The Moneychanger
Daily Commentary
Monday, 2 June a.d. 2014 Browse the commentary archive

Y'all ever see somebody drop a 50 lb. watermelon off the roof of a three story house? From the time that thing is launched into the air it's as stable as can be, just looking at the watermelon. If you ignore the approaching terra firma, that watermelon looks just fine, but when it hits the ground -- oh, my! Watermelon everywhere!

So it is with today's markets. They appear quite stable, but this is not the real world. The watermelon has been thrown off the roof -- we're just waiting for it to hit the ground.

Stocks looked bright, cheery, & healthy as a three day dead mackerel today. Dow jumped up 26.46 (0.16%) to a new high at 16,743.63 but the S&P500 hopped only 1.4 (0.07%) to a new high at 1924.67. Other indices were all down. Reminds me of watching a family all arguing with each other, yelling and gesticulating and shaking their fists. They ain't going nowhere together.

Dow In Gold & Dow in Silver both rose today, the Dow in Silver to a new high for the move (I'm getting right tired of writing that). Dow in Silver rose 5.25 to (0.59%) to 893.52 oz (S$1,155.26 silver dollars) and is bumping hard on the overhead boundary of the rising wedge pattern. (Reminder: rising wedges point up on the chart but usually resolve DOWN on the breakout.) Still looking for a top no higher than 912 oz ($S1,179.15).

Dow in gold edged up 0.77% to 13.47 oz (G$278.45 gold dollars), about where it was when the Great Depression started. Not as sure about a target on this one but looks like its aiming for a double top with the 13.80 oz ((G$285.27) December 2013 top.

That sorry, scabby US dollar index pulled itself together sufficiently today to rise 24 basis points (0.3%) to 80.68. That pulls away from the 200 day moving average (80.47) and gives the US dollar index the embryo of a shot for 81.50. Clearly, though, the currency worm hath turned & it's the dollar's turn to gain for a while against the other two scrofulous, scabby central bank fiat currencies, the yen and euro.

Speaking of the Franken-currency, it sank today upon growing speculation that at its policy meeting this week the European Central Bank criminals will engage in some kind of easing (money printing) or lower the already microscopic 0.25% interbank lending rate even further. Bugs Bunny could do a better job managing a currency.

The euro lost 0.28% to close at $1.3598 today, back beneath the 200 DMA and eyes firmly fixed on the abyss. Japanese yen gapped down below its 20 and 50 DMAs today, and closed below the uptrend line a-slanting up since early April. Looks as chipper as cholera. Dropped 0.6% to 97.68 cents/Y100.

Behold, let us ponder the gold/silver ratio. Go throw an eyeball on the chart at http://scharts.co/1opr46t

Right strange, ain't it? It's a long rising wedge that is cycling very regularly at 14 - 21 days, sort of laddering up the bearish wedge. This suggests a dead market that is just plumb wore out. Next move'll be a big un. Because the top of that wedge, now about 68.5, is so high, odds favor a fall out of that wedge.

Silver & gold spake today with fork├ęd tongues. Silver rose 5.6 cents to 1870.9 but gold scraped off $1.90 to $1,243.70.

Far's silver is concerned, it has fallen to long time support around 1865 - 1890 cents. Volume has dropped as this decline has proceeded (think of volume as the gas gauge on a move - more it drops, less fuel the move has left.) Indicators look rotten, but they always do at bottoms. Still, no concrete sign of a tergiversation yet.

Gold might stop here or at last-low-support about $1,237.50, maybe a buck or two lower. Or it might re-visit $1,180. Either way, it won't be long.

Speaking of volume, it has clean dried up on gold. Wonder they even keep the market open, no more trading than it's doing. I read somewhere credible that the drop on Options Expiration Day was precipitated by huge sales. I have no trouble believing that, since a gold plunge guaranteed big savings for those who had sold gold call options.

Y'all just be patient, and look to buy either on a turnaround (Close above $1,280 or 1950c) or a sudden plunge. I'd buy that plunge, because I think if we see one, silver & gold will reverse immediately.

On 2 June 1774 the British government re-enacted the Quartering Act, which required American colonists to give British soldiers room & board in their houses. Today we no longer have such barbaric customs. Today if the Army of Occupation (law enforcement) wants your house, they just smash down your door and throw in a flash-bang grenade. Ain't progress wonderful?

On 2 June 1862 Robert E. Lee took command of the Confederate Army of Northern Virginia. Because of his actions in difficult terrain in Virginia, the newspapers took to calling him "Granny Lee," but they soon changed that tune.

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
2-Jun-14 Price Change % Change
Gold, $/oz 1,243.70 -1.90 -0.15%
Silver, $/oz 18.71 0.06 0.30%
Gold/Silver Ratio 66.476 -0.301 -0.45%
Silver/Gold Ratio 0.0150 0.0001 0.45%
Platinum 1,438.70 -16.00 -1.10%
Palladium 832.05 -3.60 -0.43%
S&P 500 1,924.00 1.40 0.07%
Dow 16,743.63 26.46 0.16%
Dow in GOLD $s 278.30 0.86 0.31%
Dow in GOLD oz 13.46 0.04 0.31%
Dow in SILVER oz 894.95 -1.27 -0.14%
US Dollar Index 0.24 0.25 -2500.00%
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: 1,243.50      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,277.07 1,287.02 1,287.02
1/2 AE 0.50 633.68 655.01 1,310.03
1/4 AE 0.25 316.84 333.72 1,334.90
1/10 AE 0.10 130.46 136.16 1,361.63
Aust. 100 corona 0.98 1,212.78 1,221.78 1,246.46
British sovereign 0.24 294.92 299.67 1,273.00
French 20 franc 0.19 233.90 237.01 1,269.48
Krugerrand 1.00 1,258.42 1,268.42 1,268.42
Maple Leaf 1.00 1,258.50 1,273.50 1,273.50
1/2 Maple Leaf 0.50 715.01 652.84 1,305.68
1/4 Maple Leaf 0.25 317.09 332.64 1,330.55
1/10 Maple Leaf 0.10 131.81 135.54 1,355.42
Mexican 50 peso 1.21 1,491.67 1,502.67 1,246.30
.9999 bar 1.00 1,247.85 1,262.50 1,262.50
SPOT SILVER: 18.71      
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 14,267.83 14,517.83 20.30
US 40% silver 1/2s 0.30 5,326.23 5,476.23 18.56
100 oz .999 bar 100.00 1,875.50 1,925.50 19.26
10 oz .999 bar 10.00 187.55 192.55 19.26
1 oz .999 round 1.00 18.81 19.31 19.31
Am Eagle, 200 oz Min 1.00 20.56 20.96 20.96
SPOT PLATINUM: 1,438.70      
PLATINUM Fine Tr.Oz. BID ASK $/oz
Plat. Platypus 1.00 1,453.70 1,470.70 1,470.70
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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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