creek Sanitarium focused on nutrition, enemas, & exercise, although not necessarily in that order. There's a hilarious movie about Kellogg with Anthony Hopkins playing Kellogg, "The Road To Wellville." (Not for children). Kellogg believed mankind could be saved by nuts, and also patented peanut butter. If those wouldn't fix you up, then corn flakes certainly would. Now y'all know I am a faithful follower & producer of wholesome, nutrient rich, natural food, but I stop short of claiming it will save you.

Here's one of those historical ironies: the breakfast cereal industry, started as a health-food industry, has become one of the most lucrative and corrupting processed food industries. How 'bout some sugar with them corn flakes?

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-Feb-14 Price Change % Change
Gold, $/oz 1,320.60 -4.10 -0.31%
Silver, $/oz 21.84 -0.05 -0.21%
Gold/Silver Ratio 60.456 -0.057 -0.10%
Silver/Gold Ratio 0.0165 0.0000 0.10%
Platinum 1,422.90 0.00 0.00%
Palladium 735.20 1.75 0.24%
S&P 500 1,828.75 -12.01 -0.65%
Dow 16,040.56 -89.84 -0.56%
Dow in GOLD $s 251.09 -0.62 -0.25%
Dow in GOLD oz 12.15 -0.03 -0.25%
Dow in SILVER oz 734.32 -2.53 -0.34%
US Dollar Index 80.22 0.17 0.21%
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: 1,320.90      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,357.89 1,367.13 1,367.13
1/2 AE 0.50 673.15 696.11 1,392.23
1/4 AE 0.25 338.22 354.66 1,418.65
1/10 AE 0.10 138.59 144.64 1,446.39
Aust. 100 corona 0.98 1,288.27 1,297.27 1,323.48
British sovereign 0.24 312.81 324.81 1,379.80
French 20 franc 0.19 248.46 251.41 1,346.61
Krugerrand 1.00 1,343.36 1,353.36 1,353.36
Maple Leaf 1.00 1,335.90 1,350.90 1,350.90
1/2 Maple Leaf 0.50 759.52 693.47 1,386.95
1/4 Maple Leaf 0.25 336.83 353.34 1,413.36
1/10 Maple Leaf 0.10 140.02 143.98 1,439.78
Mexican 50 peso 1.21 1,584.51 1,595.51 1,323.31
.9999 bar 1.00 1,325.52 1,339.90 1,339.90
SPOT SILVER: 21.85      
SILVER Fine Tr.Oz. BID ASK $/oz
VG+ Morgan $B4 1905 0.77 25.50 27.50 35.95
VG+ Peace dollar 0.77 22.00 23.50 30.72
90% silver coin bags 0.72 16,123.25 16,373.25 22.90
US 40% silver 1/2s 0.30 6,254.00 6,404.00 21.71
100 oz .999 bar 100.00 2,685.00 2,240.00 22.40
10 oz .999 bar 10.00 218.50 224.50 22.45
1 oz .999 round 1.00 21.85 22.40 22.40
Am Eagle, 200 oz Min 1.00 23.35 24.65 24.65
SPOT PLATINUM: 1,422.90      
Plat. Platypus 1.00 1,447.90 1,487.90 1,487.90
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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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