The Moneychanger
Weekly Commentary
Friday, 14 March a.d. 2014 Browse the commentary archive
Here's the weekly scorecard:
  7-Mar-14 14-Mar-14 Change % Change
Silver, cents/oz. 2,089.70 2,138.40 48.70 2.3
Gold, dollars/oz. 1,338.10 1,379.00 40.90 3.1
Gold/silver ratio 64.033 64.487 0.454 0.7
Silver/gold ratio 0.0156 0.0155 -0.0001 -0.7
Dow in Gold Dollars (DIG$) 254.17 240.83 -13.34 -5.2
Dow in gold ounces 12.30 11.65 -0.65 -5.2
Dow in Silver ounces 787.32 751.29 -36.03 -4.6
Dow Industrials 16,452.72 16,065.67 -387.05 -2.4
S&P500 1,878.04 1,841.13 -36.91 -2.0
US dollar index 79.73 79.44 -0.29 -0.4
Platinum 1,483.00 1,469.00 -14.00 -0.9
Palladium 781.60 773.00 -8.60 -1.1

Exactly one month after silver & gold's surge on 14 February, they are repeating their act. Stocks, on the other hand, have lost 287.37 or 2.4% in a five day losing streak. US dollar index looks puking sick, & platinum & palladium are breathing hard to keep up.

Whoops! The Fed has sprung a money leak!. It holds US government securities in custody for foreign central banks, & for the week ending 12 March those fell $104 billion to $2.86 trillion. Speculation is that the Russians pulled theirs out ahead of the US government possibly locking them up. Now that little smidgen of treasuries withdrawn doesn't amount to anything, but its about three times the last biggest drop ever. And if more central banks took a notion to take delivery, or, worse yet, simply to sell, why there would be big trouble in Fed-ville.

Stocks had a consistent week: consistently lower. Dow yesterday dropped a thumping 231.19, today another 43.22 (0.27%) to end the week at 16,065.67. S&P500 lost 5.21 (0.28%) and ended the day at 1,841.13.

Y'all know that moving averages are momentum milestones. A market above its moving averages has upward inertia, a market below downward. When a market falls below its short term moving average (say, 20 day), it's warning of a downturn. When it falls below the 50 DMA, it picks up steam, etc. In the last two days the Dow dropped through both its 20 (16,241) and 50 (16,148) DMAs. S&P500 fell through its 20 (1,854) but not yet the 50 DMA (1,821).

More interesting still, the S&P500 has fallen through a long term uptrend line it had "thrown over" or broken out above. Now its punching back below. Same holds for an old upper boundary of the Dow's range. It threw over that line in November, traded up until end-December, cascaded down through that support in January all the way to its 200 DMA, then rallied back over the line. Today it sits just above it. Add a downward or sell cross in the MACD indicator, and, well, stocks look a mite peaked.

It appears that the Dow's refusal to confirm new highs in the S&P500 & other indices in this last rally was telegraphing underlying weakness. However, it's like a dead rattlesnake. Don't count it out until somebody cuts off its head. Stocks will likely still back to a new high before May.

I'm strapping on a muzzle so I don't crow too much over the Dow in Gold & Dow in Silver. They fell from end-December until end-February, then managed a little counter-trend rally -- really a sort of counter-trend burp. Now they have earnestly resumed their fall as metals outperform stocks, & they point toward much more outperformance the further they fall. They gave a couple of sell signals this week. DiG closed today at 11.65 oz (G$240.83 gold dollars), well below the 200 DMA at 12.02 oz (G$248.48)

Yo! What of the DiS? Silver has lagged gold so the DiS hasn't performed quite as spectacularly, but respectably still. Tumbled today 1.38% (10.47 oz) to 750.28 (S$970.11), a gnat's eyebrow from the 200 DMA (748.51 oz).

Bearings check: Dow in Gold topped (stocks peaked in August 1999) at 44.767 oz (G$925.42) and Silver in June 2001 at 2,573 oz. In 2013 both broke above their long term downtrend lines in a correction, and now they are headed to break below those lines. From peak to the first trough in this bear market for stocks against metal, stocks lost about 85% of their value. They'll lose another 85% before the bear market for stocks ends. Rough guess, mind you.

US dollar index fell again today, 17 basis points (0.2%) to 79.44. The November low, lowest price in a year, was 79.06. If there dollar breaches that support, no safety net appears before, oh, 78. However, the dollar has spent most of 2014 tracing out a falling wedge, which usually but not always ends by reversing upward. However, if it lurches yesterday's low, about 79.28, it might just keep on lurching downward.

Since Europe has a lot more to lose by a war in Ukraine than the US, the euro ought to be dropping like a careless tourist off a cruise ship, but it's not. Yesterday it dropped 0.27% after hitting a new high for the move, then closed lower. Today it rose 0.27% & closed higher, gainsaying any key reversal downward. Seemingly intends to rise, but why remains a mystery.

Again today the yen picked up the safe haven bid and rose 0.49% to 98.73 cents/Y100. 'Twas at this same level as March began but slid, so if it can close higher then it is rallying and not merely trifling with us.

Gold scooped up another $6.80 (0.5%) today to pierce $1,375 & close at $1,379.00. Silver joined in, grabbing 21.5 (1%) cents to rise to 2138.4.

