The Moneychanger
Daily Commentary
Thursday, 17 July a.d. 2014 Browse the commentary archive

A Chinese proverb says, "When the pupil is ready, the teacher appears." Of markets we might also say, "When the market is ready to turn, the cause appears." At least, that's what "technicians" argue against "fundamentalists," namely, that everything the market knows is already in the price, so for a market ready to turn, almost any old cause will do.

Lo, I am not that radically given to technical analysis, but the Dow today furnishes a case in point. "Overbought" does not even begin to describe the state of stocks, and they have been for a long time. Yesterday to the cheers of the unthinking, the Dow rose again & I reckon everybody tucked himself in bed thinking tomorrow would be like today, only more so.

Only, it wasn't. Today was the day a market looking for a cause to turn down (Stocks) met a cause sufficient (Malaysian Airlines plane shot down by a missile over the Ukraine). Stocks sank like your Rolex watch into the Greers Ferry Lake over the side of the bass boat.

Dow lost 161.39 (0.94%) to end at 16,976.81, giving back almost all the last three days' gains, closing at the bottom of the day's range, & almost but not quite breaking through the 20 day moving average. S&P500 lost 23.45 (1.18%) to 1,958.12. Along the way it punctured both the 20 DMA (1,967.14) and closed through the top boundary of that rising wedge it left behind since may, AND closed below the bottom border of its upward trading channel wherein it hath dwelt since mid June.

Altogether a demoralizing performance. Every indicator I watch is pointing stubbornly down, down.

Today's stock tumble helped the Dow in Metals. Dow in gold fell 2.2% to 12.29 oz (GS254.05 gold dollars), below the 50 DMA (13.00 oz or G$268.73) & through internal support at 12.91 oz (G$266.87). 20 DMA stands at 12.85 oz (G$265.63), easily close enough to be crossed tomorrow.

Dow in silver dropped 2.37% to 803.29 oz (S$1,038.60 silver dollars), also below its 20 DMA (805.06 oz or S$1,040.89). I want to see this confirmed before I say itfinally has turned down again.

I reckon not a single Nice Government Man anywhere in the world got any peace today. They were all staring at computer screens & sweating bullets trying to keep the currency markets from going wild after that Malaysian Airliner was shot down. US dollar index ended at 80.58, down just 4 basis points, nothing. Euro, which stands to lose most by a shooting war next door in Ukraine, actually rose 0.01% to $1.3526. It's still hanging over Grand Canyon by low-test fishing line. Yen benefitted more than the other rotten, nasty, corrupt, wicked fiat currencies. It rose 0.5% to 98.45 and is bumping the top boundary of that old even-sided triangle I've been writing about. Japan is a long ways from Ukraine.

About the time the airliner's crash was announced, gold, which had been having a pretty calm day below $1,306 shot straight skyward to $1,325.90. For the day it rose $17.10(1.73%) & closed Comex at $1,316.70. Silver added 35.9 cents (1.32%) to close Comex at 2108.6c.

Before y'all go to jubilatin' & opening bottles, let me caution that these safe haven rallies last only about as long as the crisis dominates the headlines. More to the point, most corrections play out in an A-B-C wave counter to the main trend. If a market is correcting a rally, the correction will drop sharply ("A"), then rally, often as high as the point where the rally began ("B" waves can be stronger than a garlic milkshake), then finish the correction with one more fall ("C") usually to a lower low. As I said above, "cause" here should really be called "catalyst" for a move already in the market. It's sort of like my dear wife: if she wants to eat out, she will FIND a reason.

So today's rally was a B-leg in a correction. It took silver above its 20 DMA (2106c), good, good, but it remains in a downtrend until it climbs higher than 2163c (last peak). Gold punched through its 20 DMA on the way up, hit its downtrend line from October 2012, then backed off to close just below that 20 DMA ($1,319.77). Again, a close higher than $1,346.80 (last peak) is necessary to call the correction over.

Of course, if today's events precipitate World War III, all bets are off and you'd better buy all the gold, silver, ammo, and dehydrated food you can afford.

In a terrible shoot out in California today, three of four bank robbers were killed along with two of three hostages. You really have to wonder how anybody could be stupid enough to rob a bank. Banks have no money. For the last 40 years, they haven't kept much currency on hand, either, rarely as much as $10,000. I had a customer who panicked half his state a few years ago when he went into the bank and told 'em he wanted every bit of his $300,000 right there on the counter. He was told they didn't keep that much on hand, and they'd have to order it from the Fed. Fine, he said (he's pretty feisty), order it! I still laugh when I think how those bankers' faces must have looked.

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
17-Jul-14 Price Change % Change
Gold, $/oz 1,316.70 17.10 1.32%
Silver, $/oz 21.09 0.36 1.73%
Gold/Silver Ratio 62.444 -0.257 -0.41%
Silver/Gold Ratio 0.0160 0.0001 0.41%
Platinum 1,503.00 18.00 1.21%
Palladium 884.10 8.75 1.00%
S&P 500 1,958.12 -23.45 -1.18%
Dow 16,976.81 -161.39 -0.94%
Dow in GOLD $s 266.53 -6.07 -2.23%
Dow in GOLD oz 12.89 -0.29 -2.23%
Dow in SILVER oz 805.12 -21.73 -2.63%
US Dollar Index 80.58 -0.00 -0.00%
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: 1,316.90      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,345.87 1,362.99 1,362.99
1/2 AE 0.50 671.11 694.66 1,389.33
1/4 AE 0.25 350.36 353.92 1,415.67
1/10 AE 0.10 139.49 144.86 1,448.59
Aust. 100 corona 0.98 1,281.79 1,290.79 1,316.86
British sovereign 0.24 311.86 323.86 1,375.78
French 20 franc 0.19 247.71 250.67 1,342.61
Krugerrand 1.00 1,332.70 1,342.70 1,342.70
Maple Leaf 1.00 1,331.90 1,346.90 1,346.90
1/2 Maple Leaf 0.50 757.22 691.37 1,382.75
1/4 Maple Leaf 0.25 335.81 352.27 1,409.08
1/10 Maple Leaf 0.10 139.59 143.54 1,435.42
Mexican 50 peso 1.21 1,578.13 1,589.13 1,318.01
.9999 bar 1.00 1,321.51 1,332.90 1,332.90
SPOT SILVER: 21.12      
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 15,243.80 15,493.80 21.67
US 40% silver 1/2s 0.30 6,038.65 6,188.65 20.98
100 oz .999 bar 100.00 2,102.00 2,162.00 21.62
10 oz .999 bar 10.00 216.20 217.20 21.72
1 oz .999 round 1.00 21.22 21.72 21.72
Am Eagle, 200 oz Min 1.00 22.87 24.12 24.12
SPOT PLATINUM: 1,503.00      
Plat. Platypus 1.00 1,528.00 1,568.00 1,568.00
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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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