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

Surprise, surprise. Academics have now discovered, & even written a paper exposing that the London Gold Fix in effect daily since 1919 is -- wait, hold onto your seat -- PRICE FIXING! Yes, yes, it's true, the five bullion house meet twice daily to FIX the gold price in the London Gold FIX and that is "price fixing." Wow. This truly is deep science & investigative reporting. See article at http://buswk.co/NnOj4f

More to the point and with slightly less sarcasm, the authors of the paper found an unexplained bias for sharply lower prices in the afternoon fix. I appreciate their work, but they could have read details of that years ago at www.GATA.org, the Gold Anti-Trust Action Committee's website, or www.LeMetropoleCafe.com.

But then, why do you think they call it a "fix"?

Surprise, surprise. Putin invaded, Obama blinked. Today gave y'all a chance to see how much stock markets love the threat of war, and how much gold loves it. Gold popped up nearly $30 while stocks fell nearly 1%. Before y'all go hog-wild, here's a leetle caution: gold usually doesn't retain these crisis-buying gains, and stocks may or may not keep these losses. I'll get to technical aspects of gold later.

Stocks fell across the board in the US and the world as the prospect of Russia turning its invasion of Ukraine from retail to wholesal. Europe can do no more than fume & bluster, because 30% of its oil & gas comes from Russia, much of it through pipelines under the Ukraine. The US ought to know well enough to stay out of other people's business, but shoot! After meddling in everybody's affairs since 1898, why scuttle imperial ambitions now? However, Putin holds all the cards & they all know or ought to know it. They'll all back down.

Dow fell 153.68 (0.94%), more than the last three days' gains, to perch at 16,168.03. S&P500 plunged 13.72 (0.74%) to land at 1,834.44. Would they have fallen without Putin's invasion? Probably. They were stretched pretty tight. If so, after this crisis blows over in a few days -- if it does -- then they will barely rally to the news & keep on falling. We'll just have to wait to see. Point is, no technical boundaries were crossed.

Today's stock plunge/gold surge took the Dow in Gold down barely below its 200 DMA at 11.98. DiG closed down 2.5% at 11.97 oz (G$247.44 gold dollars).

Now before y'all commence to jubilatin', the DiG has been falling steadily & sharply since end-December, aiming for just this mark. While that might mark a continuation, more likely it marks the occasion for a little counter trend rally.

Dow in Silver had rallied up to its 20 DMA (766.06 oz) but it lost 1.95% today (15.01 oz) to end at 752.53 oz. Remember the DiS had already fallen to its 200 DMA and bounced up off of it. Here again, most likely next move will be up in a reaction against that long fall.

Currencies reacted as you might expect to a threat of war. US dollar caught a safe-haven bid & rose a modest 31 basis points (0.38% to 80.10, erasing its humiliating breakdown Friday when it lost 53 basis points (0.65%) and closed at 79.79. That brings it barely above the morale- boosting/busting 80 level. Trend remains down within the September - till now trading range.

On Friday the Euro had gapped up to an intraday high of $1.3824, the top of its range since October, but it just as quickly gapped down today, as Europe stands to lose more out of the Ukrainian stand-off than the US or Japan, its other currency competitors. Looks like it broke the back of the euro's rally, but a only a few more days dinking will confirm that. Yen gapped up 0.37% to 98.25, back in attempted rally mode.

US Treasury bonds also caught a safe-haven bid. 10 year note yield fell 1.92% to 2.607 (bonds rise when yields fall, remember).

Gold bounded $28.70 (2.2%) to $1,350.10, throwing last week's $1,345.60 intraday high with a $1,355 high today. Gold may put on another leg that carries through $1,360, but generally these crisis-caused spurts peter out quickly.

One thing that dampens my steam is the gold/silver ratio. Silver today jumped up 24.4 cents (1.15%) to 2144.8c. That relatively weaker performance took the ratio UP to 63.841. That suggests most of the rise was powered by the war threat.

Where does silver stand now? It needs to climb above that last intraday high at 2218c, or it's downtrending. Gold, on the other hand, hit $1,361.80 as October ended, so that will place a high wall in gold's road. A jump over that wall suggests a sprint for $1,434. Not what I expect right now, but surely possible.

