The Moneychanger
Weekly Commentary
Thursday, 20 March a.d. 2014 Browse the commentary archive
Here's the weekly scorecard:
  14-Mar-14 20-Mar-14 Change % Change
Silver, cents/oz. 2,138.40 2,040.40 -98.00 -4.6
Gold, dollars/oz. 1,379.00 1,330.50 -48.50 -3.5
Gold/silver ratio 64.487 65.208 0.720 1.1
Silver/gold ratio 0.0155 0.0153 -0.0002 -1.1
Dow in Gold Dollars (DIG$) 240.83 253.73 12.90 5.4
Dow in gold ounces 11.65 12.27 0.62 5.4
Dow in Silver ounces 751.29 800.38 49.09 6.5
Dow Industrials 16,065.67 16,331.05 265.38 1.7
S&P500 1,841.13 1,872.01 30.88 1.7
US dollar index 79.44 80.37 0.93 1.2
Platinum 1,469.00 1,434.30 -34.70 -2.4
Palladium 773.00 772.00 -1.00 -0.1

I won't be in the office tomorrow, so I am sending this weekly update today.

Silver & gold probably hit the high of their rally off the December lows this week & began a correction. Stocks gained and lost more of the same ground this week than the British army in World War I, but ended a bit higher. Currencies all reversed. Mother Janet's first FOMC meeting added manic volatility to the mix, bless her heart. ("bless her heart" is a chameleon Southern expression that means, "Poor thing -- she just don't know no better.")

Let us do the nastiest job first & deal with the scrofulous parasitic fiat currencies steadily impoverishing the world to benefit a few.

In the train of the FOMC meeting the market understood, thanks to Mother Janet's loose lips in the press converence, that the Fed would raise interest rates much earlier than they mean to. Since interest rates primarily determine exchange rates (along with relative inflation rates), the dollar shot up out of the bullish falling wedge formed since the year began. Pretty tough to gainsay this breakout, since it has punched through the 20 day moving average (79.94) & reached the 50 DMA (80.46). Today the Dollar index rose another 22 basis points (0.27%) to 80.37. Dollar index needed to rise over 80 to prove it still had blood in its veins, and did that rather handily. This rally out of that falling wedge targets at least 81.50 & probably higher.

Some I will forbear to call shallow thinkers will conclude this means that silver & gold cannot rise because the dollar is rising. They are wrong. Gold & silver's long correction ended with the double bottom in December. Now markets are in new territory, & now the Fed must deal with its loony actions since 2008. Lots of things can happen, but however it plays out, silver & gold will be rising again.

The dollar's rise made a believer out of the euro. After feigning an upside breakout that carried to $1.3958, the dollar has again turned down. Euro fell like your brother-in-law's reputation when he showed up drunk for your uncle's funeral. Gapped down past the 20 DMA (1.3812) to close down 0.38% at $1.3778. 'Twould be logical to conclude that at last the Europeans had all of a high euro they could stand, so made a deal with the Fed to change places for a while.

Meanwhile the Yen fell 0.02% to 97.65 cents/Y100, trapped in a sideways trading range.

The 10 year treasury yield closed yesterday above its 20 & 50 DMAs & stayed there today. Closed up 0.11% to 2.775%. Needs to clear last high at 2.821% to claim it's rallying.

What do you say about a market that loses 2/3 of 1% on day and turns & regains it the next? Central bank interference, but you can't be sure which way. The FOMC statement yesterday took the Dow down about 110 points, but today it came back 108.88 (0.67%) to 16,331.05, resting above its 20 DMA (16,275.14). Yet the chart remains a double top until it can close above 16,505.70, the last high. S&P500 rose 11.24, up 0.6% to 1,872.01. Here, too, it remains in a down trend until it can close above $1,874, and it is close.

