The Moneychanger
Daily Commentary
Monday, 18 August a.d. 2014 Browse the commentary archive

It's always fun to share good news with y'all, considering we get a choking lot of bad news in this world, so here goes: I took Susan to her heart doctor in Nashville today and the pacemaker technician and Susan's doctor gave her an A++ report from her pacemaker reprogramming in May.

I could have told 'em that though. Susan's been doing so well I asked her doctor is she could dial her back a few notches. She's got so much energy that if she spies me, she spits out three errands and before I can wheel to do those she spits out three more.

If she gets any more energy, it's gonna put me under the sod. I'll be picking turnips from a step ladder.

Now I remember, too, how kindly y'all have responded to my prayer requests for Susan, and I deeply appreciate it.

David Stockman today at http://bit.ly/1At4Ve8 said that today's mindless rally ignited over speculations that Janet Yellum, speaking at the Jackson Hole gathering of Our Masters, would sound "dovish," i.e., promise more inflation and zero interest rates across the horizon of eternity.

Stockman is probably right since nothing in the world happened over the weekend to make the Dow worth 175.83 (1.06%) more than it was worth on Friday, or close at 16,838.74 today. S&P trailed right along with a 16.68 rise (0.85%) to 1,971.74.

In an arresting example of journalist non-neutrality and incompetent writing, a Reuters report headlined "Wall St. Jump Takes Stock Index to 14-year peak on Fading Ukraine Worries." Sounds like the whole stock market is just exploding upward, don't it? I had to read the article three times to figure out which index he was talking about, since it sure ain't the Dow or S&P500 or Nasdaq or Russell 2000, etc. Turns out he meant the Nasdaq 100, which closed at its highest level since March 2000, when it began its long tumble.

I scratched my head and went back to check the Dow & S&P500 charts. Dow reached today its 50 DMA (16,847) and 61.8% correction level (of the waterfall plunge that began in July). S&P500 has climbed above its 50 & 20 DMAs and better the 61.8% level. May be I'm wrong and there's not another leg down on this correction. Maybe the push toward the final top has begun. Either way, I wouldn't buy a market riding on Janet Yellum & the printing presses at the Fed. They're liable to suffer power failure at any time.

Today's' Dow in Precious Metals results do highlight the divergence of silver from gold. Dow in gold rests in a clear downtrending channel form the June high. Today it only hit the 38.2% correction of that fall so far, and the top line of the downward channel. This all presages lower prices. Dow in Gold rose 1.61% today to 12.97 oz (G$268.11 gold dollars). It does stand above its 20 DMA (12.84) and 50 DMA (12.92).

Silver's always more volatile than gold, so it earns a little fudge in interpretation. It rose 0.93% today to 860.22 oz (S$1,112.20 silver dollars), just above the 6.18% correction of the fall from First June to early July. Remember that fall in mid-June took the Dow in Silver through the bottom boundary of a rising wedge, usually a sign of much lower prices. I can't work out any way in my mind that the DiS would rise much further, but there ain't much room in my mind anyhow.

US dollar index rose 16 basis points (0.2%) to 81.62, accomplishing no more than to wipe out and mirror-image Friday's downmove. Euro dropped 0.27% to $1.3360, and is fixin' to drop more. Japanese yen lost 0.2% to 97.50.

Gold gave up $6.80 on Comex to close at $1.297.70 while silver gainsaid that move with an 11 cent rise to 1960c.

Gold nearly negated Friday's V or spike bottom, but not quite. Friday's low was $1,293 but today's was $1,296.50. That sure rubs the sparkle off Friday, though.

Gold has support about $1,295. It closed today below its 20 & 50 day moving averages, but above that $1,295 support. Worst is, it closed below the downtrend line form October 2012, the line gold has been struggling to conquer. Friday and today have tugged the RSI below 50%, but the MACD remains barely pointing upward. Gold just has to begin moving up soon.

Silver is just contrary. Gold drops, silver rises. It remains above the downtrend form the August 2013 high, and that is excellent. Unfortunately, that exhausts silver's excellent news. It's below all its moving averages, rose on lower volume, and has other indicators that look like five miles of bad road.

Still, still, it's the time of the year for both metals to turn up, and all the positives of the June 2013 - December 2013 bottoms and better performance in 2014 remain. I am biting my nails and am as long as I can stand.

On 15 August 1587 at the Roanoke Island colony was born Virginia Dare, first baby born to English settlers in America. A year later, John White, leader of the 117 colonist sent to Roanoke Island (North Carolina) returns from a trip to England to find the settlement deserted. No trace of the settlers was ever found, but legend connects the lost colony to the Melungeon people in East Tennessee, who still speak an Elizabethan form of English.

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
18-Aug-14 Price Change % Change
Gold, $/oz 1,297.70 -6.80 -0.52%
Silver, $/oz 19.60 0.11 0.56%
Gold/Silver Ratio 66.209 -0.723 -1.08%
Silver/Gold Ratio 0.0151 0.0002 1.09%
Platinum 1,443.20 -15.00 -1.03%
Palladium 895.40 0.40 0.04%
S&P 500 1,971.74 16.68 0.85%
Dow 16,838.74 175.83 1.06%
Dow in GOLD $s 268.23 4.18 1.58%
Dow in GOLD oz 12.98 0.20 1.58%
Dow in SILVER oz 859.12 4.17 0.49%
US Dollar Index 81.62 0.16 0.20%
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: 1,298.40      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,326.96 1,343.84 1,343.84
1/2 AE 0.50 668.16 684.91 1,369.81
1/4 AE 0.25 334.08 348.95 1,395.78
1/10 AE 0.10 136.23 142.17 1,421.75
Aust. 100 corona 0.98 1,266.33 1,275.33 1,301.09
British sovereign 0.24 307.48 319.48 1,357.17
French 20 franc 0.19 244.23 247.21 1,324.11
Krugerrand 1.00 1,312.68 1,322.68 1,322.68
Maple Leaf 1.00 1,313.40 1,328.40 1,328.40
1/2 Maple Leaf 0.50 746.58 681.66 1,363.32
1/4 Maple Leaf 0.25 331.09 347.32 1,389.29
1/10 Maple Leaf 0.10 137.63 141.53 1,415.26
Mexican 50 peso 1.21 1,557.52 1,568.52 1,300.92
.9999 bar 1.00 1,302.94 1,314.40 1,314.40
SPOT SILVER: 19.64      
SILVER Fine Tr.Oz. BID ASK $/oz
VG+ Morgan $B4 1905 0.77 26.00 28.50 37.25
VG+ Peace dollar 0.77 22.00 24.00 31.37
90% silver coin bags 0.72 13,935.35 14,185.35 19.84
US 40% silver 1/2s 0.30 5,602.05 5,752.05 19.50
100 oz .999 bar 100.00 1,954.00 2,014.00 20.14
10 oz .999 bar 10.00 201.40 202.40 20.24
1 oz .999 round 1.00 19.74 20.24 20.24
Am Eagle, 200 oz Min 1.00 21.39 22.64 22.64
SPOT PLATINUM: 1,443.20      
PLATINUM Fine Tr.Oz. BID ASK $/oz
Plat. Platypus 1.00 1,468.20 1,508.20 1,508.20
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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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