For some reason the "this day in history" websites are showing that today in 1791 congress established the US mint. That's wrong. The Coinage Act of 1792, styled, "An act establishing a mint, and regulating the Coins of the United States" passed on 2 April 1792. I can't imagine what these people are confusing with the 1792 Act.

But while I'm here, I'll talk about the most excellent 1792 Coinage act. It established "symmetallic" system with silver, gold, and copper coins. The silver dollar of 371-1/4 grains fine silver provided by that Act has never been changed, and it was made the country's standard coin.

The act also established half dollars, quarter dollars, tenth dollars ("dismes"), and half dismes, all minted to their exact fraction of a dollar coin. They weren't made subsidiary (lighter than a dollar) until 1857.

It wasn't really a monometallic silver standard, because the law enacted also gold coins to be adjusted to changes in world market prices, as was done in 1834, WITHOUT cheating anyone. It was pure genius.

The gold coins weren't even denominated dollars but were called "Eagles" and "valued in" dollars. The Eagle contained 0.515625 oz fine gold, the half eagle half that much, and the quarter eagle one-fourth.

That established a mint gold/silver ratio of 15:1, lower than the world ratio & overvaluing silver because they wanted to draw silver into the country, viewing it as the more useful metal because it supported daily commerce.

The trimetallic system made 15 oz of silver equal to one oz of gold or 1,066-2/3 oz of copper.

On 3 March 1863 Abraham Lincoln added to all his other crimes signing the conscription act which compelled Americans caught in his dictatorship to report for duty in his army or pay $300. That made it a rich man's war but a poor man's fight. Just in gold value at today's prices, that exemption would have cost nearly $20,000 in 2014 dollars.

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-Mar-14 Price Change % Change
Gold, $/oz 1,350.10 28.70 2.17%
Silver, $/oz 21.45 0.24 1.15%
Gold/Silver Ratio 62.948 0.629 1.01%
Silver/Gold Ratio 0.0159 -0.0002 -1.00%
Platinum 1,460.10 13.90 0.96%
Palladium 749.80 5.95 0.80%
S&P 500 1,834.44 -13.72 -0.74%
Dow 16,168.03 -153.68 -0.94%
Dow in GOLD $s 247.55 -7.78 -3.05%
Dow in GOLD oz 11.98 -0.38 -3.05%
Dow in SILVER oz 753.82 -15.92 -2.07%
US Dollar Index 80.10 0.31 0.39%
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SPOT GOLD: 1,351.10      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,388.93 1,398.39 1,398.39
1/2 AE 0.50 688.55 711.69 1,423.38
1/4 AE 0.25 344.28 362.60 1,450.41
1/10 AE 0.10 141.76 147.95 1,479.45
Aust. 100 corona 0.98 1,317.73 1,326.73 1,353.53
British sovereign 0.24 320.43 325.18 1,381.41
French 20 franc 0.19 254.14 257.10 1,377.08
Krugerrand 1.00 1,367.31 1,377.31 1,377.31
Maple Leaf 1.00 1,366.10 1,381.10 1,381.10
1/2 Maple Leaf 0.50 776.88 709.33 1,418.66
1/4 Maple Leaf 0.25 344.53 361.42 1,445.68
1/10 Maple Leaf 0.10 143.22 147.27 1,472.70
Mexican 50 peso 1.21 1,619.11 1,630.11 1,352.01
.9999 bar 1.00 1,355.83 1,370.10 1,370.10
SPOT SILVER: 21.40      
SILVER Fine Tr.Oz. BID ASK $/oz
VG+ Morgan $B4 1905 0.77 25.50 27.50 35.95
VG+ Peace dollar 0.77 22.50 24.50 32.03
90% silver coin bags 0.72 15,833.68 16,083.68 22.49
US 40% silver 1/2s 0.30 6,119.78 6,269.78 21.25
100 oz .999 bar 100.00 2,144.50 2,194.50 21.95
10 oz .999 bar 10.00 214.45 219.45 21.95
1 oz .999 round 1.00 21.50 22.00 22.00
Am Eagle, 200 oz Min 1.00 22.90 24.10 24.10
SPOT PLATINUM: 1,460.10      
PLATINUM Fine Tr.Oz. BID ASK $/oz
Plat. Platypus 1.00 1,475.10 1,492.10 1,492.10
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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.
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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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