The Moneychanger
Weekly Commentary
Tuesday, 22 April a.d. 2014 Browse the commentary archive
Here's the weekly scorecard:
  15-Apr-14 22-Apr-14 Change % Change
Silver, cents/oz. 1,947.80 1,935.10 -12.70 -0.7
Gold, dollars/oz. 1,300.00 1,280.60 -19.40 -1.5
Gold/silver ratio 66.742 66.177 -0.565 -0.8
Silver/gold ratio 0.0150 0.0151 0.0001 0.9
Dow in Gold Dollars (DIG$) 258.60 266.58 7.98 3.1
Dow in gold ounces 12.51 12.90 0.39 3.1
Dow in Silver ounces 834.92 853.41 18.49 2.2
Dow Industrials 16,262.56 16,514.37 251.81 1.5
S&P500 1,842.98 1,879.55 36.57 2.0
US dollar index 79.89 79.99 0.10 0.1
Platinum 1,444.10 1,399.60 -44.50 -3.1
Palladium 796.15 783.90 -12.25 -1.5

Since I took off during Holy Week & Easter Monday, I'll give y'all a report today for the last week, which may set our minds straight for the rest of the week.

Before I start on markets, I've got to hack up a bone. This morning I was driving from my home (The Shoe) to the office torturing myself by listening to National Pompous Radio, a.k.a., National Proletarian Radio. As I listened to their advertisement ( it couldn't properly be called a newscast) for extending early childhood education, a.k.a., pre-pre-pre-kindergarten, I realized that every single clause was a propaganda lie. Yes, it was all outright lies, presented as if it were truth. They claimed that institutionalizing little children at an earlier age would somehow pay "benefits." (Remember how much you liked going to school as an intimidated six year old? Imagine how much more fun that would be as a 4 year old.) They called these expenditures of tax funds extorted at gunpoint from citizens "investing." They called all this "free" when clearly somebody must pay for it. Every claim was manifestly untrue as a matter of fact.

All this is presented without every asking, indeed, to avoid enabling anyone to ask, the threshold question, Is any of this necessary? Is public education (really "state-run child indoctrination force-paid by taxpayers") really necessary?

Why is it a crime for private people to kidnap children and indoctrinate them, but not for the state?

Then to pour salt in my bleeding intellectual wounds, they call this "democracy." But then again, maybe that's the ONLY true thing they said.

Hack, hack! Okay, that bone's out of my throat, let's move to markets.

Stepping back form the charts a little, the silver & gold rally that began the year has cycled downward and stocks that were falling have turned up. Play this out against the backdrop of a probable double bottom (June 2013 - Dec 2013) closing the long correction in silver and gold, and a 300 year cyclical top coming in stocks probably in May. In monetary terms the Fed since 2008 has roughly quadrupled the US money supply, but has managed to (1) make the banks balance sheets whole, the true aim of Quantitative Easing and (2) quarantine most of the inflation out of consumer prices and into asset prices (stocks) and bank reserves. By manipulating stocks higher by inflation, the Fed has set the stage for a worse crash to come, and enormously higher silver & gold prices. Currency markets are drifting sideways in broad ranges, which probably reflects the terror of the Nice Government Men & central bank criminals. Above all things, they want stability.

But the trump card in the reasoning process that tries to make sense of all this is, WHAT HAS CHANGED? WHAT IS ABOUT TO CHANGE? What voice of reason is calling for economic, government-budget, monetary, or financial market reform? Where is that Solon who will straighten this out? He ain't in the US congress, & he ain't in the European parliament, and if he's anywhere he's sure enough well camouflaged. As long as a cause continues, it begets the same outcome. The causes have not changed, so the outcome will not change. That puts the world's strongest powers -- governments & central banks -- squarely on the side of silver & gold investors, because they have proven through crisis after crisis that they will inflate until they die, and inflation drives silver & gold higher.

Now in the shorter term . . .

After a brutal correction stocks are approaching again their last highs. May could see them exceed those old highs, but the end of stocks draweth nigh, & 'twill be bloody.

In the last week the Dow rose 1.5%, the S&P500 2%. Dow today rose 65.12 (0.4%) to 16,514.37. S&P500 climbed 7.66 (0.41% to 1,879.55.

The last week's stock strength & metals weakness has played hob with the Dow in Gold & Dow in silver. Thanks to lagging silver the Dow in Silver has risen nearly to its high for the move seen at December's end, 853.15 oz. Today it closed at 851.70 oz (s$1,101.19 silver dollars). It appears to be in the last leg of its rise, & could easily rise to a new high for this move, say, 870 oz (S$1,124.85).

