The Moneychanger
Daily Commentary
Wednesday, 16 July a.d. 2014 Browse the commentary archive

Mother Janet Yellum was at it again today to sucker punch stock markets. There they stood like a bunch of hicks with their jaws hanging down, looking at the bearded lady in the sideshow, waiting for their pockets to be picked. Yesterday the bearded lady told 'em some stocks were overvalued, today she said they weren't. (That, by the way, was either a WHOPPING big lie, or a WHOPPING big confession of historical ignorance.)

They fell for it, and while yesterday stocks fell on Mama Yellum's mere hint, today they ran like scalded dogs the other way. Friends, ask yourself this: when has the Fed, or any Fed chief accurately forecast the economy? Bernanke, who didn't see the 2008 financial panic coming? Greenspan, who set up the 2008 Crash by goosing real estate? Go ahead, look, investigate, dig up the background, and you'll find the Fed almost NEVER forecasts accurately.

Here's where reason runneth off the tracks, and logic falleth dead: why would you believe the Fed or Mother Yellum NOW, when they've always been wrong before? Thus triumphs hope over experience, and Mother Yellum manipulates the markets by the gentlest of weapons, her bad breath.

Question from a nacheral born fool is, Who is the fool now? Mama Yellum, or the investors who slavishly and against history follow her?

Stocks gainsaid each other today, that is, the S&P500 refused to confirm the Dow's move. Dow made a new all time high, both intraday at 17,139.35 and closing at 17,138.20, up 77.52 (0.45%). S&P500 made no kind of new high no way, but closed higher by 8.29 (0.42%). Friends, when the words "It don't get no better than this!" involuntarily roll off your tongue, it probably don't. Stocks are close to a huge fall.

Oddly enough, after a straight up rise the Dow in Gold put a little hook on that today and stayed flat at 13.19 oz (G$272.66 gold dollars). Dow in silver rose a measly 0.26% to 824.94 oz (S$1,066.59 silver dollars). Neither indicator shows any sign of turning down yet.

Assuming it follows through tomorrow, the US dollar index made an important breakout today, through the upper boundary of the even-sided triangle I mentioned yesterday. At stake is whether the dollar index has formed an upside-down head and shoulders since March. Today's breakout makes the picture appear to be the Dollar Index completing a right shoulder. If all that's accurate, the neckline stands about 81.15, and a breakout from there would carry the dollar index to 82.75.

The Frankencurrency took this news badly, gapping down from $1.3570 yesterday to open at $1.3537 today, then lost 0.33% and closing near the bottom at $1.3525. If it cracks June's $1.3503 low, 'twill fall like a meteor across the night sky.

Meanwhile the Yen barely moved, dropping 0.4% to 98.31 cents/Y100. No direction, no change, who cares.

Yellum's antics today sufficed to beat back the 10 year treasury yield to 2.538%, squelching the threatened upside breakout for interest rates.

Silver & gold blew cold & hot. Silver lost 11.5 cents to 2072.7c but gold gained $2.70 to $1,299.60.

This sounds like the coward's way out, but today's action didn't change anything. Silver has traded down to an old internal support line, but that's a thin reed to hang by. That big flagpole gain from 19 June is asking, like a gap, to be filled. The 200 DMA at 2036c is also beckoning. Sure, silver closed lower on Comex today, but at the end of the day it was higher. No way around saying it, after drops like this it takes several days to forecast with any certainty what might happen.

Gold with a $1,292.60 low yesterday reached my first support zone. Here's a really odd tidbit. If you draw a rising trend line from the June gold low at $1,240.20 through the mid-June low, it come in today exactly at the lows. In other words, it defines an uptrend that has yet to be broken. Fact is, you can do the same with silver.

Can they still move lower? Of course, but for the present they don't look so weak as to move much lower.

On 16 July 1439 King Henry VI banned kissing by royal proclamation. He hoped to curtail the spread of pestilence then rampant. Unfortunately for the king, and fortunately for the rest of us, his subjects gave the law only lip service.

On 16 July 1661 the first European banknotes were issued by the Bank of Stockholm, which, by the way, through the route of bankruptcy and takeover by the state, became the first central bank. Sort of like becoming the first small pox virus.

On the night of 16/17 July 1918 a Bolshevik firing squad at Ekaterinburg, Siberia murdered Tsar Nicholas II of Russia, his wife, four daughters, and his son. Shallow, weak, untrained, he was wholly unprepared to face the monstrous challenges of his reign, but he didn't deserve murdering.

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
16-Jul-14 Price Change % Change
Gold, $/oz 1,299.60 2.70 0.21%
Silver, $/oz 20.73 -0.12 -0.55%
Gold/Silver Ratio 62.701 0.476 0.76%
Silver/Gold Ratio 0.0159 -0.0001 -0.76%
Platinum 1,485.00 0.70 0.05%
Palladium 875.75 9.45 1.09%
S&P 500 1,981.57 8.29 0.42%
Dow 17,138.20 77.52 0.45%
Dow in GOLD $s 272.60 0.67 0.25%
Dow in GOLD oz 13.19 0.03 0.25%
Dow in SILVER oz 826.85 8.28 1.01%
US Dollar Index 80.62 0.19 0.24%
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: 1,298.90      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,328.77 1,344.36 1,344.36
1/2 AE 0.50 661.93 685.17 1,370.34
1/4 AE 0.25 345.57 349.08 1,396.32
1/10 AE 0.10 137.58 142.88 1,428.79
Aust. 100 corona 0.98 1,264.27 1,273.27 1,298.99
British sovereign 0.24 307.60 319.60 1,357.67
French 20 franc 0.19 244.32 247.30 1,324.61
Krugerrand 1.00 1,314.49 1,324.49 1,324.49
Maple Leaf 1.00 1,313.90 1,328.90 1,328.90
1/2 Maple Leaf 0.50 746.87 681.92 1,363.85
1/4 Maple Leaf 0.25 331.22 347.46 1,389.82
1/10 Maple Leaf 0.10 137.68 141.58 1,415.80
Mexican 50 peso 1.21 1,556.56 1,567.56 1,300.12
.9999 bar 1.00 1,303.45 1,314.90 1,314.90
SPOT SILVER: 20.73      
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 15,000.70 15,250.70 21.33
US 40% silver 1/2s 0.30 5,923.60 6,073.60 20.59
100 oz .999 bar 100.00 2,063.00 2,123.00 21.23
10 oz .999 bar 10.00 212.30 213.30 21.33
1 oz .999 round 1.00 20.83 21.33 21.33
Am Eagle, 200 oz Min 1.00 22.48 23.73 23.73
SPOT PLATINUM: 1,485.00      
PLATINUM Fine Tr.Oz. BID ASK $/oz
Plat. Platypus 1.00 1,510.00 1,550.00 1,550.00
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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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