The Moneychanger
Weekly Commentary
Friday, 26 September a.d. 2014 Browse the commentary archive
Here's the weekly scorecard:
  19-Sep-14 26-Sep-14 Change % Change
Silver, cents/oz. 1,778.10 1,747.70 -30.40 -1.7
Gold, dollars/oz. 1,215.30 1,214.10 -1.20 -0.1
Gold/silver ratio 68.348 69.468 1.120 1.6
Silver/gold ratio 0.0146 0.0144 -0.0002 -1.6
Dow in Gold Dollars (DIG$) 293.92 291.38 -2.55 -0.9
Dow in gold ounces 14.22 14.10 -0.12 -0.9
Dow in Silver ounces 971.81 979.18 7.37 0.8
Dow Industrials 17,279.74 17,113.15 -166.59 -1.0
S&P500 2,010.40 1,982.85 -27.55 -1.4
US dollar index 84.86 85.75 0.89 1.0
Platinum 1,338.80 1,303.50 -35.30 -2.6
Palladium 812.35 783.55 -28.80 -3.5

Whoa. All you had to do this week was wait from one day to the next for things to turn inside out, save for the US dollar index, which rose 1%. Silver & gold took a whipping, and stocks turned down. White metals platinum & palladium were pounded.

Yet again into the teeth of an monstrously overbought RSI (80.13) the dollar index rose 41 more basis points (0.48%) to 85.75, it's highest price since mid-2010. All those overbought indicators argue the dollar ought to experience just a little correction, but it has been overbought since mid-August, and continues.

Euro hit a new low for the move today at $1.2693, down 0.45%. No relief in sight. Yen lost 0.45% to 91.54 cents/Y100. Not a new low close but a new intraday low.

Stocks show that wildly shifting volatility as the titanic struggle continues between bulls and bears. Every day this week the Dow moved in three digit numbers, down, down, up, down, then up again, but lower for the week by 1% or 166.59 points. S&P500 lost more, 1.4% for the week.

Today the Dow gained 167.35 (0.99%) to close 17,113.15. S&P500 added 16.88 (0.86%) to close at 1,982.85.

This is all confusion until you look at the chart and realize that, for all the big moves up and down, stocks have steadily worked lower with lower lows and lower highs, in other words, a downtrend. Yesterday the S&P500 closed lower than its last low (19 September), which proclaims gravity wreaking its vengeance. Today's rally changed nothing. However, it does seem a bit suspicious, even to such an unsuspicious mind as mine, that stocks could find no traction until 2:00, when "some" Big Buyer entered the market. I won't say "Nice Government Men" of the Plunge Protection Team, but y'all know that's who I mean.

Dow in gold rose 1.19% (thanks to gold's fall) to end at 14.03 oz (G$290.03 gold dollars). Still needs to close under the 20 DMA (13.78 oz, G$284.86) to begin to confirm a reversal. However, the MACD had turned down already, as has the RSI.

Dow in Silver ended at 969.58 oz (S$1,253.60 silver dollars), up 0.7%, after making a new high on Wednesday at 974.25oz (S$1,259.64). Still wildly overbought.

Gold today tumbled again, down $7.10 (0.6%) to $1,214.10. Silver, gainsaying gold, rose 9.8 cents (0.81%) to 1747.7c.

Thursday's 24 hour trading in silver saw three bottoms about 1740c, off of which silver rallied today to 1773c about 3:30 a.m. eastern time. But the downwave from that high seems to have dropped in three legs, which, if accurate, suggests it was correcting the upmove. In other words, the direction of trend is up.

That close at 1747.7 cents was classic tape painting, since I hardly saw silver trading under 1762c all day. End of the day found silver at 1768c.

On a five day chart gold made a low this week around $1,206, climbed sharply off that Thursday bottom only to be smacked down again today, but down to a higher low ($1,212.80).

Gold closed today, as it did yesterday, ABOVE its downtrend line from 1 September. Yes, that does mean something. Add to that the MACD turning up, and the RSI moving up out of oversold-land, and there are the ingredients for an upturn. However, no one has yet lit the eye under the pan.

