The Moneychanger
Weekly Commentary
Monday, 15 September a.d. 2014 Browse the commentary archive
Here's the weekly scorecard:
  5-Sep-14 15-Sep-14 Change % Change
Silver, cents/oz. 1,908.20 1,855.60 -52.60 -2.8
Gold, dollars/oz. 1,265.80 1,233.60 -32.20 -2.5
Gold/silver ratio 66.335 66.480 0.145 0.2
Silver/gold ratio 0.0151 0.0150 -0.0000 -0.2
Dow in Gold Dollars (DIG$) 279.87 285.40 5.53 2.0
Dow in gold ounces 13.54 13.81 0.27 2.0
Dow in Silver ounces 898.09 917.82 19.73 2.2
Dow Industrials 17,137.36 17,031.14 -106.22 -0.6
S&P500 2,006.81 1,984.13 -22.68 -1.1
US dollar index 83.79 84.37 0.58 0.7
Platinum 1,412.50 1,365.00 -47.50 -3.4
Palladium 891.00 836.90 -54.10 -6.1

Ideas pop up in the media. When other commentators & investment advisors, looking for material to justify their salaries, pick those ideas up and repeat them, you've got a recipe for a market rise. More and more people pick up & pass on the idea, and the price rises as more and more people listen and crowd in. They believe because everybody else believes. They buy because the price is rising.

Only one problem: when everybody expects the same thing, they've already placed their bets and for lack of buyers the market collapses. Government and central bank actions -- "surprise parties" -- exaggerate these reactions. Right now the dollar and stocks are priced for perfection. Markets rarely grant perfection.

Right now, everybody who wears pointy Eye-talyun shooes on Wall Street is certain that Mother Yellum will begin raising interest rates AND SOON. Problem is, they haven't quite thought that through. Sure, Mother Janet, with two eyes on the labor market, is going to raise rates and risk slowing the economy while unemployment still rages? Is she going to raise rates in the face of Japan & Europe suppressing rates & QE-ing themselves to death, thus pricing US products out of world markets?

More, you just let Mother Yellum get a whiff of something scorching in her Wall Street kitchen, that is, you let stocks burn a day or two, & she'll come out of that kitchen a spittin- & a-printin' money like a threshing mo-sheen.

Mother Yellum, as all socialists and fascists, has a problem: the more you control an economy, the more you have to control. Totalitarians must become totaller. Their excuse is always, "It would have worked, if we'd done more of it! We need MORE control!"

And get out of your head the hogwash notion that QE and ZIRP have saved the world or the economy: they haven't. They saved the banks, which is all they were meant to do. They've starved any recovery.

Problem for socialists -- ALL socialists, American, German, Russian, or Chinese -- is that socialism doesn't work. Therefore they always need MORE control. Now so many central banks have entered markets -- and I'm not talking merely about central banks KNOWN interest rate and currency exchange rate manipulations, I mean in all stock and commodity markets, and central banks around the world -- that there ain't much free anything left. After all, a central bank with bottomless pockets can run a market for a long time, as the present stock rally proves.

So the question becomes, when will the wastage of socialism finally catch up with the socialists? The Soviet Union lasted 70 years, and US socialism ain't far behind, & piling on control by the second.

But I have strayed to chase rabbits. Point is that an awful lot of folks are long dollars and stocks might be disappointed this week when the FOMC makes its pronouncements. Any words the market interprets as working against raising interest rates soon might just rabbit chop the dollar in the back of the neck, & stocks along with the dollar.

This best of all possible worlds for financial confidence feeds the dollar & stocks but starves gold & silver. That's what you've seen in the last week. Let's look closer.

The past week stocks rolled over and eroded but crashed not. Dow today gained 43.63 (0.26%) while the S&P500 lost 1.41 (0.7%) to 1,984.13. Nasdaq, N-100, & Russell 2000 all fell as well. Dow & S&P500 have both fallen below their 20 day moving averages. Why do we watch the 20 day moving averages anyway? To alert us when a market's momentum has turned down, when it is trading below the average of the last 20 days. Lo, not far from here (16,913 & 1,973) stand the next tripwires, the 50 day moving averages. Add to that the straining behavior of the last month, eking out new highs by points. Next move here should be down, though few expect it.

O merciful heavens! My top target for the Dow in Silver for months has been 912 oz, and the high Friday was 912.33 (S$1,179.58 silver dollars). I won't chortle too loud, since it might rise another 10 oz to the upper trend line, but when you stare at a number that long it does leave a crease in your brain.

Meanwhile the Dow in Gold today touched the December high at 13.80 oz (G$285.27 gold dollars). When a market touches a previous high (or low), it is Fish Or Cut Bait time. Either it will accelerate through the high to establish a new uptrend, or fall back & reverse.

Both the Dow in Silver & Dow in Gold are way overbought. It could be a disappointment from the FOMC this week would knock the dollar & stocks down and perk up metals. However, a trend in force remains in force until it reverses. Haven't seen any reversal yet.

US dollar index gained 58 basis points (0.7%) last week, and today added another 13 basis points (0.15%) to end at 84.37. Shucks, I'm plumb out of similes and metaphors to describe how overbought it is. The dollar index is knocking at the downtrend line from the late-2005 high. This same line also forms the upper boundary of a triangle building since the 2008 low at 71.33. Ridiculous as it sounds, the rough target for a breakout from here would be over 102 for the dollar index.

