The Moneychanger
Weekly Commentary
Friday, 11 April a.d. 2014 Browse the commentary archive
Here's the weekly scorecard:
  4-Apr-14 11-Apr-14 Change % Change
Silver, cents/oz. 1,992.70 1,993.30 0.60 0.0
Gold, dollars/oz. 1,303.20 1,318.70 15.50 1.2
Gold/silver ratio 65.399 66.157 0.758 1.2
Silver/gold ratio 0.0153 0.0151 -0.0002 -1.1
Dow in Gold Dollars (DIG$) 260.34 251.23 -9.11 -3.5
Dow in gold ounces 12.59 12.15 -0.44 -3.5
Dow in Silver ounces 823.64 804.03 -19.61 -2.4
Dow Industrials 16,412.71 16,026.75 -385.96 -2.4
S&P500 1,865.09 1,815.69 -49.40 -2.6
US dollar index 80.56 79.57 -0.99 -1.2
Platinum 1,449.40 1,461.60 12.20 0.8
Palladium 791.00 807.05 16.05 2.0

Yesterday I erred bizarrely, and jumped into my commentary out of my usual order and forgot to update prices. Please forgive me.

Wall Street bled and bled this week, and no bandaids are in sight, let alone tourniquets. US dollar index broke, too, while silver & gold held up & the white metals (platinum & palladium) also gained. Nothing normal about this situation, & a stock market rout always carries in its bosom the threat of contagion to other markets. 2008 was not so long ago.

Stocks had their worst week since memory runneth not to the contrary, and today only opened more blood vessels. Technically the damage astounds me.

Dow lost 385.96 points this week or 2.4%, 143.47 points today (0.89%) 7 closed at 16,026.75. That's 3.3% lower than the high close on 3 April.

Damage doesn't stop there. Dow closed today beneath its 50 day moving average ((16,172) -- 20 DMA (16,331.25) was left behind yesterday. Recall that in November last year the Dow "threw over" its upper boundary line. Today it crossed beneath it again, & for good measure punched thru the bottom Bollinger Band.

February's low was 15,340.89. The Dow could fall much, much further as

Don't overlook the Nasdaq Composite. It's lost 8.3% since its downtrend began on 5 March. Since 2 April it has lost 6.5%. It, too, languisheth far below its 20 & 50 DMA, and treadeth not far from its 200 DMA (3,936.25).

Then there's the S&P500. Down 2.6% this week, it lost 17.39 (0.9%) today to end at 1,815.69. 200 DMA stands at $1,761.43 & the last (February) low at 1,737.92.

Why do I mention the 200 DMA? In a rising market the price spends most of its time ABOVE the 200 DMA. From time to time in large corrections it will re-visit its 200 DMA, and wide knowledge of this fact means that investors will wait to buy there, and thus support the market. A bfreak below the 200 DMA is very bad juju.

This is a rout, like First Manassas. The blue army is running back to Washington & throwing away rifle and knapsack as they flee. Mark, however: it is not impossible for stocks to return and make one last high in May.

Dow in Silver dropped 0.54% today (4.36 oz) to 802.94 oz (S$1,038.14 silver dollars) in what appears to be a downtrend renewed after the correction from March through 1 April. Dow in Gold has really tanked. Dropped another 0.91% today to 12.16 oz (G$251.37 gold dollars) and skidded to a stop smack atop the 200 DMA. Bottom of that correction was 11.62 oz (G$240.21) so the DiG has not far to travel to confirm unequivocally a new downleg.

US dollar index experienced a Niagara week, and waterfalls don't flow up. Gained 10 basis points today to end at 79.57. Stinks. Sits below its 20 & 50 DMA, but won't confirm a new debacle until it closes below 79. Euro has been the chief beneficiary of the dollar's woes, but is now stuck below its last peak. Ended today flat at $1.3876. Yen has met its major downtrend line and top of its 2 month trading range. Must fish or cut bait or row back to the dock. Flat at 98.42 cents/Y100. Could escape skyward.

I watch the Philadelphia Bank Stock index divided by Gold because that reveals which way the investing public's confidence is leaning. The spread is a fraction, with the bank stock index as the numerator and the gold price as denominator. Thus when gold is rising faster than the Bank Stock Index the denominator is growing faster than the numerator so the graph falls. Voilà, chart is here: http://bit.ly/1sOiOAy

This spread peaked early in January, sank with the gold rally/stock correction into end-February, rose as stocks rallied and gold corrected, and since 1 April has cascaded down to close at its 200 DMA today. It has twice already reached this point in March, not a hopeful sign. This suggests investors appetite for risk and confidence in financial markets is dropping as they adopt the motto, "In gold we trust, not banks."

