The Moneychanger
Daily Commentary
Wednesday, 28 May a.d. 2014 Browse the commentary archive

Sometimes I don't keep my mind on what I'm doing & so overlook things. I read an article today by James Turk pointing out that yesterday was options expiration date for Comex options & Thursday expiration for OTC options.

The 20 watt bulb in my dim brain flickered to life. Of course. If the black- shirts on the Comex floor can run the prices of silver & gold down, they'll have to pay off on futures options. This happens monthly -- how could I have forgotten? You don't have to postulate a global government/bank conspiracy for this one, just the same old thieves running things answers nicely. It's a variant of another game floor traders play called "run the stops" where they run the price down or up enough to hit the nested stops, then run the price back the other way to clear their position.

If the options expiration scam was the force operating in yesterday's decline, then it was meaningless even to the short term trend. You'll know after Thursday. Market ought to come back Friday if that analysis is valid.

For the nonce, at least, stocks have yet again disappointed. Too early to say for sure, thought. Dow fell back 42.32 (0.25%) to 16,633.18. S&P500 did not make another new high, yea, fell back 2.13 (0.11%) to 1,909.78.

Friends, I may look silly, but it's nigh impossible to parse a topping market. S&P500 might shoot up to 2000, or it might crumple here. Either way it's riding on dandelion fluff and moonbeams.

A close above the last high at 16,715.44 is needed to take the Dow higher, and I don't mean two points above that, I mean 2% or above 17,050. That would clearly state stocks are moving higher.

Dow in gold barely moved today, up 0.13% from 13.20 oz yesterday to 13.22 oz (G$273.28 gold dollars), but it clean broke out of that flat topped triangle yesterday. Here's a chart, http://scharts.co/1wns6W3 Dow in silver nicked down, 0.1% to 874.74 oz (S$1,130.98 silver dollars). Here's the chart, http://scharts.co/1wnsV1c

In the currency markets everybody is betting the ECB will soon "ease," or, in plain English, crank up the presses & create a tanker load of new money. This sent the Euro down again today 0.3% to $1.3594 even though the 10 year US treasury note yield dropped 3.18% today. Since currency exchange rates are largely determined by interest rate differentials (yes, and inflation expectations) the dollar ought to have weakened against the euro. Instead, it rose 18 basis points (0.22%) to 80.60. Y'all ought also bear in mind that just as a rising market attracts buyers, so a falling market attracts sellers, as rotten meat draws flies. Thus the euro's fall is feeding on itself & the news (that really is no news), and today fell past another milestone, the 200 day moving average ($1.3630). Probably several months more of falling euro lies before us.

Yen doesn't know sic 'em from come here. Touched its 200 DMA above but fell away and now is vibrating around its 20 DMA.

Gold chiseled off $6.20 (0.5%) to $1,259.30. Silver lost 4/10 of one cent to 1903.5c.

Silver ranged a huge 19 cents today, from 1897c to 1916c, then closed 4/10 cent higher? Dead. No new sellers coming in. That argues it won't go lower, or not by much. Then there's that falling gold/silver ratio, down from 66.624 on 23 May to 66.157 today. (By the way, don't let me forget to remind y'all to swap gold for silver. That high ratio will not last forever.) Volume dropped today too, right sharp.

Y'all think about gold a minute. Since last June's low it has traded in a range from $1,180 to $1,434, more narrowly $1,180 - $1,360. It double bottomed in December, & has spent most of the last year above $1,250. There's no big change here, and it acts like a market that has run out of downside momentum.

Wouldn't everyone be amazed if silver turned around and blasted through 1950c in a day or two? Watch for it. As long as silver doesn't fall through 1868c, it's possible.

On 28 May 1892 John Muir formed the Sierra club in San Francisco for the conservation of nature. Oddly enough, in 1899 he took an Alaska cruise with zillionaire E.H. Harriman and others. That is typical of the history of the ultra-rich and environmentalists. People with good intentions are co-opted to someone else's bottom line agenda. Or maybe gigantic global paper companies really are interested in spotted owls.

On 28 May 1936 was born N. Carolina writer and poet Fred Chappell. Read anything he writes. It's liable to be very good.

Today's quotation:

"[The] struggle to submit  . . . is not a struggle to submit, but a struggle to accept and with passion, I mean, possibly, with joy.  Picture me with my ground teeth stalking joy " fully armed too as it is a highly dangerous quest." -- The Letters of Flannery O'Connor: The Habit of Being. New York: Random House Vintage Books Edition, 1980; p. 126.

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
28-May-14 Price Change % Change
Gold, $/oz 1,259.30 -6.20 -0.49%
Silver, $/oz 19.04 0.00 0.02%
Gold/Silver Ratio 66.157 -0.340 -0.51%
Silver/Gold Ratio 0.0151 0.0001 0.51%
Platinum 1,465.10 0.40 0.03%
Palladium 830.65 9.20 1.12%
S&P 500 1,909.78 -2.13 -0.11%
Dow 16,333.18 -42.32 -0.26%
Dow in GOLD $s 268.11 0.62 0.23%
Dow in GOLD oz 12.97 0.03 0.23%
Dow in SILVER oz 858.06 -2.40 -0.28%
US Dollar Index 80.60 0.18 0.22%
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: 1,258.20      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,292.80 1,302.24 1,302.24
1/2 AE 0.50 641.17 662.76 1,325.51
1/4 AE 0.25 320.59 337.67 1,350.68
1/10 AE 0.10 132.01 137.77 1,377.73
Aust. 100 corona 0.98 1,227.12 1,236.12 1,261.09
British sovereign 0.24 298.40 303.15 1,287.81
French 20 franc 0.19 236.67 239.76 1,284.18
Krugerrand 1.00 1,273.30 1,283.30 1,283.30
Maple Leaf 1.00 1,273.20 1,288.20 1,288.20
1/2 Maple Leaf 0.50 723.47 660.56 1,321.11
1/4 Maple Leaf 0.25 320.84 336.57 1,346.27
1/10 Maple Leaf 0.10 133.37 137.14 1,371.44
Mexican 50 peso 1.21 1,509.30 1,520.30 1,260.93
.9999 bar 1.00 1,262.60 1,277.20 1,277.20
SPOT SILVER: 19.01      
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 14,482.33 14,732.33 20.60
US 40% silver 1/2s 0.30 5,414.73 5,564.73 18.86
100 oz .999 bar 100.00 1,905.50 1,955.50 19.56
10 oz .999 bar 10.00 190.55 195.55 19.56
1 oz .999 round 1.00 19.11 19.61 19.61
Am Eagle, 200 oz Min 1.00 20.86 21.26 21.26
SPOT PLATINUM: 1,465.10      
PLATINUM Fine Tr.Oz. BID ASK $/oz
Plat. Platypus 1.00 1,480.10 1,497.10 1,497.10
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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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