The Moneychanger
Weekly Commentary
Friday, 1 August a.d. 2014 Browse the commentary archive
Here's the weekly scorecard:
  25-Jul-14 1-Aug-14 Change % Change
Silver, cents/oz. 2,058.80 2,033.20 -25.60 -1.2
Gold, dollars/oz. 1,303.30 1,293.60 -9.70 -0.7
Gold/silver ratio 63.304 63.624 0.320 0.5
Silver/gold ratio 0.0158 0.0157 -0.0001 -0.5
Dow in Gold Dollars (DIG$) 269.01 263.57 -5.45 -2.0
Dow in gold ounces 13.01 12.75 -0.26 -2.0
Dow in Silver ounces 823.81 811.20 -12.61 -1.5
Dow Industrials 16,960.57 16,493.37 -467.20 -2.8
S&P500 1,978.34 1,925.15 -53.19 -2.7
US dollar index 80.61 81.43 0.82 1.0
Platinum 1,477.60 1,463.80 -13.80 -0.9
Palladium 878.80 865.50 -13.30 -1.5

This week the Dow suffered its worst weekly loss in six months (2.8%), the S&P500 its worst weekly loss in two years (2.7%). Silver & gold were battered but not routed, and the US dollar index rallied convincingly. Not convincingly enough for me to buy the nasty, mangy thing, but convincingly still.

"Lawsa mercy!" as my country aunts used to say, stocks took a big-stick whupping this week. Dow fell out of a rising bearish wedge -- called "bearish" because it generally ends with the market falling down -- then through more internal resistance, and then -- O, THEN -- it sliced clean through the uptrend line from March 2009. Having long ago left behind its 50 (16,876) and 20 (16,962) day moving averages, it is now zeroing in on the 200 DMA at 16,322. Dow has now fallen 3.75% from its last (and all time high) at 17,138.2 on 16 July.

Is this the Ultimate Break & reversal we've been waiting for? Too soon to tell yet, but it ought at least usher in that ephemeral 10% correction everyone is mumbling about, namely, a correction to 15,424. Dow did break the uptrend line on its weekly chart.

Y'all bear in mind that along the way waterfall drops like this one always experience corrections sharp enough to fool even the wise into believing the decline has ended. This Dow has much further to fall still.

IguaƧu, Niagara, Victoria, doesn't matter what you call the S&P500, it is a cataract. However, it had risen further from its moving averages than the Dow, so probably has more to correct. Today's close left it down 3.16% from the 24 July high at 1,987.98. Stopped today at the last (June) low. Next support comes from the last (May) high at 1,902. Finally down there at 1,858 stands the 200 DMA. The uptrend line from the March 2009 low today stands about 1,840.

O, my, the Dow in gold PLUMMETED today. It left behind 1.35% to close at G$263.15 gold dollars (12.73 oz), having punctured its 20 DMA (G$267.91 or 12.96 oz) long ago. It halted bare inches from its 200 DMA (G$262.33 or 12.69 oz). Once it finds the trapdoor at the 200 DMA AND closes below the uptrend line from August 2011 (now about G$210.85 or 10.20 oz), the entire DiG's correction from 2011 - 2014 can be declared dead.

Y'all, don't push on me now, because I'm trying to resist gloating. Dow in silver dropped just a leetle today to end at S$1,048.67 silver dollars (811.08 oz). 200 DMA stands below at S$1,041.80 (805.77 oz).

Lawsa Mercy! There's more downside coming!

Scabrous US dollar Index fell back today after piercing the 81.50 resistance yesterday, but that's probably just a normal reaction. Dollar is rallying, & first technical target is 82.75. Of course, what are technicals when you are dealing with central bank manipulated markets? Only a sign.

Euro rose 0.3% today to $1.3430, but that was only to save face for wallowing down for the past three weeks. Ain't even no reason to TALK about the euro till it climbs above $1.3500. Looks like MUCH lower prices are coming, and before Christmas.

The yen this week fell out of that long narrow triangle it has been forming, Lo, these eight months, and it fell plumb hard. Readying itself for a visit at least to the last low at 96.05.