Dow in Gold and in Silver are receiving the correction I had expected earlier. Dow in silver rose 2.36% (18.56 oz) to 805.28 oz (S$1041.13 silver dollars). That's way aboev the downtrend line and above the 20 DMA & 50 DMA. Doe in gold also broke above its downtrend line and rose again above the 200 DMA (12.05 oz) and 20 DMA (12.10 oz). Floated up 0.85% to 12.3 oz ($254.26 gold dollars). Both must stop soon or continue to rise much higher.

Silver & gold both dropped today but only roughly to the levels seen in yesterday's aftermarket. From yesterday's Comex close gold dropped $10.90 to $1,330.50 while silver lost 39.6 cents (1.9%) to 2040.4c. Gold/silver ratio rose to 65.208.

Really only one question hangs over gold and silver: was December's low really a double bottom, or now, after a rally, will they drop terrifyingly to a new low. Whichever outlook you take determines your opinion at this juncture. I'll tell y'all up front I believe the December lows were a double bottom, & so I expect this correction to be limited like a bull market rally. In other words gold will give back 38% to 50% and silver 62% to 75% of the foregoing gain, but the bottom will not drop out to hit new lows.

First let's look at some related markets. The gold stock indices XAU, GDX, & HUI have all broken down after strong rallies but remain above their 50 & 200 DMAs. The Gold/BKK Banking Stock Index has fallen sharply below its 50 DMA. Bank stocks jumped up strongly yesterday, probably on anticipation they will be sucking more blood out of us in the future, interest-wise. When Bank stocks outperform gold it means the public is willing to take on more risk. In what cannot be labeled good news for stocks, copper broke down below $3.00 and in spite of coagulating right under that breakdown, has not managed to come back.

So gold stocks are falling in sympathy with their underlying value-giver, gold, while the public is reaching for more risk. Unhappily for the public, Dr. Copper is predicting more economic anemia, with perhaps violent puking in the wastebasket.

Gold todayranged from $1,336.30 to $1,320.80. It hit that low about 9:30, then rose again to trade around $1,330 most of the day, about where it ended the day yesterday. On a chart this looks like a V bottom. That low came in not far from a 38.2% correction ($1,311.92). A 50% correction would take gold to $1,287.00. Gold also broke through the lower boundary of its Dec - March upward trading channel. The 200 DMA stands at $1,301.44, and that offers another safety net to catch gold.

I hope I'm not just imagining things in the chart, but silver made a V-bottom today at 2014c between 9:00 a.m. & 10:00 am, then rose to spend the rest of the day oscillating between 2045 and 2025c. A 62% correction would take silver to 2005c. It broke the 50 DMA (2056c).

As I said, if this is a correction to a rally and the 2011-2013 correction has ended, we have seen falls just about far enough to satisfy that correction. The market will tell us.

On 20 March 1556 Thomas Cranmer, reforming Archbishop of Canterbury, was burned at the stake by Bloody Mary after retracting the last of his seven recantations that same day.

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
20-Mar-14 Price Change % Change
Gold, $/oz 1,330.50 -10.90 -0.8
Silver, $/oz 20.40 -0.40 -1.9
Gold/Silver Ratio 65.208 -0.521 -0.8
Silver/Gold Ratio 0.0153 -0.0003 -1.9
Platinum 1,434.30 -16.90 -1.2
Palladium 772.00 3.35 0.4
S&P 500 1,872.01 11.24 0.6
Dow 16,331.05 108.88 0.7
Dow in GOLD $s 253.73 3.77 1.5
Dow in GOLD oz 12.27 0.18 1.5
Dow in SILVER oz 800.38 20.47 2.6
US Dollar Index 80.37 0.22 0.3
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US 40% silver 1/2s 0.30 5,792.33 5,942.33 20.14
100 oz .999 bar 100.00 2,033.50 2,083.50 20.84
10 oz .999 bar 10.00 203.35 208.35 20.84
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Am Eagle, 200 oz Min 1.00 21.79 22.99 22.99
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Platinum Platypus 1.00 1,449.30 1,466.30 1,466.30
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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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