Dow in Gold chart offers a different pattern. From December to the March low, the Dow in gold fell from 13.8 oz to 11.62, then recovered by 1 April to 12.92, about 2/3 of the fall before. It fell again, to 12.16 oz in mid-April, and now has rallied today to 12.87 oz (G$266.05 gold dollars). I expect it will rise a bit further, but not to a new high.

In the last 12 days the US dollar index has fallen nearly to the last low, then recovered. Right now it's stymied at the confluence of the 20 & 50 day moving averages (80.07 and 80.06), staring at 'em like a calf staring at a new gate. After rising six trading days, the dollar fell back today 5 basis points to 79.99. Basically the buck has been range-trading since August, but in the last two months the range has narrowed & weakened.

The manic-depressive euro has been Range-trading, too, but hasn't been able to make good its upside escape. Today at $1.3805 it's above its 20 & 50 DMAs, but within a downtrend of lower highs & lower lows. Nothing to cheer about there.

Yen has been perfectly range bound, 99.24 - 96.05, in a slightly declining channel since 1 February. Presently it is crumpling yet again.

Recall that all the central banks' and the US government's grand plans hang upon one slender hook: suppressed interest rates. 10 days ago it looked as if the 10 year treasury note yield would break down, but it caught and scrabbled its way out of danger. Today it closed 2.726%, up 0.18%. Last June it broke out to the upside, and although it lapsed into a consolidating range the rest of the year, the longer trend points up. Higher interest rates will tear all those grand plans off the hook and shred them.

Gold lost $7.40 today & closed Comex at $1,280.60. Silver gained -- get ready -- one cent to close at 1935.1 cents.

Metals momentum is down, clearly, but without a lot of conviction. That is, they are running out of downward steam. A ratio today at 66.177 shows that silver has played the weak sister.

I expect gold might hit $1,270 before it turns and silver 1900c. Dow below silver must not drop below 1890c nor gold below $1,260. Clear rally confirmations occur when gold betters $1,331.40 and silver 2050c.

Think of silver & gold (and stocks) as a huge bus turning -- it's a slow, tedious business. Unless prices gainsay it, my operating interpretation remains that the June - December lows constituted a double bottom, & silver & gold won't again drop below those prices.

On 22 April 1893 Paul Kruger was elected president of the Transvaal Republic for the third time. Kruger would later lead the Boers in their war against the English invasion.

Here's one you won't believe, given the last 100 years' experience: on 22 April 1792 President George Washington proclaimed American neutrality in the war in Europe.

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
22-Apr-14 Price Change % Change
Gold, $/oz 1,280.60 -7.40 -0.6
Silver, $/oz 19.35 0.01 0.1
Gold/Silver Ratio 66.177 -0.383 -0.6
Silver/Gold Ratio 0.0151 0.0000 0.1
Platinum 1,400.90 -0.40 -0.0
Palladium 784.95 5.85 0.8
S&P 500 1,879.55 7.66 0.4
Dow 16,514.37 65.12 0.4
Dow in GOLD $s 266.58 2.60 1.0
Dow in GOLD oz 12.90 0.13 1.0
Dow in SILVER oz 853.41 2.93 0.3
US Dollar Index 79.99 -0.05 -0.1
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SPOT GOLD: 1,282.60      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,317.87 1,327.49 1,327.49
1/2 AE 0.50 653.62 675.61 1,351.22
1/4 AE 0.25 326.81 344.22 1,376.87
1/10 AE 0.10 134.57 140.44 1,404.45
Aust. 100 corona 0.98 1,250.92 1,259.92 1,285.37
British sovereign 0.24 304.19 308.94 1,312.40
French 20 franc 0.19 241.26 244.31 1,308.58
Krugerrand 1.00 1,299.27 1,309.27 1,309.27
Maple Leaf 1.00 1,297.60 1,312.60 1,312.60
1/2 Maple Leaf 0.50 737.50 673.37 1,346.73
1/4 Maple Leaf 0.25 327.06 343.10 1,372.38
1/10 Maple Leaf 0.10 135.96 139.80 1,398.03
Mexican 50 peso 1.21 1,538.57 1,549.57 1,285.20
.9999 bar 1.00 1,287.09 1,301.60 1,301.60
SPOT SILVER: 19.37      
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 14,846.98 15,096.98 21.11
US 40% silver 1/2s 0.30 5,520.93 5,670.93 19.22
100 oz .999 bar 100.00 1,941.50 1,991.50 19.92
10 oz .999 bar 10.00 194.15 199.15 19.92
1 oz .999 round 1.00 19.47 19.97 19.97
Am Eagle, 200 oz Min 1.00 20.87 22.07 22.07
SPOT PLATINUM: 1,400.90      
Platinum Platypus 1.00 1,415.90 1,432.90 1,432.90
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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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