The Moneychanger
Daily Commentary
Tuesday, 8 July a.d. 2014 Browse the commentary archive

Yesterday evening shortly before I had finished this commentary, a powerful thunderstorm knocked out our electricity. Susan & I drove home, hoping the power would still be on there, but it wasn't. So instead of finishing this commentary, I got to sit on the back deck with my sweet wife, watching the rain drops drumming on the tree leaves. I enjoyed that more than any commentary I ever wrote.

This morning the power's back on, it's 7:47 a.m., so here 'tis:

Gene Fowler (1890 - 1960) wrote, "Writing is easy. All you do is stare at a blank sheet of paper until drops of blood form on your forehead."

Some days I think that Fowler severely overstated the ease of writing. When you write about markets & markets go dead, you don't have enough material even to write a good obituary.

Stocks tanked today, but other markets were steady. All the stock indices fell. Dow tumbled 117.59 (0.7%) to 16,906.62 while the S&P500 skidded 13.94 (0.7%) to 1,963.71.

Those are nasty falls but as yet say little. Both indices reached for their 20 Day Moving averages, first tripwire of a decline, but both closed barely above them. What makes this interesting? Both are hovering above internal resistance/support lines left from earlier bearish rising wedges. A drop below 16,840 & 1957 and 1937 slices through that support, and threatens a drop toward the 50 DMAs (16,722 & 1,921).

All this is taking place in an utterly complacent market. In a pinch, complacency quickly turns into eye-bleeding panic.

Flat metals & steeply lower stocks took the Dow in Metals down today. Dow in gold bounced down off the resistance line left behind by its April-May flat-topped triangle. Remember, we wan these indicators to drop, because that means stocks are becoming cheaper against meals, or metals are gaining value on stock. Dow in Gold dropped 0.35% to 12.82 oz (G$265.01 gold dollars) & remains below the 20 & 50 DMAs so momentum is down, although MACD is trying to turn up.

Dow in silver has only managed a little dribble of a correction from its late June low at 797.38 oz (S$1,030.96 silver dollars). Today the DiS slipped 0.23% to 804.58 (S$1,040.26). It is rising off a strongly overbought Relative Strength Index and an MACD that wants to turn up.

Gold ended on Comex at $1,316, down 50 cents. Silver closed 2096.7, up an invisible 1/10 cent.

Gold suffered another raid by sellers, but it accomplished little. At the $1,324 high the selling began and within a few minutes had driven gold to a $1,314 low. From which it recovered to $1,320 by day's end. This morning gold has risen right back up past yesterday's (8 July's) high, and it's trading at $1,326.80. A close above $1,334 breaks gold out of its prison and run higher.

Silver suffered the same bout of selling and instantaneous fall, but from 2120c to 2095c. This morning silver is right back knocking on 2116c.

I haven't checked the 300 day moving averages for a while, but lo & behold! This morning I realize that both silver and gold stand above their 300 DMA, since 24 June and 19 June respectively. More than that, the 300 DMA has been acting as a safety net, catching every fall & throwing it back up into the air.

Silver's RSI is shockingly overbought, the MACD & Full stochastics are rolling over, but if it can clear 2133c (last high) today or tomorrow, it will burst through 22 or even 23 before it rests. Likewise if gold can close through $1,334 it will run for $1,350 or $1,370 before correcting. This morning both appear pretty perky.

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
8-Jul-14 Price Change % Change
Gold, $/oz 1,316.00 -0.50 -0.04%
Silver, $/oz 20.97 0.00 0.00%
Gold/Silver Ratio 62.765 -0.027 -0.04%
Silver/Gold Ratio 0.0159 0.0000 0.04%
Platinum 1,495.40 0.50 0.03%
Palladium 873.20 3.95 0.45%
S&P 500 1,963.71 -13.94 -0.70%
Dow 16,906.62 -117.59 -0.69%
Dow in GOLD $s 265.57 -1.75 -0.65%
Dow in GOLD oz 12.85 -0.08 -0.65%
Dow in SILVER oz 806.34 -5.65 -0.70%
US Dollar Index 80.22 -0.04 -0.05%
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SPOT GOLD: 1,319.70      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,356.65 1,365.89 1,365.89
1/2 AE 0.50 672.54 696.14 1,392.28
1/4 AE 0.25 351.10 354.67 1,418.68
1/10 AE 0.10 139.78 145.17 1,451.67
Aust. 100 corona 0.98 1,283.22 1,292.22 1,318.32
British sovereign 0.24 312.52 324.52 1,378.60
French 20 franc 0.19 248.24 251.19 1,345.41
Krugerrand 1.00 1,331.58 1,341.58 1,341.58
Maple Leaf 1.00 1,334.70 1,349.70 1,349.70
1/2 Maple Leaf 0.50 758.83 692.84 1,385.69
1/4 Maple Leaf 0.25 336.52 353.02 1,412.08
1/10 Maple Leaf 0.10 139.89 143.85 1,438.47
Mexican 50 peso 1.21 1,581.48 1,592.48 1,320.80
.9999 bar 1.00 1,324.32 1,335.70 1,335.70
SPOT SILVER: 21.04      
SILVER Fine Tr.Oz. BID ASK $/oz
VG+ Morgan $B4 1905 0.77 25.00 26.50 34.64
VG+ Peace dollar 0.77 22.00 24.25 31.70
90% silver coin bags 0.72 15,329.60 15,579.60 21.79
US 40% silver 1/2s 0.30 6,015.05 6,165.05 20.90
100 oz .999 bar 100.00 2,094.00 2,154.00 21.54
10 oz .999 bar 10.00 215.40 216.40 21.64
1 oz .999 round 1.00 21.14 21.64 21.64
Am Eagle, 200 oz Min 1.00 22.79 24.04 24.04
SPOT PLATINUM: 1,495.40      
PLATINUM Fine Tr.Oz. BID ASK $/oz
Plat. Platypus 1.00 1,520.40 1,560.40 1,560.40
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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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