The Moneychanger
Daily Commentary
Monday, 12 May a.d. 2014 Browse the commentary archive

As I've been expecting, Stocks made a new high here in May. Dow today posted a new all time high close at 16,695.47, up today 112.13 or 0.68%. S&P500 joined in, up 18.17 (0.97%) to 1,896.65. But if I owned stocks I would be sore distressed about the non-confirming Russell 2000 & Nasdaq Composite & Wilshire 5000, all many furlongs from new highs.

It is instructive for my Tennessee hick mind to gaze upon the Bank Stock Index ($BKX) divided by the S&P500 ($SPX). Lo, since 2011 late Bank Stocks have outperformed the S&P500, yea, even these very scoundrel, bankrupt, Too-Big-To-Fail- Too-Big-To-Jail banks. A clearer sign of faith in the financial system would be impossible to imagine than faith in these parasitic behemoths. Behold! the spread broke down early in April, or, in English, the S&P500 began outperforming the Bank Stock Index.

Lo, also instructive to my benighted mind, which lives so far back in the woods that I have to order sunlight from Sears and Roebuck: Divide the Bank Stock Index by Gold. Since (as you would expect) the gold peak in August 2013 bank stocks have outperformed gold as faith in the (preposterous, ridiculous, jerry-built, predatory, corrupt) financial system solidified. That trend went into high gear in 2013, but turned and broke down in January 2014. It remains in an overall downtrend, and within that downtrend is -- get this -- trending down.

What can it all mean? That investor confidence in the financial system is turning down and shifting to gold, and, ultimately that implies, from financial to tangible assets. In case you're wondering, the BKX has turned down against silver as well.

But what do I know, a durned nacheral born fool from Tennessee? What's my hick opinion against all them Wall Street Smarties?

Last Thursday the head criminal at the European Central Bank (ECB) one Mario Draghi (look for his picture coming in post offices soon) announced he would begin inflating the euro more. As usual, he announced no real move but only jawboned, but that was enough to break the euro's back. Friday the US dollar index shot up 45 basis points to end at 79.93. The euro's uptrend was crushed. The Yen was indifferent.

Today the US dollar index rested quietly in a narrow range and rose only 2 basis points to 79.95. The euro fell another 0.1% to $1.3757, while the Yen dropped slightly (0.25%) to 97.92. Dollar should remain strong for several months, although technically it must still close above 80.20 to confirm its reversal.

Before we turn from stocks, let it be noted that in spite of new all time highs in the Dow & S&P500, the Dow in silver did not rise but fell. The Dow in Gold rose only 0.2%, and is nowhere near its all time high (13.80 oz or G$285.27 gold dollars).

Today Gold traded as high as $1,304.50, but fell back at Comex close to $1,295.60, up only $8.30. Silver added 42.3 cents to 1950c.

Over the weekend gold traded down to $1,277.70, but began recovering and today climbed steadily to a $1,304.50 high. Thrice now gold has validated the bottom boundary of an even-sided triangle (forming since mid-April.). If gold closes above $1,315.80 (last low), it will break out of this triangle.

Silver's pattern over the last three days followed gold's, with a 1905c low over the weekend and a 1967c high today. Silver has now walked through its downtrend line and closed today above its 1949c 20 day moving average.

Most frustrating part of my job is watching investors. Why? Because they love to buy a rising market, especially after it's been rising a long, long time -- precisely when they shouldn't buy. And they hate to buy a low market, especially if it's been low a long time, like silver & gold. But the road to riches is not "buy high and sell low," but just the opposite. And nowhere are the nerves wracked more or more courage needed than to buy when it's low, based on your own knowledge and analysis.

So I sit here watching investors shun gold & silver at precisely the instant they ought to be buying. I reckon that goes with the territory.

Expect silver & gold to grind higher through May. Stocks are topping now, although they may make additional marginal new highs. Watch for it.

On 12 May 1935 "Bill W." and "Dr. Bob S." founded Alcoholics Anonymous in Akron, Ohio. They've probably done more good than all the do-gooders and temperance campaigns in history.

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
12-May-14 Price Change % Change
Gold, $/oz 1,295.60 8.30 0.64%
Silver, $/oz 19.50 0.42 2.22%
Gold/Silver Ratio 66.441 -1.038 -1.54%
Silver/Gold Ratio 0.0151 0.0002 1.56%
Platinum 1,440.90 12.00 0.84%
Palladium 808.90 9.00 1.13%
S&P 500 1,896.65 18.17 0.97%
Dow 16,697.47 112.13 0.68%
Dow in GOLD $s 266.41 0.08 0.03%
Dow in GOLD oz 12.89 0.00 0.03%
Dow in SILVER oz 856.28 -13.11 -1.51%
US Dollar Index 79.95 0.02 0.03%
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: 1,295.30      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,332.86 1,340.64 1,340.64
1/2 AE 0.50 660.09 682.30 1,364.60
1/4 AE 0.25 330.05 347.63 1,390.50
1/10 AE 0.10 135.90 141.84 1,418.35
Aust. 100 corona 0.98 1,263.30 1,272.30 1,298.01
British sovereign 0.24 307.20 311.95 1,325.19
French 20 franc 0.19 243.65 246.68 1,321.28
Krugerrand 1.00 1,309.55 1,319.55 1,319.55
Maple Leaf 1.00 1,310.30 1,325.30 1,325.30
1/2 Maple Leaf 0.50 744.80 680.03 1,360.07
1/4 Maple Leaf 0.25 330.30 346.49 1,385.97
1/10 Maple Leaf 0.10 137.30 141.19 1,411.88
Mexican 50 peso 1.21 1,553.81 1,564.81 1,297.84
.9999 bar 1.00 1,299.83 1,314.30 1,314.30
SPOT SILVER: 19.49      
SILVER Fine Tr.Oz. BID ASK $/oz
VG+ Morgan $B4 1905 0.77 26.50 28.50 37.25
VG+ Peace dollar 0.77 22.50 23.75 31.05
90% silver coin bags 0.72 14,932.78 15,182.78 21.23
US 40% silver 1/2s 0.30 5,556.33 5,706.33 19.34
100 oz .999 bar 100.00 1,953.50 2,003.50 20.04
10 oz .999 bar 10.00 195.35 200.35 20.04
1 oz .999 round 1.00 19.59 20.09 20.09
Am Eagle, 200 oz Min 1.00 21.34 21.74 21.74
SPOT PLATINUM: 1,440.90      
PLATINUM Fine Tr.Oz. BID ASK $/oz
Plat. Platypus 1.00 1,455.90 1,472.90 1,472.90
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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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