Ten year treasury not yield fell back today, wiping out the breakout and all the gains of the last two days, and closing again below the downtrend line. I am not convinced. I think that yield wants to rise. Closed today at 2.505%and needs to rise above the 200 DMA at 2.681%.

Gold leapt up $12.30 to $1,293.60 while silver lost 4.1 cents to 2033.2 cents.

I wasn't here watching markets today but the daily chart shows gold sleeping along between $1,282 and $1,286 until about 9:30 when sellers tried to slam it. Wasn't having any of that, and rose straight up from $1,281 to $1,296 in about half an hour.

It's time for us to start talking about the possibility that gold has fallen as much as it means to fall. Hard to tell on a Friday close when much of the rise may be cause by shortsellers covering their positions before the weekend, but a close above $1,300 on Monday will lend credence to that "we've seen the bottom" theory.

Silver (like gold) closed above its 200 DMA but barely, 2033.2 against 2030c.

Silver & gold keep gainsaying each other, one up and the other down, day after day. That puzzles me, but seems strong rather than weak, as does their stubbornness here at the last lows. Yet I am patient, and know that silver must clear 2100c before we get excited, and 2163 (July high) before it confirms a rally. Gold must close above $1,330, then $1,346.80 before it confirms a turnaround. Of course, that's $40 - $56 higher.

How far might they fall? I think the lowest possible low for silver is 1980c, and for gold $1,265. But what do I know? I'm no more'n a natural born durn fool from Tennessee!

Many thanks for your prayers on behalf of my friend Daniel Freemon. Susan & I have spent much time in the hospital this week. They have no diagnosis yet, but it appears to be either viral encephalitis or a tick borne disease. Please continue to pray for him.

On 1 August 1291 the Swiss Cantons of Uri, Schwyz, and Unterwalden formed an Everlasting League (Ewiger Bund). The participants are called Oath-comrades, Eidgenossen in German. After only 723 years, it's too early to say whether it will live up to its "everlasting" name or not.

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
1-Aug-14 Price Change % Change
Gold, $/oz 1,293.60 12.30 1.0
Silver, $/oz 20.33 -0.04 -0.2
Gold/Silver Ratio 63.624 0.606 1.0
Silver/Gold Ratio 0.0157 -0.0000 -0.2
Platinum 1,463.80 -1.90 -0.1
Palladium 865.50 -9.50 -1.1
S&P 500 1,925.15 -5.52 -0.3
Dow 16,493.37 -69.93 -0.4
Dow in GOLD $s 263.56 -3.63 -1.4
Dow in GOLD oz 12.75 -0.18 -1.4
Dow in SILVER oz 811.20 -1.80 -0.2
US Dollar Index 81.43 -0.11 -0.1
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SPOT GOLD: 1,292.80      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,323.83 1,338.05 1,338.05
1/2 AE 0.50 658.82 681.95 1,363.90
1/4 AE 0.25 343.94 347.44 1,389.76
1/10 AE 0.10 136.93 142.21 1,422.08
Aust. 100 corona 0.98 1,260.87 1,269.87 1,295.52
British sovereign 0.24 306.15 318.15 1,351.53
French 20 franc 0.19 243.18 246.17 1,318.51
Krugerrand 1.00 1,304.44 1,314.44 1,314.44
Maple Leaf 1.00 1,307.80 1,322.80 1,322.80
1/2 Maple Leaf 0.50 743.36 678.72 1,357.44
1/4 Maple Leaf 0.25 329.66 345.82 1,383.30
1/10 Maple Leaf 0.10 137.04 140.92 1,409.15
Mexican 50 peso 1.21 1,544.57 1,555.57 1,290.18
.9999 bar 1.00 1,297.32 1,308.80 1,308.80
SPOT SILVER: 20.26      
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 14,518.08 14,768.08 20.65
US 40% silver 1/2s 0.30 5,783.48 5,933.48 20.11
100 oz .999 bar 100.00 2,015.50 2,075.50 20.76
10 oz .999 bar 10.00 207.55 208.55 20.86
1 oz .999 round 1.00 20.36 20.86 20.86
Am Eagle, 200 oz Min 1.00 22.01 23.26 23.26
SPOT PLATINUM: 1,463.80      
Platinum Platypus 1.00 1,488.80 1,528.80 1,528.80
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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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