The Moneychanger
Daily Commentary
Wednesday, 18 June a.d. 2014 Browse the commentary archive

The Federal Reserve's Federal Open Market Committee met again and announced another $10 billion monthly taper & mumbled about interest rates but placed the time at some far distant future not specified or even hinted at. Same old song and dance.

A friend sent me a Bloomberg article you'll find at "Bonds' Liquidity Threat is Revealed in Derivatives Explosion." Stripping out the technical stuff, bond markets are becoming illiquid making it very difficult for traders to sell in case of a crisis, so traders are turning more to trading derivatives. It sounds as if central bank bond buying and interest rate suppression is painting the banks into the corner as their policies disrupt the markets they rely on to manipulate interest rates and money.

Let me see if I can squeeze out a tear here. MMMMMM. Nope. Dry's a bone.

US dollar index waxed volatile under pressure of the FOMC statement. Didn't know whether to go up or down, but settled on dropping 18 basis points (0.23%) to 80.53. It managed a high at 80.97, challenging that 81 resistance, then wilted like an orchid in the Mojave Desert, & even closed below its 20 DMA (80.54). It has been trading above its 200 day moving average, but that's nearby at 80.42. 'Twill tumble if it steps over that line.

Euro was encouraged by the Dollar's woes and rose 0.33% to $1.3548. Almost reached its $1.3602 two hundred day moving average. Must prove a rally by rising again tomorrow. Yen rose 0.26% also to 98.13, but remains below the downtrend line from its May high, and locked in the same old range.

Just ponder for a moment. Suppose you had a friend in the Fed who 24 hours before, or even 2 hours before, the FOMC announcement could whisper to you what the FOMC would announce. Do you think you could make any money trading stocks?

Fed's announcement that it would continue wrecking the US economy by suppressing interest rates sparked jubilation on Wall Street, where it seems nobody thinks much farther out than 20 minutes. Dow rose 98.13 (0.58%) to 16,906.62. S&P500 jumped 14.99 (0.77%) to a new all-time high close at 1956.98. Dow's close was not near a new high, but Nasdaq Composite is, and Nasdaq 100 already has made new highs. Russell 2000 isn't close, but the Wilshire 5000 made a new high. That looks a little like the cats & dogs flying toward the end of a move (lower grade stocks tend to outperform toward the end of a rally).

Now it gets interesting. Today the Dow in Gold rose while the Dow in silver kept on falling, even through its 50 day moving average (853.75 oz or S$1,103.84 silver dollars). Dow in gold didn't rise much, 0.12%, and ended at 13.23 oz (G$273.49 gold dollars), barely below its 20 DMA. Dow in silver fell 0.15% to 849.79 oz (S$1,098.72). This catches my eye because, as y'all will remember, I have not been expecting the Dow in Silver to exceed 912 oz (S$1,179.15) at this top. The high at 892.99 oz (S$1,154.57) June 1 might have been THE top, and today's fall below the 50 DMA certainly supports that conclusion.

Remember, when these two indicators top, it won't matter two hoots & a holler what stocks are doing, because even if they are rising silver & gold will be rising faster.

I'm ashamed to report what gold did today, up 70 cents to $1,272.40 with a skinny 10 dollar range. Silver added 4.6 cents to end on Comex at 1976.7c.

What's interesting is that despite a dull day, here at the end both metals are tugging at their leashes. Gold stands at $1,275.90. Silver was 1984 cents when I plugged in my prices, but it's risen to 1993c now.

Just looking at those charts, I'd be more comfortable buying on a pullback tomorrow, but if silver pushes through 2000c and gold through $1,285, there won't be any pullback.

Both metals have me chompin' at the bit. Indicators are all positive, and both look ready to sprint.

On 18 June 1815 at the Battle of Waterloo the Duke of Wellington leading an international coalition defeated Napoleon.

On 18 June 1986 IRS Criminal Investigation agents showed up at my office for the first time. Wouldn't be an exaggeration to say I learned a lot in the next 14 years I spent fighting them & the state. I had 18-ophobia for a long time, dreaded to see that day roll around every month, because it seemed like they had me on the agenda every 18th of the month. It's amazing how much power our own fear gives others over us. In the end, I can honestly and unreservedly thank God for the entire affliction. Apparently I only learn things the hard way. If you want to know more about all this fun, see

And the eighteenth of the month doesn't bother me at all any more.

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
18-Jun-14 Price Change % Change
Gold, $/oz 1,272.40 0.70 0.06%
Silver, $/oz 19.77 0.05 0.23%
Gold/Silver Ratio 64.370 -0.115 -0.18%
Silver/Gold Ratio 0.0155 0.0000 0.18%
Platinum 1,452.80 7.70 0.53%
Palladium 823.65 6.20 0.76%
S&P 500 1,956.98 14.99 0.77%
Dow 16,906.62 98.13 0.58%
Dow in GOLD $s 274.67 1.44 0.53%
Dow in GOLD oz 13.29 0.07 0.53%
Dow in SILVER oz 855.30 2.98 0.35%
US Dollar Index 80.53 -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: 1,275.90      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,309.07 1,320.56 1,320.56
1/2 AE 0.50 650.20 672.08 1,344.16
1/4 AE 0.25 325.10 342.42 1,369.68
1/10 AE 0.10 133.86 139.71 1,397.11
Aust. 100 corona 0.98 1,241.88 1,250.88 1,276.15
British sovereign 0.24 302.60 307.35 1,305.65
French 20 franc 0.19 240.00 243.06 1,301.88
Krugerrand 1.00 1,289.93 1,299.93 1,299.93
Maple Leaf 1.00 1,290.90 1,305.90 1,305.90
1/2 Maple Leaf 0.50 733.64 669.85 1,339.70
1/4 Maple Leaf 0.25 325.35 341.30 1,365.21
1/10 Maple Leaf 0.10 135.25 139.07 1,390.73
Mexican 50 peso 1.21 1,530.53 1,541.53 1,278.54
.9999 bar 1.00 1,280.37 1,294.90 1,294.90
SPOT SILVER: 19.84      
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 14,936.35 15,186.35 21.24
US 40% silver 1/2s 0.30 5,661.05 5,811.05 19.70
100 oz .999 bar 100.00 1,989.00 2,039.00 20.39
10 oz .999 bar 10.00 198.90 203.90 20.39
1 oz .999 round 1.00 19.94 20.44 20.44
Am Eagle, 200 oz Min 1.00 21.69 22.09 22.09
SPOT PLATINUM: 1,452.80      
Plat. Platypus 1.00 1,467.80 1,484.80 1,484.80
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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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