Another measure of dropping confidence or panic, call it which you will, is the yield on the 10 year treasury note. It has also looked like Iguaçu Falls lately, and has even fallen below its uptrend line to 2.619%. Bear in mind that yields (interest rates) fall as bonds rise, and bonds rise because there is more demand for the safety they offer. Sizeable shift like this rolls snake-eyes for stocks.

Gold backed down $1.40 (0.7%) today to $1,318.70, while that rascal silver gave up 14.5 cents (0.1$) to 1993.3.

Gold's loss signifieth nothing, as it remains above its 200 ($1,298), 50 ($1,314), & 20 (1,311.25) day moving averages, as well as support/resistance at roughly $1,318. Every indicator I watch points higher, so why am I gnawing my gnails? Gold's moving slowly and that scoundrel silver won't climb up high enough to confirm gold's move. Of course, that is easily explained by the weakness in stocks, but still . . .

Gold's weekly chart shows upward bias, too, & gold stands above its 18 week MA ($1,284.43) & 50 week MA ($1,312.79) and barely above its downtrend line from August 2011. All burners lit.

Silver actually fell back from its 20 DMA (2007c) today and closed below it. 2015c keeps stopping it. In fact, silver needs to throw a leg over 2050c and run. Yes, yes, all the indicators point higher, but this is awfully slow and trying.

Back off and review the last year. Gold must better its $1,434 peak from last August, then climb over $1,550 where it was clobbered last April. Silver needs to beat its recent 2218c high, then its 2512c August high, and then 225c where it fell off a year ago.

Until gainsaid, the double bottom in June and December says silver & gold won't drop any lower, and that they have begun their next leg up. Bull markets always climb a wall of worry, so y'all ought to expect that now. Meanwhile gold & silver's best friends remain the Federal Reserve, world central banks, and the yankee government since their policies are bound to send them higher.

On 11 April 1900 the US Navy acquired its first submarine, designed by Irish immigrant John P. Holland. The Confederate States Navy already had a submarine in 1863.

On April 11 1898 US President McKinley asked congress for a declaration of war against Spain. Of all the dumb durned things in the world, they gave it to him.

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
11-Apr-14 Price Change % Change
Gold, $/oz 1,318.70 -1.40 -0.1
Silver, $/oz 19.93 -0.15 -0.7
Gold/Silver Ratio 66.157 -0.065 -0.1
Silver/Gold Ratio 0.0151 -0.0001 -0.7
Platinum 1,461.60 3.20 0.2
Palladium 807.05 14.50 1.8
S&P 500 1,815.69 -17.39 -0.9
Dow 16,026.75 -143.47 -0.9
Dow in GOLD $s 251.23 -1.95 -0.8
Dow in GOLD oz 12.15 -0.09 -0.8
Dow in SILVER oz 804.03 -1.34 -0.2
US Dollar Index 79.57 0.10 0.1
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: 1,317.80      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,352.06 1,363.92 1,363.92
1/2 AE 0.50 671.57 694.15 1,388.30
1/4 AE 0.25 335.78 353.66 1,414.66
1/10 AE 0.10 138.26 144.30 1,442.99
Aust. 100 corona 0.98 1,285.25 1,294.25 1,320.39
British sovereign 0.24 312.54 317.29 1,347.86
French 20 franc 0.19 247.88 250.88 1,343.78
Krugerrand 1.00 1,334.93 1,344.93 1,344.93
Maple Leaf 1.00 1,332.80 1,347.80 1,347.80
1/2 Maple Leaf 0.50 757.74 691.85 1,383.69
1/4 Maple Leaf 0.25 336.04 352.51 1,410.05
1/10 Maple Leaf 0.10 139.69 143.64 1,436.40
Mexican 50 peso 1.21 1,580.80 1,591.80 1,320.23
.9999 bar 1.00 1,322.41 1,336.80 1,336.80
SPOT SILVER: 19.96      
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 15,093.65 15,343.65 21.46
US 40% silver 1/2s 0.30 5,696.45 5,846.45 19.82
100 oz .999 bar 100.00 2,001.00 2,051.00 20.51
10 oz .999 bar 10.00 200.10 205.10 20.51
1 oz .999 round 1.00 20.06 20.56 20.56
Am Eagle, 200 oz Min 1.00 21.46 22.66 22.66
SPOT PLATINUM: 1,461.60      
PLATINUM Fine Tr.Oz. BID ASK $/oz
Platinum Platypus 1.00 1,476.60 1,493.60 1,493.60
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© 2015 Little Mountain Corporation, d.b.a. The Moneychanger. All rights reserved. May not be republished in any form, including electronically, without our express permission.

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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