The Moneychanger
Daily Commentary
Thursday, 4 September a.d. 2014 Browse the commentary archive

Reminder: I will be vacationing with my family from 8 September through 12 September, so will not be publishing commentaries that week.

When governments or central banks throw a surprise party, all bets are off. Today the European Criminal Bank threw a heck of a surprise party, announcing (1) an interest rate cut from 0.15% to 0.05%, (2) cutting the interest rate on funds held at the ECB (think "Federal Funds" in the US) to negative 0.2 percent (yes, they are charging banks to hold reserves), and (3) an asset-backed securities and bond buying program, as much as E500 billion ($691 billion) over three years, or US$230 billion a year, about US$20 billion a month, small by Federal Reserve standards. In plain English, the European Central bank is going to inflate.

The ECB news sent the US dollar index screaming up 93 basis points (1.12%) to 83.80, highest close since 11 June 2013. That's a gigantic move for a currency.

Euro fell 1.59% to $1.2941, it's lowest since 10 July 2013. That sets up a further drop to target the last low at $1.2755. It appears the deal has been cut long ago to let the dollar rise and the euro drop. Come on! These things don't happen without consultation and conspiracy.

Japanese yen lost 0.3%, all yesterday's gain and then some for a new low for the move. It ended at 95.05.

All this currency turmoil has made the US dollar look better and pay more interest, a prime determinant of exchange rates. Ten year treasury yield rose 1.58% to 2.448%. That brings the 10 year yield near its 50 DMA (already above the 20 DMA) and not far from the bottom boundary of the triangle it broke down out of in August. Needs to climb over 2.5% to prove itself.

The ECB's currency tricks did not please US stocks. The Dow gave back 14.16 (0.08%) to close at 17,064.12. S&P500 dropped 3.8 (0.19%) to 1,996.92, below the fabled 2000 mark.

I'm no more'n a natural born durned fool for Tennessee, so I cannot peer into the deep thangs of the cosmos, but theseyere lines on charts fascinate me. S&P500 today closed below an internal uptrend line (it marked the rising wedge's lower boundary), and it is dropping on rising volume. That means that there's a feedback loop: faster it falls, more folks sell. Momentum indicators appear to be rolling over earthward, as for the Dow's.

Dow in Silver exceeded the 1 June high at 892.22 by closing up 0.58% to 894.40 oz (S$1,156.40 silver dollars). It has reached turning-green overboughtness on the RSI. Some time ago I calculated a possible target at 912 oz (S$1,179.15). We might see that.

Dow in gold rose today 0.23% to 13.48 oz (G$278.66 gold dollars). This takes it above the downtrend line from the 13.80 oz top in December.

Pondering both these indicators and their last 10 months' trading, I keep getting the picture that both are presently double topping, or will have by sometime next week.

Needless to note, today's dollar surge helped not silver & gold. Gold gave back a lethargic $3.80 to close Comex at $1,265.10. Silver puked up 4.4 cents to close at a new low for the move, 1906.4 cents.

Today gold hit a high of $1,279.20 then was trashed by the ECB's surprise party. Closed near the low of its range. Yet, in all this gold remains simply within that downsloping channel from the July high, in fact, not quite at the bottom line. Considering the strength of today's stroke, gold acquitted itself quite well.

Silver closed below that downtrend line from the August 2013 high, and barely above 1900c support. On news about as bad as an announcement that alchemists had learned how turn mulch into silver, silver dropped four point four measly cents. Silver is acting as if it is sold out, that is, not attracting any new sellers. Unhappily, that ain't no recipe for success. Got to have buyers to raise the price.

Best thing that can be said for silver and gold is that a large skunk sprayed all the markets, but silver & gold don't smell too bad. T'aint much, but 'tis something.

On 4 September 1862 Robert E Lee at the head of the Confederate army invaded Maryland, beginning the Antietam Campaign.

On 4 September 1870 the French proclaimed the Third French Republic as they overthrew the scoundrel Emperor Napoleon II. The Prussians had defeated and captured him at the Battle of Sedan.

Merciful heaven! I mentioned SILVER BONANZA yesterday but forgot to add the link, Y'all go look. Why? It's still the best book ever written about silver.

I wrote it in 1993 for Jim Blanchard. Unhappily, when a New York publisher picked it up, they gutted it, deleting roughly a fourth of the book, the part with all the history without which nobody can understand why silver acts as it does.

With permission, I have republished not that gutted version, but the original unexpurgated version in PDF. Originally published at $75, we well it on our website for $39. For one week only (offer expires 10 September 2014) I am offering it to my commentary readers for $19, twenty bucks off list price. Here's how to get that price. Go to click on "Add to cart," and during check out you will have a chance to enter the special offer code "MC0903). SILVER BONANZA is available only in PDF format. Act quickly! Time's a wastin'!

Argentum et aurum comparanda sunt —
Silver and gold must be bought.

— Franklin Sanders, The Moneychanger

Your source for gold and silver. Read our latest reviews and testimonials.
Market Snapshot See more charts and market data
4-Sep-14 Price Change % Change
Gold, $/oz 1,265.10 -3.80 -0.30%
Silver, $/oz 19.06 -0.04 -0.23%
Gold/Silver Ratio 66.361 -0.046 -0.07%
Silver/Gold Ratio 0.0151 0.0000 0.07%
Platinum 1,409.80 -4.20 -0.30%
Palladium 890.40 15.05 1.72%
S&P 500 1,996.92 -3.80 -0.19%
Dow 17,064.12 -14.16 -0.08%
Dow in GOLD $s 278.83 0.60 0.22%
Dow in GOLD oz 13.49 0.03 0.22%
Dow in SILVER oz 895.10 1.32 0.15%
US Dollar Index 83.80 0.93 1.12%
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: 1,260.80      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,291.06 1,304.93 1,304.93
1/2 AE 0.50 648.80 665.07 1,330.14
1/4 AE 0.25 324.40 338.84 1,355.36
1/10 AE 0.10 132.28 138.06 1,380.58
Aust. 100 corona 0.98 1,227.19 1,236.19 1,261.16
British sovereign 0.24 298.57 310.57 1,319.34
French 20 franc 0.19 237.16 240.19 1,286.51
Krugerrand 1.00 1,273.41 1,283.41 1,283.41
Maple Leaf 1.00 1,275.80 1,290.80 1,290.80
1/2 Maple Leaf 0.50 724.96 661.92 1,323.84
1/4 Maple Leaf 0.25 321.50 337.26 1,349.06
1/10 Maple Leaf 0.10 133.64 137.43 1,374.27
Mexican 50 peso 1.21 1,510.90 1,521.90 1,262.25
.9999 bar 1.00 1,265.21 1,276.80 1,276.80
SPOT SILVER: 19.01      
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 13,624.33 13,910.33 19.46
US 40% silver 1/2s 0.30 5,414.73 5,564.73 18.86
100 oz .999 bar 100.00 1,890.50 1,950.50 19.51
10 oz .999 bar 10.00 195.05 196.05 19.61
1 oz .999 round 1.00 19.11 19.61 19.61
Am Eagle, 200 oz Min 1.00 20.76 22.01 22.01
SPOT PLATINUM: 1,409.80      
Plat. Platypus 1.00 1,434.80 1,474.80 1,474.80
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© 2015 Little Mountain Corporation, d.b.a. The Moneychanger. All rights reserved. May not be republished in any form, including electronically, without our express permission.

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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