The Moneychanger
Daily Commentary
Thursday, 20 February a.d. 2014 Browse the commentary archive

Do y'all ever get tired of the Self-Appointed Righteous pontificating in their nasal voices over the airwaves about how "we" (they always carry a mouse around in their pockets) "must" (always imperative) correct some wrong or other in the world, whether its keeping children in Hong Kong from getting too many spankings or putting pants on poor naked cats all over the world?

Mercy, I am plumb wore out with it. It's like having to live with Hillary Clinton or Eleanor Roosevelt, or like waking up in a nightmare being married to both of 'em. Listen, I am too busy trying to mind my own business and straighten my own self out to run around the country or the globe messing in other people's business. But this same meddlin' mentality has seized control of US foreign policy so that every time "we" (there's that mouse again) don't fancy what somebody else does, we launch an invasion and go kill 'em to save 'em. It's called the "Janet Reno Waco Option."

Latest crisis is what will Colorado do with the $100 million in sales tax it's collecting on marijuana sales. Colorado's governor with the improbable and ironic name Hickenlooper wants to spend $50 million of it on programs to keep kids from smoking dope. Now, this leaves me scratching my head. Maybe y'all can make sense out of this. I can't.

Let's look at markets. Maybe they'll make sense.

Stocks recovered somewhat today. Dow added 92.67 (0.58%) to 16,133.23 while the S&P500 managed about the same gain with 11.03 points or 0.6%.

There's an eye-catching divergence between these two stock indices. On this latest rally the S&P500 made an intraday high yesterday at 1,847.50, nearly the same as its January new all time high at 1,850.84. This makes a screaming megaphone or broadening top formation since last November with higher or flat highs and lower lows.

Compare that to the Dow, the "senior" index. Since the Dow's intraday all time high at 16,588.25 at end-December, the Dow has only fallen and fallen. And the February reaction has only taken it as high as 16,225.72 yesterday. WHY do these two indices look so different? Why does the Dow look so much weaker than the S&P500?

Meanwhile the Dow measured in metals continues to slide. After a little bounce up yesterday the Dow in Silver dropped 0.74% to 739.55 oz, dancing around its 200 DMA (now 740.70). Dow in gold is not falling nearly as fast, down today 0.33% to 12.20 oz (G$252.20 gold dollars).

US Dollar Index rose a measly ten basis points today (0.12%) to 80.32. Dollar still gives no unequivocal hint which way the Nice Government Men intend to take it. The schizo-euro today flaked and dropped back below that old uptrend line, apparently forced back by the longer-term downtrend line. Closed $1.3719, down 0.13%. Yen went sideways & the Japanese Nice Government Men went home for a well-earned cup of hot sake.

Silver & gold kept on relaxing today. Although they closed lower on the Comex (lovely shade of tape painting), at end of day they were higher. At Comex close gold had lost $3.50 (0.3%) to $1,317.10 & silver gave up 16.6 cents (0.8%) to 2167.8c.

Looking at both charts, silver & gold are forming flags or pennants. These formations form after a sudden high rise as the market trades sideways digesting the quick gains. Rule of thumb says "flags always fly at half staff," i.e., the flag marks the half way point of the move.

I wore my eyes out doing another study of indicators today -- too complicated to explain, but it says very loudly and with very small chance of error that silver & gold have bottomed, period.

On 20 February 1864 Confederate forces under General Joseph Finnegan routed a yankee invasion force at the Battle of Olustee. In a fiercely fought battle the Union casualties amounted to about 34% while Confederate losses were about 19%.

On 20 February 1839 Congress prohibited duelling in the District of Columbia. Personally, I believe duelling, like men going armed, cultivates very nice manners. Maybe we ought to bring duelling back only for the District of Columbia. Those folks could use some work on their manners.

On 20 February 1811 Austria declared bankruptcy. The more things change, the more thay remain the same.

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
20-Feb-14 Price Change % Change
Gold, $/oz 1,317.10 -3.50 -0.27%
Silver, $/oz 21.68 -0.17 -0.76%
Gold/Silver Ratio 60.757 0.301 0.50%
Silver/Gold Ratio 0.0165 -0.0001 -0.50%
Platinum 1,410.90 -12.00 -0.84%
Palladium 736.90 0.90 0.12%
S&P 500 1,839.78 11.03 0.60%
Dow 16,133.23 92.67 0.58%
Dow in GOLD $s 253.21 2.12 0.84%
Dow in GOLD oz 12.25 0.10 0.84%
Dow in SILVER oz 744.22 9.90 1.35%
US Dollar Index 80.32 0.10 0.12%
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: 1,319.10      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,356.03 1,365.27 1,365.27
1/2 AE 0.50 672.23 695.17 1,390.33
1/4 AE 0.25 337.76 354.18 1,416.71
1/10 AE 0.10 138.40 144.44 1,444.41
Aust. 100 corona 0.98 1,286.52 1,295.52 1,321.69
British sovereign 0.24 312.38 324.38 1,377.99
French 20 franc 0.19 248.12 251.08 1,344.81
Krugerrand 1.00 1,341.52 1,351.52 1,351.52
Maple Leaf 1.00 1,334.10 1,349.10 1,349.10
1/2 Maple Leaf 0.50 758.48 692.53 1,385.06
1/4 Maple Leaf 0.25 336.37 352.86 1,411.44
1/10 Maple Leaf 0.10 139.82 143.78 1,437.82
Mexican 50 peso 1.21 1,582.36 1,593.36 1,321.52
.9999 bar 1.00 1,323.72 1,338.10 1,338.10
SPOT SILVER: 21.74      
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 16,044.60 16,294.60 22.79
US 40% silver 1/2s 0.30 6,221.55 6,371.55 21.60
100 oz .999 bar 100.00 2,674.00 2,229.00 22.29
10 oz .999 bar 10.00 217.40 223.40 22.34
1 oz .999 round 1.00 21.74 22.29 22.29
Am Eagle, 200 oz Min 1.00 23.24 24.54 24.54
SPOT PLATINUM: 1,410.90      
PLATINUM Fine Tr.Oz. BID ASK $/oz
Plat. Platypus 1.00 1,435.90 1,475.90 1,475.90
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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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