The Moneychanger
Daily Commentary
Wednesday, 9 July a.d. 2014 Browse the commentary archive

To keep Wednesdays from becoming too dull, the Federal Open Market Committee releases it minutes from the last month's meeting. This fills the market with new lies and false hopes, and profits somebody.

Today's minutes (from June) say they will finish tapering Quantitative Easing in October, but offered no deadlines to end interest rate suppression.

Now I don't reckon I could explain the Why rationally, but here's how markets reacted. The US dollar sank while silver and gold rose, a lot. To my little nacheral born Tennessee fool brain, if the Fed plans to print less money, that ought to make the dollar more valuable. But then, if they keep on suppressing interest rates, that makes the interest lost by holding gold next to nothing, so gold rose. Bonds, which had been enjoying higher prices thanks to flight from stocks, fell (interest rates rose), then thought it over and decided to rise (interest rates fell).

Tomorrow they'll take it some other way, according to where they eat lunch.

A friend wrote and asked me if this announcement meant that the Fed is quitting its money printing. Think of it as a drunk recognizing he has a problem and not "quitting," but "tapering" his consumption to a quart of vodka a day. That's the Fed.

You'd have to be either one brave or foolhardy man to trade the US dollar index. Today it fell 16 basis points (0.2%) to 80.07, below all its moving averages & back in the ambiguous danger zone it escaped a week ago. However, backing away from the chart, it appears to have formed an upside down heard and shoulders. If any chart formation is valid in a market as manipulated as currencies, then this one targets a rise above 83. That presumes, of course, that the US dollar index holds on right here.

Euro rose 0.22% to $1.3641 today but that's not spit in the wind. The Franken-currency fell through the 200 DMA a week ago when its last rally attempt belly-flopped. It's above its 20 DMA, but the trend since May is affirmatively down, down, down. Yen dropped 0.08% to 98.39, still trapped in that long, narrow sidewise triangle. No hint what it intends.

Stocks are talking out of both sides of their mouth today. After yesterday's big tumble, Dow gained 78.09 (0.47%) to 16,985.61. S&P500 rose 9.12 (0.46%) to 1,972.83.

Both hit their 20 DMAs yesterday, both bounced today. Both remain near rising trend lines their cheerleaders don't want them to break. A 160 point drop here crashes the Dow through support & sends it hurtling toward the 50 DMA.

I have been gazing & staring at the Dow in Silver chart. I tell y'all, it looks like that thing topped on 29 May at 896.22 oz (S$1158.75 silver dollars). Since then it has fallen steadily, and only turned back up four ounces from the 200 DMA. That's important because since September 2011 when the Dow in Silver crossed above the 200 DMA for the first time in this correction, the 200 DMA has acted as a safety net or limit to earthward moves. Humility and the stinging memory of times I've been wrong demands I hedge this interpretation, but the DiS still looks like it peaked finally in May. A 3% drop through the 200 DMA will unequivocally confirm.

Today the DiS rose 0.5% to 806.23 oz (S$1,042.40). Dow in Gold climbed 0.2% to 12.83 oz (G$G$265.22 gold dollars).

Gold/Silver ratio has seen a closing low for this move at 62.366, and is now propitiously below its 200 DMA. Closed today at 62.972 with 200 DMA above at 63.27.

On Comex gold closed $7.80 higher at $1,323.80, but in the aftermarket has traded as high as $1,331.35. This suggests gold wants to go higher, but until it crosses that last high at $1,334, nothing is proved.

Silver closed Comex 5.5 cents higher at 2102.2c, but then in the aftermarket has traded as high as 2117.5c. Nothing is confirmed until silver fights its way through the last high at 2133.5c.

Both metals are tugging at the leash as if they would run away higher, but that can be a trap. If they can break away, Gold will reach $1,350 - $1,370 quickly and silver might reach 2300c. On the other hand, a close below 2075c or $1,306 will propel them lower.

Premiums on physical gold and silver have softened (dropped), especially that on US 90% silver coin, which has dropped to 65c over spot from 95c July 1 and 160c on 2 June. Generally softening premiums presage lower metals' prices, while rising premiums signal higher prices to come. "Generally," of course, is sized like a muumuu to fit all bodies & occasions.

Don't let my fidgeting about what will happen tomorrow distract you from the Big Picture. I believe silver & gold have posted their lows for the 2011-2014 correction. The next big move will be up, as up as up gets.

On 9 July 1991, exactly one year and six months after we had been arrested, my wife and I and 14 others were acquitted in Federal District Court in Memphis, Tennessee of conspiracy to delay and defeat the IRS and willful failure to file income tax returns. We were facing 19 years in prison. I learned one thing for sure: there were no gentlemen on the other side. You can read about "The Most Dangerous Man in the Mid-South" at Soli Deo gloria -- to God alone be the glory.

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 10.50 0.71%
Palladium 873.20 -0.20 -0.02%
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      
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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