Next week and October promise an abundance of pain for stock investors. But until that US dollar Index takes a breather, silver & gold will keep struggling. Look for them to stage a sudden, sharp rally within the next two weeks. Gold may keep chiseling lower in the meantime. A break below $1,205 sends gold lower, above $1,237 sends it higher. Silver needs to clear 1800c to begin to turn up, and 1850c to convince a crowd.

About the time my treacherous brain thinks it's time to throw in the towel on gravity and monetary reality and call Mother Janet Yellum a winner, common sense slaps my jaws and brings me back. I interviewed the great Harry Browne in 1993 when I was researching for Silver Bonanza, & he said one thing I've never forgotten: the size of the rally depends on the preceding government price suppression. So, the longer the government suppressed silver & gold, all the way through the 1960s and 1970s, the stronger the eventual rally and blow up.

In the past 5 years the Fed has increased is balance sheet by about 4 times, a number for which history offers no comparison. The Fed has also suppressed interest rates to zero percent, and, I doubt not, the prices of silver & gold. At the same time, its money printing has driven the stock market farther into the stratosphere.

What happens when the suppression can no longer be continued, and it all blows up?

On 26 September 1900 the US Mint ceased minting $1 & $3 gold coins and the three cent piece. Why, y'all ask, were they minting $3 gold coins & 3 cent coins? Because they bought a sheet of postage stamps, why else?

On 26 September 1964 the Warren Commission, investigating John F. Kennedy's assassination, issued its report, concluding that Lee Harvey Oswald was the sole gunman, except for some help from the Abominable Snowman. Then they locked up all the secret evidence for 75 years.

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
26-Sep-14 Price Change % Change
Gold, $/oz 1,221.20 -7.10 -0.6
Silver, $/oz 12.14 0.10 0.8
Gold/Silver Ratio 100.585 -0.593 -0.6
Silver/Gold Ratio 0.0099 0.0001 0.8
Platinum 1,303.50 -12.20 -0.9
Palladium 783.55 -18.65 -2.3
S&P 500 1,982.85 16.86 0.9
Dow 17,113.15 167.35 1.0
Dow in GOLD $s 289.68 4.52 1.6
Dow in GOLD oz 14.01 0.22 1.6
Dow in SILVER oz 1,409.53 2.43 0.2
US Dollar Index 85.75 0.41 0.5
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SPOT GOLD: 1,219.50      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,248.77 1,262.18 1,262.18
1/2 AE 0.50 627.53 643.29 1,286.57
1/4 AE 0.25 313.76 327.74 1,310.96
1/10 AE 0.10 127.94 133.54 1,335.35
Aust. 100 corona 0.98 1,184.60 1,193.60 1,217.71
British sovereign 0.24 288.79 300.79 1,277.79
French 20 franc 0.19 229.39 232.48 1,245.21
Krugerrand 1.00 1,232.91 1,242.91 1,242.91
Maple Leaf 1.00 1,234.50 1,249.50 1,249.50
1/2 Maple Leaf 0.50 701.21 640.24 1,280.48
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1/10 Maple Leaf 0.10 129.27 132.93 1,329.26
Mexican 50 peso 1.21 1,458.47 1,469.47 1,218.77
.9999 bar 1.00 1,223.77 1,235.50 1,235.50
SPOT SILVER: 17.68      
SILVER Fine Tr.Oz. BID ASK $/oz
VG+ Morgan $B4 1905 0.77 24.00 27.00 35.29
VG+ Peace dollar 0.77 19.00 22.50 29.41
90% silver coin bags 0.72 12,569.70 12,998.70 18.18
US 40% silver 1/2s 0.30 5,023.85 5,173.85 17.54
100 oz .999 bar 100.00 1,758.00 1,818.00 18.18
10 oz .999 bar 10.00 181.80 182.80 18.28
1 oz .999 round 1.00 17.78 18.28 18.28
Am Eagle, 200 oz Min 1.00 19.43 20.68 20.68
SPOT PLATINUM: 1,303.50      
PLATINUM Fine Tr.Oz. BID ASK $/oz
Platinum Platypus 1.00 1,328.50 1,368.50 1,368.50
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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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