Silver was pushed to a 2114c low but gapped up about 5:30 a.m. EST. It stopped a leap from 2120 at 2180, but backed off that and traded between 2130c and 2150c most of the day.

Silver has formed what is probably a bullish flag (down-pointing flag) and today broke above the top of that range, but at the close was only about 8 cents above it. At day's end silver stopped at 2146c. Climbed today above the 20 DMA.

The gold silver ratio at 64.487 STRONGLY witnesses that silver is verging on playing catch up with gold, and running past it. First, however, silver must close above 2160 and then above 2218c, the February high.

Gold is a little overbought, but bull markets can stay overbought a long time. Since today it punched through its top Bollinger Band (a measure of range), we might see gold take a rest for the first couple of days next week. Of course, anything can happen over a weekend.

Last week gold closed above the downtrend line from its August 2011 high and above its 50 week moving average. This week's trading all took place above that downtrend line. On the monthly chart gold remains below its 20 & 50 month moving averages, but has broken out through the downtrend line there, too, and posted three rising months.

On a weekly chart silver has spent five weeks above the post-April 2011 downtrend line and this week closed barely below its 50 week MA (2150). It has spent four weeks trying to fight through that moving average. Silver's monthly chart reveals a breakout similar to gold's above the downtrend line, but only two months.

We're in the middle of a rally. Buy -- more silver than gold. If you have gold to swap for silver, do it fast.

Did y'all ever notice that over time, everybody becomes more consistent with what they believe? That they are conformed to whatever god they worship & serve, even if they're atheists? If they serve sex, they become daily more lecherous. If they serve money, they become stingier and greedier. If they serve food or drink or -- well, y'all get the picture. That's why Lloyd Blankfein of Goldman Sachs can say that as a banker, "I am doing god's work." He really is doing the work of his god -- Mammon.

Sort of makes you cautious about your choice of gods, don't it?

On 14 March 1900 congress passed the Gold Standard Act, allegedly to put the United States on a gold standard, really to try to make the banks' demonetization of silver permanent and demoralize bimetallists. The bill made the gold dollar of the standard of 1834 the "standard unit of value" to which the secretary of the treasury was supposed to maintain all other forms of money at parity The act is another irrefutable argument against government issuing any money at all, since the whole history of government issued money is a parade of corruption, stupidity, confiscation, and market suppression. A government monopoly on money issue, along with legal tender laws, is the tyrant's indispensable tools to rob the people

On 14 March 1794 Eli Whitney was granted a US patent for a cotton gin. The invention quickly and easily separated cotton fiber from the seed & revolutionized the cotton industry. At also led to growing demand for cotton workers, i.e., slaves, in the South. Mercy, that didn't work out at all.

Y'all enjoy your weekend!

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
14-Mar-14 Price Change % Change
Gold, $/oz 1,379.00 6.80 0.5
Silver, $/oz 21.38 0.22 1.0
Gold/Silver Ratio 64.487 0.312 0.5
Silver/Gold Ratio 0.0155 0.0002 1.0
Platinum 1,469.00 -9.80 -0.7
Palladium 773.00 -5.70 -0.7
S&P 500 1,846.34 -5.21 -0.3
Dow 16,065.67 -43.22 -0.3
Dow in GOLD $s 240.83 -1.82 -0.7
Dow in GOLD oz 11.65 -0.09 -0.7
Dow in SILVER oz 751.29 -9.67 -1.3
US Dollar Index 79.44 0.03 0.0
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: 1,382.30      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,422.39 1,430.68 1,430.68
1/2 AE 0.50 704.46 728.13 1,456.25
1/4 AE 0.25 352.23 370.97 1,483.90
1/10 AE 0.10 145.04 151.36 1,513.62
Aust. 100 corona 0.98 1,348.16 1,357.16 1,384.57
British sovereign 0.24 327.83 332.58 1,412.85
French 20 franc 0.19 260.01 262.93 1,408.28
Krugerrand 1.00 1,397.51 1,407.51 1,407.51
Maple Leaf 1.00 1,397.30 1,412.30 1,412.30
1/2 Maple Leaf 0.50 794.82 725.71 1,451.42
1/4 Maple Leaf 0.25 352.49 369.77 1,479.06
1/10 Maple Leaf 0.10 146.52 150.67 1,506.71
Mexican 50 peso 1.21 1,658.17 1,669.17 1,384.40
.9999 bar 1.00 1,387.14 1,401.30 1,401.30
SPOT SILVER: 21.45      
SILVER Fine Tr.Oz. BID ASK $/oz
VG+ Morgan $B4 1905 0.77 26.25 28.25 36.93
VG+ Peace dollar 0.77 22.25 23.75 31.05
90% silver coin bags 0.72 15,833.68 16,083.68 22.49
US 40% silver 1/2s 0.30 6,134.53 6,284.53 21.30
100 oz .999 bar 100.00 2,149.50 2,199.50 22.00
10 oz .999 bar 10.00 214.95 219.95 22.00
1 oz .999 round 1.00 21.55 22.05 22.05
Am Eagle, 200 oz Min 1.00 22.95 24.15 24.15
SPOT PLATINUM: 1,469.00      
Platinum Platypus 1.00 1,484.00 1,501.00 1,501.00
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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.
  • 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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