The Moneychanger
Daily Commentary
Wednesday, 17 September a.d. 2014 Browse the commentary archive

If you aren't familiar with Fred Reed and his ruthless, witty honesty, you are leading a deprived life. Go read his piece, "King George Days: When We Were America." Be warned, there's some rough language. He & I were born the same year.


Easiest thing in the world to do when things go against you is to panic -- throw your hands up in the air, whine & cry, spiral down by lamenting all the stuff you didn't see you should've seen and all the stuff you should have done but didn't do.

All that ain't worth spit in the ocean. Worse, it only makes you feel worse & keeps you from taking action. Worse yet, it makes you look like a coward & whiner, and nobody likes those. Besides, I'd hate to admit I'd been whupped by the likes of pudgy Janet Yellum & the socialist apparatchiki at the Federal Reserve.

Although for the moment it might seem that way. First thing you do when things go north is look around and ask if you've read them right. It is possible that what you are seeing right this instant is the WASH-OUT in silver & gold and blow-up in stocks & the US dollar. I won't know until we see how markets continue tomorrow.

The FOMC's announcement contained no hint of raising interest rates anytime soon, and emphasized that by mumble-mouthing about the labor market.

At first stocks foundered on the FOMC announcement, then, reasoning (if they reason) that Zero Interest Rates are good for stocks (they're not), they rose. Dow made a new high close at 17,156.85, up 24.88 or 0.15% but the S&P500 did not make a new high, rising only 2.59 (0.13%) to 2001.57. Both charts show what could be double tops, or a continuation higher.

Today took the Dow in silver to 925.15 oz (S$1,196.13 silver dollars) and the upper boundary of that rising wedge. Must stop here if it intends to stop. Dow in Gold broke through the December high (13.80 oz/G$285.28) to end up 1.09% at 14.02 oz (G$289.82).

The US dollar index rose 53 basis points to 84.75. Remains fabulously overbought and due for a correction. Maybe tomorrow? FOMC wrecked the yen, down 1.13% to 92.30c/Y100. Euro lost only 0.8% to $1.2859, right at the bottom of its recent range.

Most interesting & most paradoxical is the 10 year US treasury note yield ROSE today, by 0.42% to 2.600%. That carries it up into the triangle it broke out of, and above the downtrend's upper boundary. It broke out upside. On news the Fed isn't raising rates any time soon. I can't parse that.

Gold was holding steady until the FOMC report. It had closed Comex down only 80 cents to $1,234.40, but the announcement took it down another $10. Silver closed Comex higher by 7/10 cent to 1866.3.

Here's what's odd. The gold/silver ratio closed at 66.142, but in the aftermarket was trading lower, at 65.913. When a panic strikes it usually grips silver fiercer than gold, but not today. Silver's relative strength is a good sign -- no bigger than a cloud the size of a man's hand on the horizon, but a good sign.

Gold's break in the aftermarket tugs it down to the low of its recent range & then some. It's lustily oversold, but gives only the merest breath of a hint of turning up in the MACD.

In the aftermarket silver lost 10 cents to 1857, but didn't reach its recent low. Unless both silver & gold come to life tomorrow, then we'll have to endure yet more downside. "Come to life" means close higher, strikingly higher.

On 17 September 642 Arabs conquered Alexandria and destroyed the world famous library there.

On 17 September 1900 the Commonwealth of Australia was proclaimed.

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
17-Sep-14 Price Change % Change
Gold, $/oz 1,234.40 -0.80 -0.06%
Silver, $/oz 18.66 0.01 0.04%
Gold/Silver Ratio 66.142 -0.068 -0.10%
Silver/Gold Ratio 0.0151 0.0000 0.10%
Platinum 1,363.70 -5.10 -0.37%
Palladium 838.80 -5.40 -0.64%
S&P 500 2,001.57 2.59 0.13%
Dow 17,156.85 24.88 0.15%
Dow in GOLD $s 287.32 0.60 0.21%
Dow in GOLD oz 13.90 0.03 0.21%
Dow in SILVER oz 919.30 0.99 0.11%
US Dollar Index 84.75 0.53 0.63%
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: 1,224.00      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,253.38 1,266.84 1,266.84
1/2 AE 0.50 629.85 645.66 1,291.32
1/4 AE 0.25 314.92 328.95 1,315.80
1/10 AE 0.10 128.42 134.03 1,340.28
Aust. 100 corona 0.98 1,188.97 1,197.97 1,222.17
British sovereign 0.24 289.86 301.86 1,282.32
French 20 franc 0.19 230.23 233.32 1,249.71
Krugerrand 1.00 1,237.46 1,247.46 1,247.46
Maple Leaf 1.00 1,239.00 1,254.00 1,254.00
1/2 Maple Leaf 0.50 703.80 642.60 1,285.20
1/4 Maple Leaf 0.25 312.12 327.42 1,309.68
1/10 Maple Leaf 0.10 129.74 133.42 1,334.16
Mexican 50 peso 1.21 1,463.85 1,474.85 1,223.23
.9999 bar 1.00 1,228.28 1,240.00 1,240.00
SPOT SILVER: 18.57      
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 13,206.05 13,635.05 19.07
US 40% silver 1/2s 0.30 5,286.40 5,436.40 18.43
100 oz .999 bar 100.00 1,847.00 1,907.00 19.07
10 oz .999 bar 10.00 190.70 191.70 19.17
1 oz .999 round 1.00 18.67 19.17 19.17
Am Eagle, 200 oz Min 1.00 20.32 21.57 21.57
SPOT PLATINUM: 1,363.70      
Plat. Platypus 1.00 1,388.70 1,428.70 1,428.70
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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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