The Moneychanger
Daily Commentary
Monday, 25 August a.d. 2014 Browse the commentary archive

Some things are so bodaciously stupid that you hardly know where to begin unraveling them, because the stupid sticks out all over. Today there's reports the European Criminal Bank -- whoops, Central bank -- will engage in new stimulus measures, read: inflate more. In a statement that for utterly pure stupidity could hardly be beaten, ABC News reported that "Draghi warned that low inflation -- a sign of economic weakness -- could be getting worse."

But inflation doesn't result from any act by the economy weak or strong, it can only be done by a central bank, because it is creating new money. But the point of this moronism is the lame idea that somehow new inflationary money can stimulate the economy. In fact, it can only cripple the economy, because it makes money artificially cheap which fools entrepreneurs into investing in unprofitable ventures -- in short, wasting capital. So the result of inflation is not only picking the pockets of all savers, but also misdirecting capital so that a temporary economic crisis can become chronic.

Here's proof: the US Federal Reserve has been stimulating the US economy since 2008, and the "economic recovery" remains one with the Yeti and Bigfoot. Never mind, they keep on doing it anyway, because if they ever stop printing money, their whole system will collapse.

Stocks today continued rising higher into irrationality. S&P500 hit 2000 but closed below at 1,997.92, up 9.52 or 0.48%. That was a new high for the S&P500, but not the Dow. It rose 75.65 (0.44%) to 17,076.87. Last high was 17,138.20 on 16 July.

It has become pointless to drag out measures of overvaluation for you. In the end reality will take its vengeance.

Dow in silver rose 0.66% to 882.16 oz (S$1,140.57 silver dollars), still heading for a double top with June's high at 892.99 oz (S$1,154.57).

Dow in gold rose 0.67% to 13.35 oz (G$275.97 gold dollars). Same show playing here, toward the June high at 13.53 oz (G$279.69).

US Dollar Index rose 19 basis points to 82.58, pushing close to my top target at 82.75. This might mark a top that would last a while, which would help gold. Yen today at 96.14 (down 0.1%) has reached the bottom of a 15 month trading range. Must turn up here or dive. Euro lost 0.38% to $1.3194. Euro is greatly oversold, so may show a corrective reversal soon.

In the teeth of news about as bad as it could get, a surging dollar, and a break of $1,280 support last week, gold held its ground. Oh, it lost a meager $1.30 (0.1%) to close Comex at 1,277.30. Spot silver also held firm, losing 2.8 cents (0.14%) to 1935.8c.

Gold sits just barely above the uptrend line from the December 2013 bottom, and the long term uptrend line on the monthly chart. I'm betting gold will hold here. If so, this will prove the buying opportunity of 2014.

Silver continues to slide down that downtrend line from the 2013 high.

For both metals, I have to ask, Why haven't they broken down? Short answer is that buyers are waiting for these low prices. Another part of the answer is lack of interest. Silver's range today was 1930c to 1947c, gold's $1,281.6 to $1,276.10.

Only thing that could cancel a rosy outlook for silver & gold is a sudden drop through these levels.

On 25 August a.d. 325 the Council of Nicaea ended by adopting the Nicene Creed which affirmed the doctrine of the Holy Trinity and rejecting Arianism.

On 25 August 1718 hundreds of French colonists arrived in Louisiana, and some settled in what is now New Orleans. It was above sea level back then.

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
25-Aug-14 Price Change % Change
Gold, $/oz 1,277.30 -1.30 -0.10%
Silver, $/oz 19.36 -0.03 -0.14%
Gold/Silver Ratio 65.983 0.028 0.04%
Silver/Gold Ratio 0.0152 -0.0000 -0.04%
Platinum 1,420.40 -0.10 -0.01%
Palladium 889.75 2.15 0.24%
S&P 500 1,997.92 9.52 0.48%
Dow 17,076.87 75.65 0.44%
Dow in GOLD $s 276.37 1.50 0.55%
Dow in GOLD oz 13.37 0.07 0.55%
Dow in SILVER oz 882.16 5.18 0.59%
US Dollar Index 82.58 0.19 0.23%
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: 1,276.70      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,307.34 1,321.38 1,321.38
1/2 AE 0.50 656.99 673.46 1,346.92
1/4 AE 0.25 328.49 343.11 1,372.45
1/10 AE 0.10 133.95 139.80 1,397.99
Aust. 100 corona 0.98 1,245.16 1,254.16 1,279.50
British sovereign 0.24 302.34 314.34 1,335.34
French 20 franc 0.19 240.15 243.16 1,302.41
Krugerrand 1.00 1,289.47 1,299.47 1,299.47
Maple Leaf 1.00 1,291.70 1,306.70 1,306.70
1/2 Maple Leaf 0.50 734.10 670.27 1,340.54
1/4 Maple Leaf 0.25 325.56 341.52 1,366.07
1/10 Maple Leaf 0.10 135.33 139.16 1,391.60
Mexican 50 peso 1.21 1,531.49 1,542.49 1,279.33
.9999 bar 1.00 1,281.17 1,292.70 1,292.70
SPOT SILVER: 19.34      
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 14,221.35 19.89
US 40% silver 1/2s 0.30 5,513.55 5,663.55 19.20
100 oz .999 bar 100.00 1,924.00 1,984.00 19.84
10 oz .999 bar 10.00 198.40 199.40 19.94
1 oz .999 round 1.00 19.44 19.94 19.94
Am Eagle, 200 oz Min 1.00 21.09 22.34 22.34
SPOT PLATINUM: 1,420.40      
PLATINUM Fine Tr.Oz. BID ASK $/oz
Plat. Platypus 1.00 1,445.40 1,485.40 1,485.40
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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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