The Moneychanger
Weekly Commentary
Thursday, 19 June a.d. 2014 Browse the commentary archive
Here's the weekly scorecard:
  13-Jun-14 19-Jun-14 Change % Change
Silver, cents/oz. 1,963.70 2,063.70 100.00 5.1
Gold, dollars/oz. 1,273.70 1,313.70 40.00 3.1
Gold/silver ratio 64.862 63.658 -1.205 -1.9
Silver/gold ratio 0.0154 0.0157 0.0003 1.9
Dow in Gold Dollars (DIG$) 272.27 266.27 -6.00 -2.2
Dow in gold ounces 13.17 12.88 -0.29 -2.2
Dow in Silver ounces 854.29 819.96 -34.34 -4.0
Dow Industrials 16,775.74 16,921.46 145.72 0.9
S&P500 1,936.16 1,959.48 23.32 1.2
US dollar index 80.62 80.42 -0.20 -0.2
Platinum 1,437.00 1,476.50 39.50 2.7
Palladium 813.35 839.35 26.00 3.2

Yesterday I suspected silver & gold were ready to explode, but that didn't prepare me for what happened today. The FOMC's announcement yesterday managed to suck the life out of the dollar, and, contradictory as it is, drove stocks up, too. This week may have been the watershed.

S&P500 made its second new high this week, but like the Dow, it's struggling for tiny gains. Dow rose 14.84 (0.09%) to 16,921.46 and the S&P500 inched up 2.5 (0.13%) to its new high at 1959.48. On the other hand, the Nasdaq and Nasdaq 100 dropped a bit.

But all this says practically nothing -- it squeaks, it whispers -- next to what the Dow did against silver & gold. It TANKED.

Dow in Gold plunged 2.68% to 12.88 oz (G$266.25 gold dollars, from G$273.49 yesterday). That took it from its 20 DMA to its 50 DMA (12.91 oz or G$266.87), and through support from a past triangle's top line. Assuming the DiG doesn't turn around & reverse skyward, this leaves behind a double top (Dec - June) which looks like the end to the three year rally of stocks against gold. O, yes, it does.

Dow in silver DOVE 3.56% to 819.52 oz (S$1,059.58 silver dollars, from S$1,098.72) leaving its 50 DMA (853.93) far behind and puncturing its long term uptrend line. Awaiting at 787.45 oz (S$1,018.12) is the 200 DMA. I suppose it could look better than this, but I don't know how without violating natural law & good manners.

US Dollar index sliced through its 200 DMA (80.41), but ended the day right on it at 80.42, down only 11 basis points. At one point it was down 27 bp to 80.24. Dollar index appears to have expended all its fuel and like a rocket, turned its nose down.

As if to verify that, the euro jumped over its 20 DMA ($1.3598) and rose 0.11% to $1.3605. Looks set for a rally at least to $1.3725. European manufacturers must be screaming in pain.

The yen reacted with more reserve, losing 0.2% to 98.1. No traction, no direction.

I am going to enjoy typing this next sentence SO mightily.

Today silver rose 87 cents (4.4%) to close on Comex at 2063.7c. Treading right on silver's heels, gold leapt $41.30 (3.25%) to close at $1,313.70.

View, O, View, this with a long eye! Both silver & gold SMASHED not one but three resistance levels and blew past their 200 day moving averages without even slowing down. Be still, my beating heart!

The great oil man H.L. Hunt said, "Never get really elated in victory; when times are tough, never get down." Times like this, you have to grab yourself and imagine what might make it go the other way. After a fierce rally -- depending on how far it runs -- they might collapse back to a low, but a higher low than we have recently seen.

What might cause that? It's not clear how much this rally is being driven by safe-haven demand spawned by events in Ukraine & Iraq. I would say, "Probably not much," because this rise came on the heels of the FOMC's announcement & the dollar's fall. Still, much of this rise could be air from those crises, and that sort of boost quickly deflates.

Not that time for a silver and gold turnaround is not ripe -- it is, and you're watching it now. Only question is how it plays out in the foreground.

