The Moneychanger
Daily Commentary
Tuesday, 5 August a.d. 2014 Browse the commentary archive

Someone wrote to chide me about leaving out the other half of the John Peter Zenger trial yesterday: Jury Nullification. That case helped establish that a jury can bring in any verdict it wants, even in the teeth of the law. (Thanks, I always appreciate being corrected. Truly)

I think I am going to write down a new Axiom: stuff that goes down, then goes down again, will go down some more. Witness stocks today.

The Dow (along with all other stock indices) plunged 139.81 (0.84%) to wind up at 16,429.47. Since the 16 July high the Dow has lost 4.2%. Its 200 day moving average awaits nearby at 16,333.

Volume riseth.

Reason the media grabbed for today's plunge was heightening tensions in Ukraine. If so, that was only the catalyst for a plunge already fated.

S&P500 tumbled 18.78 (0.97%) to 1,920.21, down since its 24 July high by 3.4%. For both the Dow and S&P there is one more big push down coming before it corrects.

Dow fell so sharply today that even with Gold declining the Dow in Gold dropped 0.87% to 12.74 oz (G$263.36 gold dollars). Crossing below its 200 DMA at 12.70 oz (G$262.53) would cinch the upward correction has ended.

Dow in silver telleth yet another tale, as silver tumbled, too. Dow in silver rose 1.11% to 830.1 oz (S$1,073.92 silver dollars). That punched up through the downtrending fanline and reached for the 50 DMA at 832.58 oz (S$1,76.47).

Clearly, silver & gold are out of synch here, but where will that take us? Implies silver may fall further than I expect. Still, gazing upon that Dow in Silver chart for the last six months, that June high followed by a steep fall certainly argues that stocks topped June 1 against silver, so the next move for the DiS ought to be dirtward.

Buoyed by lying government reports about services sector growth and increasing factory orders, the US dollar shot up 21 basis points to 81.60. Since that close is well above the 81.50 resistance, it whispers that another dollar rally leg may have begun. May.

Euro, stitched together scrofulous fiat currency for the European Union next door to Ukraine, was cold-cocked by news today. Fell 0.36% to $1.3374, on its way to $1.3200. Yen fell only 0.4% to 97.48.

Gold tripped $3.70 (0.3%) to $1,284 at Comex close. Silver choked up a massive 40 cents (2%) to 1,979.4c. In the aftermarket, gold's at $1,290.90.

Silver first, since it has now reached my downside target at 1975c (today's low was 1978c). Two or three pennies below silver will strike the downtrend line from the August 2013 high. It broke up through that trendline with a magnificent June rally, so this touchback to that line looks like the "final kiss good-bye." Also the 1975c area has been resistance & support for months. If silver breaks 1975, it might merely chisel its way to 1950, or it could fall to stronger support at 1925c. Today's fall chilled the blood, but that's what markets do, so you have to resist the urge to panic just when the market hits your buying target.

I have a gold chart with so many lines it looks like a Georgia roadmap. I wiped 'em all off and started over with one downtrend line from the October 2012 high and one uptrend line from the 31 December 2013 low at $1,181.40 to the 1 June low at $1,240,20. Those two (1) make an even-sided triangle) and (2) show gold trending upwards.

Today that uptrend line meets gold at about $1,260. English translation: gold could drop to $1,260 without violating its reigning uptrend. Tis also an optimistic sign that gold has hung on above $1,280. A spike low followed by just as swift a jump up would elegantly finish the move.

But markets seldom listen to me.

On 5 August 1846 the Oregon Territory, which included British Columbia, was divided between the US & Great Britain at the 49th parallel. If they hadn't done that, they'd have had to call British Columbia American Columbia and American citizens wouldn't get to wait in hours-long lines to cross northward out of Washington.

My friend Daniel Freemon is still unconscious in ICU, improving very slowly. Please keep on praying for him.

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
5-Aug-14 Price Change % Change
Gold, $/oz 1,284.00 -3.70 -0.29%
Silver, $/oz 19.79 -0.40 -1.98%
Gold/Silver Ratio 64.868 1.102 1.73%
Silver/Gold Ratio 0.0154 -0.0003 -1.70%
Platinum 1,457.40 -10.70 -0.73%
Palladium 849.25 -6.80 -0.79%
S&P 500 1,920.21 -18.78 -0.97%
Dow 16,429.47 -139.81 -0.84%
Dow in GOLD $s 264.51 -1.48 -0.56%
Dow in GOLD oz 12.80 -0.07 -0.56%
Dow in SILVER oz 830.02 9.52 1.16%
US Dollar Index 81.60 0.21 0.26%
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: 1,290.90      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,323.17 1,336.08 1,336.08
1/2 AE 0.50 657.85 680.95 1,361.90
1/4 AE 0.25 343.44 346.93 1,387.72
1/10 AE 0.10 136.73 142.00 1,419.99
Aust. 100 corona 0.98 1,259.01 1,268.01 1,293.63
British sovereign 0.24 305.70 317.70 1,349.62
French 20 franc 0.19 242.82 245.81 1,316.61
Krugerrand 1.00 1,302.52 1,312.52 1,312.52
Maple Leaf 1.00 1,305.90 1,320.90 1,320.90
1/2 Maple Leaf 0.50 742.27 677.72 1,355.45
1/4 Maple Leaf 0.25 329.18 345.32 1,381.26
1/10 Maple Leaf 0.10 136.84 140.71 1,407.08
Mexican 50 peso 1.21 1,542.30 1,553.30 1,288.30
.9999 bar 1.00 1,295.42 1,306.90 1,306.90
SPOT SILVER: 19.88      
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 14,246.38 14,496.38 20.27
US 40% silver 1/2s 0.30 5,671.38 5,821.38 19.73
100 oz .999 bar 100.00 1,977.50 2,037.50 20.38
10 oz .999 bar 10.00 203.75 204.75 20.48
1 oz .999 round 1.00 19.98 20.48 20.48
Am Eagle, 200 oz Min 1.00 21.63 22.88 22.88
SPOT PLATINUM: 1,457.40      
Plat. Platypus 1.00 1,482.40 1,522.40 1,522.40
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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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