The Moneychanger
Daily Commentary
Tuesday, 2 September a.d. 2014 Browse the commentary archive

Markets hit me over the head with a club today. Might as well take the licking.

Silver & gold both plunged while the US dollar index, gainsaying my expectation, rose. Let's see how this mess sorts out.

US dollar index has been highly overbought off and on since July, & persistently so for the last two weeks, yet it rose 29 basis points today (0.34%) to 83.01. That might be the last thrust to this leg up, but that's not too likely. Overbought can always get overboughter, and the dollar index faces little resistance between 83.50 and 84.15. One suspects that fear is driving European money into the dollar, now that the Europeans have joined Obama in sticking their tongues out at Russia.

The Euro barely moved today, down 0.02% to $1.3133 but still looks sick as a dog that's been eating bad meat. It was the Yen that fell over the cliff. Yen has been contained since last February by 96 cents/Y100 on the range bottom, and 99-ish on the top. Today it closed at 95.16, down 0.96%, leaving behind a gap from 96.08 to 95.3, and falling to its lowest price since 2008. And as the US dollar is overbought, so is the yen oversold.

I keep fussing with that overbought oversold business for this reason: those conditions can last a while, but when they move to seldom seen levels, they are powerfully arguing for a change of direction, even if only temporary to swing the price pendulum back to the other side.

Ten year treasury note yield today rose 3.24% to 2.419%, and closed above its 20 day moving average. It make a big gap up, which probably means that investors are buying in anticipation of the Fed raising interest rates soon. 10 year yield needs to close over 2.500% to change its trend, however.

Stocks dipped today, back to support. Dow's low today touched the uptrend line from the March 2009 low. That's the big one, the line that defines the trend.

Dow lost 30.89 (0.18%) to 17,067.56. S&P peeled off a tiny 1.09 (0.05%) to wind up at 2,002.28. Volume rose with today's drops. I continue to await the inevitable plunge, and I am learning patience.

Dow in metals reached the hour of decision today. Dow in gold closed up 1.51% at 13.48 oz (G$278.66). That is dead on the downtrend line from the December 2013 high at 13.80 oz (G$285.27 gold dollars). This catches your eye more firmly when you note that all the trading this year, all of it, has been bounded in an even sided triangle between that downtrend line I just mentioned and the uptrend line from the June 2013 low. See the chart at http://scharts.co/1q94H8X

Clearly the even-sided triangle foretells a break, but sayeth naught of which direction. Unless the Dow in Gold means to extend this rally and climb above the old high, it must turn down at once.

Dow in silver closed today up 1.51% at 889.63 oz (S$1,150.23 silver dollars). That's mighty close to a double top with the June high at 892.99 oz (S$1,154.57). What makes this troublesome to parse is this: Dow in silver spent 12 months tracing out a rising wedge, a pattern that presages a downward resolution. In June it resolved downward indeed, out of the wedge, but now has climbed again almost to that last peak -- to make a double top? Lo, how overbought it is! http://scharts.co/1q96oDo

Several months ago I worked out a maximum target for the Dow in Silver at 912 ounces (S$1,179.15) That would be about where the top line of that wedge now stands.

Oh, my! Gold lost 22.10 (1.72%) today to end at $1,263.70 while silver lost 32.7 cents (1.69%) to 1907.10.

Whether these are one-day spikes or not we shall see tomorrow. Gold's close takes it under the uptrend line from the December low, but on the other hand merely to the lower line of the current trading channel.

For a long time I've had marked on my gold chart a potential upside down head and shoulders formation. If there's anything to that, gold today is completing the bottom of the right shoulder. Bottom of the left came at $1,268.40.

Course, all that's pie in the sky if gold keeps falling tomorrow. You can see what I'm looking at here, http://scharts.co/1q97NK8

Silver closed down on that downtrend line from the August 2013 low. If it breaks that line, it's 1860c. Chart's at http://scharts.co/1hD8aVD

Silver & gold have both reached their line in the sand. If they fall much further, gravity will take hold and pull gold toward $1,200 and silver toward 1860c.

On 2 September 1793 was created within the federal government the treasury department. Washington chose Alexander Hamilton as the first secretary, and Hamilton set about trying to create a central bank for the money interest. Jefferson was the first secretary of state, and opposed Hamilton's policies. To Hamilton's plans for a country enslaved by national debt to the money interest, Jefferson opposed a nation of independent freeholders. All of American history can be viewed as a struggle between Hamiltonians and Jeffersonians. Today, of course, the Hamiltonians & the banking party reign supreme, and have since the War Between the States. That's why the US got the Fed in 1913. But someday . . .

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
2-Sep-14 Price Change % Change
Gold, $/oz 1,263.70 -22.10 -1.72%
Silver, $/oz 19.07 -0.33 -1.69%
Gold/Silver Ratio 66.263 -0.022 -0.03%
Silver/Gold Ratio 0.0151 0.0000 0.03%
Platinum 1,410.40 -16.30 -1.14%
Palladium 882.60 -26.05 -2.87%
S&P 500 2,002.28 -1.09 -0.05%
Dow 17,067.56 -30.89 -0.18%
Dow in GOLD $s 279.19 4.30 1.57%
Dow in GOLD oz 13.51 0.21 1.57%
Dow in SILVER oz 894.95 13.49 1.53%
US Dollar Index 83.01 0.29 0.35%
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SPOT GOLD: 1,264.40      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,293.48 1,308.65 1,308.65
1/2 AE 0.50 650.65 666.97 1,333.94
1/4 AE 0.25 325.33 339.81 1,359.23
1/10 AE 0.10 132.66 138.45 1,384.52
Aust. 100 corona 0.98 1,230.69 1,239.69 1,264.73
British sovereign 0.24 299.43 311.43 1,322.96
French 20 franc 0.19 237.83 240.86 1,290.11
Krugerrand 1.00 1,275.78 1,285.78 1,285.78
Maple Leaf 1.00 1,279.40 1,294.40 1,294.40
1/2 Maple Leaf 0.50 727.03 663.81 1,327.62
1/4 Maple Leaf 0.25 322.42 338.23 1,352.91
1/10 Maple Leaf 0.10 134.03 137.82 1,378.20
Mexican 50 peso 1.21 1,516.74 1,527.74 1,267.10
.9999 bar 1.00 1,268.83 1,280.40 1,280.40
SPOT SILVER: 19.11      
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 13,699.40 13,985.40 19.56
US 40% silver 1/2s 0.30 5,445.70 5,595.70 18.97
100 oz .999 bar 100.00 1,901.00 1,961.00 19.61
10 oz .999 bar 10.00 196.10 197.10 19.71
1 oz .999 round 1.00 19.21 19.71 19.71
Am Eagle, 200 oz Min 1.00 20.86 22.11 22.11
SPOT PLATINUM: 1,410.40      
PLATINUM Fine Tr.Oz. BID ASK $/oz
Plat. Platypus 1.00 1,435.40 1,475.40 1,475.40
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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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