Can that happen? We live in Never-Neverland where anything can happen. Do I expect that? No, it works too hard against too many other things Our Masters are trying to manage.

Yen & Euro are both excruciatingly oversold, but can't so much as raise a little finger. Yen rose 01.6% today to 93.31. Euro fell 0.21% to $1.2939. Sure look ripe for some kind of rally.

Over the last week gold lost 2.5% and silver lost 2.8%. I've seen better weeks, but it wasn't Waterloo & Isandlwana combined.

Today silver gained one cent to 1855.6 on Comex; gold gained $3.70 to $1,233.60. Today's $13 range in gold and 13 cent range in silver show how genuinely dead metals are. The flashing US dollar & the hope of higher interest rates has sucked away all interest.

Imagine you talked your wife into moving from south Georgia to Florida. Imagine you began with $200 and a shaky transmission. Imagine you reach the Mojave Desert and the transmission blows. That is not the time to turn to your wife and say, "Well, at least we've still go our health!"

That's what it feels like for me to say, "Well, at least silver & gold have held up well for all the support they've broken."

Gold has reached and breached the June low at $1,240.20, after falling through the since-July trading channel bottom, after falling throu8gh the uptrend line from the December lows. I'm sure enough glad we've still got our health.

Silver reached a low of 1845c, below the December, May, and June lows but above the June 2013 low at 1817c.

Here's what's sorry: the more times a market challenges support, the weaker that support becomes, and the more likely to give. On the other hand, silver is now more oversold than at any time since June 2013. Small signs of life appear in momentum indicators. But it's big brother gold we're looking at. It's oversold, too, but not as severely as in June 2013. Only one indicator, the Full stochastics, hint at an upturn, besides the RSI.

Waiting this way for silver & gold to turn around, I am given to meditate on my loyalties and beliefs. Somewhere down around my liver or spleen dwells an abiding and unconquerable mistrust of the yankee government & its central bank & fiat money. I look at them the same way a worm looks at a robin, worm that I am. I don't trust 'em, and I've watched them through the worst financial crisis in the past 80 years do exactly what I expected: print more money.

They have only two weapons against that deadly loss of confidence that is a financial panic: blarney and liquidity. Blarney is gussying up Janet Yellum or Ben Bernanke and Warren Buffett and Bernard Obama and putting them on the tube to whisper soothing words to the stampeding masses. Liquidity is printing money.

Right now, that BLARNEY is working better than even I, who have an opinion of the American Public's gullibility even lower than PT Barnum, am flabbergasted. It is truly amazing.

But I am patient as a rock, calm as a 200 year old oak. Facts eventually avenge themselves. The Gods of the Copybook Headings may take long to wreak their vengeance, as Kipling observed, but their vengeance is sure.

Here's a recommendation: If you have ever suffered from depression or know anybody who has, get and read Martyn Lloyd-Jones' book, Spiritual Depression. Lloyd-Jones was one of the 20th century's greatest preachers. I don't mean get it tomorrow, I mean TODAY,

Y'all enjoy your weekend!

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
15-Sep-14 Price Change % Change
Gold, $/oz 1,233.60 3.70 0.3
Silver, $/oz 18.56 0.01 0.1
Gold/Silver Ratio 66.480 0.199 0.3
Silver/Gold Ratio 0.0150 0.0000 0.1
Platinum 1,365.00 -7.00 -0.5
Palladium 836.90 0.85 0.1
S&P 500 1,984.15 -1.41 -0.1
Dow 17,031.14 43.63 0.3
Dow in GOLD $s 285.40 -0.10 -0.0
Dow in GOLD oz 13.81 -0.00 -0.0
Dow in SILVER oz 917.82 1.86 0.2
US Dollar Index 84.37 0.13 0.2
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: 1,232.70      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,262.28 1,275.84 1,275.84
1/2 AE 0.50 634.33 650.25 1,300.50
1/4 AE 0.25 317.16 331.29 1,325.15
1/10 AE 0.10 129.33 134.98 1,349.81
Aust. 100 corona 0.98 1,197.42 1,206.42 1,230.79
British sovereign 0.24 291.92 303.92 1,291.07
French 20 franc 0.19 231.87 234.95 1,258.41
Krugerrand 1.00 1,246.26 1,256.26 1,256.26
Maple Leaf 1.00 1,247.70 1,262.70 1,262.70
1/2 Maple Leaf 0.50 708.80 647.17 1,294.34
1/4 Maple Leaf 0.25 314.34 329.75 1,318.99
1/10 Maple Leaf 0.10 130.67 134.36 1,343.64
Mexican 50 peso 1.21 1,474.25 1,485.25 1,231.86
.9999 bar 1.00 1,237.01 1,248.70 1,248.70
SPOT SILVER: 18.61      
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 13,266.83 13,552.83 18.96
US 40% silver 1/2s 0.30 5,296.73 5,446.73 18.46
100 oz .999 bar 100.00 1,850.50 1,910.50 19.11
10 oz .999 bar 10.00 191.05 192.05 19.21
1 oz .999 round 1.00 18.71 19.21 19.21
Am Eagle, 200 oz Min 1.00 20.36 21.61 21.61
SPOT PLATINUM: 1,365.00      
Platinum Platypus 1.00 1,390.00 1,430.00 1,430.00
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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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