Gold reached it's first tough resistance level, May's $1,315.80 high. In the aftermarket it's trading right there. Tomorrow is Friday, so likely a lot of those New York traders headed home for martinis will sell tomorrow to realize the week's profits, taking it down a little.

What happened? Apparently the market was full of uneasy shorts. Once their buy stop orders were hit around $1,385, gold just kept on rocketing, hitting the next levels of buy stops. Time it stopped, it was $41.30 higher. Silver progressed through the same rout.

Think about the gold chart. Remember that in April and May it traced a long even-sided triangle, then broke out of that in late' may about $1,280. So it fell out of that triangle, bottomed at $1,240.20, rallied steadily through June, and today broke through old $1,285 resistance as well as the apex of that triangle (about $1,290).

Next gold must overcome April's $1,331.40 high, and down the road March's $1,392.60. The big log in the road is last August's high at $1,434. Those are the milestones. Watch for them.

That 2050/2060c level was a high hurdle for silver, support/resistance stretching back more than a year. Silver has oscillated over and under it, and today has vaulted over it, along with its 2049c 200 DMA. Resistance awaits at 2218c (February high), then 2309 (October high), and 2512c (August high).

On the weekly chart today's close takes silver to the 50 week moving average (2065c) and above the 20 WMA (20.11). Silver is already above the major downtrend line from the April 2011 high, but still needs to cross above 2400c to break clean free of all taint of the long correction.

Without discounting the possibility for one more, but higher, low in June, I have metals have screamed in your ear that they are rallying.

Today was a breakout. You BUY the breakouts, in case y'all missed those lows where I was urging y'all to buy. Ain't that just like a nacheral born durn'd fool from Tennessee, to say "I told y'all so"?

I'm sending y'all a weekly report today because I have to travel to Rome, Georgia for a wedding tomorrow. God willing, I'll see y'all again on Monday.

On 19 June 240 BC Eratosthenes estimated the circumference of the earth using two sticks. Today he's need four sticks, a bunch of electronic gear, and a government grant & he would STILL get it wrong.

Y'all enjoy your weekend!

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
19-Jun-14 Price Change % Change
Gold, $/oz 1,313.70 41.30 3.2
Silver, $/oz 20.64 0.87 4.4
Gold/Silver Ratio 63.658 1.975 3.2
Silver/Gold Ratio 0.0157 0.0007 4.4
Platinum 1,476.50 23.70 1.6
Palladium 839.35 15.70 1.9
S&P 500 1,959.48 2.50 0.1
Dow 16,921.46 14.84 0.1
Dow in GOLD $s 266.27 -8.37 -3.0
Dow in GOLD oz 12.88 -0.41 -3.0
Dow in SILVER oz 819.96 -35.34 -4.1
US Dollar Index 80.42 -0.11 -0.1
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SPOT GOLD: 1,318.60      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,352.88 1,364.75 1,364.75
1/2 AE 0.50 671.98 694.57 1,389.15
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Aust. 100 corona 0.98 1,283.44 1,292.44 1,318.55
British sovereign 0.24 312.73 317.48 1,348.67
French 20 franc 0.19 248.03 251.03 1,344.58
Krugerrand 1.00 1,334.42 1,344.42 1,344.42
Maple Leaf 1.00 1,333.60 1,348.60 1,348.60
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Mexican 50 peso 1.21 1,581.76 1,592.76 1,321.02
.9999 bar 1.00 1,323.22 1,337.60 1,337.60
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SILVER Fine Tr.Oz. BID ASK $/oz
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VG+ Peace dollar 0.77 22.50 23.75 31.05
90% silver coin bags 0.72 15,544.10 15,794.10 22.09
US 40% silver 1/2s 0.30 5,941.30 6,091.30 20.65
100 oz .999 bar 100.00 2,084.00 2,134.00 21.34
10 oz .999 bar 10.00 208.40 213.40 21.34
1 oz .999 round 1.00 20.89 21.39 21.39
Am Eagle, 200 oz Min 1.00 22.64 23.04 23.04
SPOT PLATINUM: 1,476.50      
Platinum Platypus 1.00 1,491.50 1,508.50 1,508.50
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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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