The Moneychanger
Daily Commentary
Thursday, 2 October a.d. 2014 Browse the commentary archive

Ain't them open borders great? Looks like to me one clear job the yankee government does have is the very one they don't bother themselves with, namely, controlling who comes into the country. And now the want of the most minimal public health precautions at the border have brought the ebola virus into the US. Great job, Yankee government, sorry, Texas.

And an epidemic, or fear of an epidemic, can wreak havoc on an economy. First it was the airline stocks, hit by the threat of waning travel. Now its your gas tank. Ebola in West Arica is disrupting drilling plans for Exxon.

For reasons unclear, very little is taught in history about the impact of plagues. The Black Death, for instance, hit Europe about 1346, spreading north. In some places 90% died, and 30% to 60% of the entire population perished. Alive in the morning, they were dead by dusk. Imagine what effect this had on social mood! And England was roiled by labor unrest for the next 100 years and more because the much reduced population made labor more valuable, but landowners didn't want to pay up.

Two fascinating books about theplagues' impact are Rats, Lice, & History: the Biography of a Bacillus by Hans Zinsser (1935) and Plagues & Peoples by William H. McNeil (1976). Sounds ridiculous, but Zinsser's book is a charming adventure. You can't put down Plagues & Peoples, either.

Aside from all that, does it seem to y'all that Our Masters are pulling out all the stops on their media organ to play Ebola. It's been around since the 1970s, but suddenly -- after 3000 deaths -- it's gonna carry us all away, and our dogs, too. When the media all sing that sweetly together, I know they're working hard to sell us something. Me, I ain't buying. I don't even buy the germ theory of disease. If the germ really caused the disease, rather than a failure of the immune system, then every disease should cause 100% fatalities.

But I ain't nothing but a nat'ral born durned fool from Tennessee. All I know about medicine is putting cobwebs on bleeders.

On to markets:

Stocks skidded to a stop today. Dow lost only 3.66 points to close at 16,801.05. S&P500 actually gained 1/100th point. That's probably not the end of the first leg of this tumble, but only the beginning. Bull markets die hard, in particular stock bull markets.

Dow in gold fell further below its 20 DMA (13.89) and lost 0.13% to close at 13.83 oz (G$285.89 gold dollars). Dow in Silver fish-hooked up 0.45% to 983.38 oz (S$1271.44 silver dollars). Dow in Gold has surely turned down, the Dow in silver presumptively.

US dollar index dropped 29.7 basis points (0.38%) to 85.614, but the Internet waves are filled with speculation that at least a year long dollar bull market has begun. Yeah, maybe, but not without some correction first. That may have begun today.

Over in Euro-land the Head Felon at the ECB, Super Mario Draghi, revealed new measures today to fight off the evil spirit of deflation. His nostrums will do about the same good as a witch doctor's rattle dance, only making the economy worse, and creating more bubbles. Maybe the Europeans would be better off with a witch doctor.

Euro rose 0.41% to $1.2670, about what the US dollar index fell. It rose to close a gap in the chart, but that doesn't say it will rise again tomorrow. In the past two days the Yen has staged a rally from its 90.93 low for the move to 92.24 today, up 0.43%. It actually reached its 20 DMA today! Clearly the yen has begun a rally, and has escaped grotesquely oversold conditions so far as to bring its RSI up to 36.8 today. Other indicators have turned up, too.

Gold lost 40 cents to close $1,214.20. Silver lost 20.9 cents (1.21%) to end at 1700.1 cents, right where it started.

Gold jiggled fiercely today in a range from $1,209 to $1,221.50 without accomplishing anything but burning rubber off its tires. There stands a double bottom from Tuesday and Wednesday, but today built little on that -- unless that move that topped in overnight trading and fell today is only a correction of that first little leg up. If so, tomorrow gold will close above $1,225 tomorrow.

Yea, silver did about the same today, just jiggling back and forth with no progress, but losing all the previous day's gains. Silver must close above 1750c or drop further.

What's the big picture? Tentatively I answer that the Dow in Gold & Dow in Silver have pinpointed (again) a top in stocks, which implies also a bottom in silver & gold. But that theory requires much more confirmation.

Is it even possible to talk about gold & silver reversing? Well, gold's MACD has turned up, along with the full stochastic and the rate of change. It has pulled out of grotesquely oversold mode. All that's surely a start. Silver has yet has none of that in its favor, but at this sort of turnaround it's to be expected that silver would lag. We wait patiently.

On 2 October 1535 French explorer Jacques Cartier named Mount Royal (Montreal) in Canada.

On 2 October 1656 the Colony of Connecticut passed a law banning a pestilential sect: Quakers.

On 2 October 1780 British Major Jon Andre was hanged as a spy by the US forces in Tappan, New York

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-Oct-14 Price Change % Change
Gold, $/oz 1,214.20 -0.40 -0.03%
Silver, $/oz 17.00 -0.21 -1.21%
Gold/Silver Ratio 71.419 0.844 1.20%
Silver/Gold Ratio 0.0140 -0.0002 -1.18%
Platinum 1,269.10 -18.60 -1.44%
Palladium 767.80 -15.90 -2.03%
S&P 500 1,946.17 0.01 0.00%
Dow 16,801.65 -3.66 -0.02%
Dow in GOLD $s 286.05 0.03 0.01%
Dow in GOLD oz 13.84 0.00 0.01%
Dow in SILVER oz 988.27 11.79 1.21%
US Dollar Index 85.61 0.30 0.35%
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SPOT GOLD: 1,213.50      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,241.41 1,255.97 1,255.97
1/2 AE 0.50 624.44 640.12 1,280.24
1/4 AE 0.25 312.22 326.13 1,304.51
1/10 AE 0.10 127.31 132.88 1,328.78
Aust. 100 corona 0.98 1,178.77 1,187.77 1,211.76
British sovereign 0.24 287.37 299.37 1,271.76
French 20 franc 0.19 228.26 231.36 1,239.21
Krugerrand 1.00 1,224.42 1,234.42 1,234.42
Maple Leaf 1.00 1,228.50 1,243.50 1,243.50
1/2 Maple Leaf 0.50 697.76 637.09 1,274.18
1/4 Maple Leaf 0.25 309.44 324.61 1,298.45
1/10 Maple Leaf 0.10 128.63 132.27 1,322.72
Mexican 50 peso 1.21 1,451.29 1,462.29 1,212.82
.9999 bar 1.00 1,217.75 1,229.50 1,229.50
SPOT SILVER: 17.03      
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 12,280.13 12,566.13 17.58
US 40% silver 1/2s 0.30 4,830.63 4,980.63 16.88
100 oz .999 bar 100.00 1,692.50 1,752.50 17.53
10 oz .999 bar 10.00 175.25 176.25 17.63
1 oz .999 round 1.00 17.13 17.63 17.63
Am Eagle, 200 oz Min 1.00 18.78 20.03 20.03
SPOT PLATINUM: 1,269.10      
PLATINUM Fine Tr.Oz. BID ASK $/oz
Plat. Platypus 1.00 1,294.10 1,334.10 1,334.10
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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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