The Moneychanger
Daily Commentary
Monday, 6 October a.d. 2014 Browse the commentary archive

All right! We got some sings of life out of silver & gold today. Okay!

US dollar index lost 92 basis points of that 107 bp it won on Friday, leaving today looking a lot like a key reversal, only because its 86.85 high lacked 2 bps of Fridays. Nonetheless, a follow-through tomorrow will confirm the dollar's reversal. Closed at 85.89, and fell off its grotesquely overbought condition (RSI now 64.64, i.e., below overbought 70 line). I saw an article today by Clive Maund which credited unrest/potential war in Ukraine, Hong Kong, & the Middle East with sending investors, especially non-US investors, into the US dollar. In other words, it's a flight to safety. Add momentum following hedge funds to that and he's likely correct.

Dollar's stumble was health & well-being to the yen & euro. Euro found a ladder and climbed 1.14% to $1.2657. This means little until the Euro crosses that 20 DMA (now $1.2797), but it did carry the euro up out of oversold territory. Yen rallied Wednesday & Thursday, crashed Friday, then bounced back today, up 0.92% to 91.95. Clearly above oversold.

Ten year treasury note yield fell along with the dollar, and has sunk below its 50 day moving average. Suddenly all the certainty that Mother Yellum "must" raise interest rates evaporated.

All the stock indices I watch stumbled today: Nasdaq, N-100, Russell 200, Wilshire 5000, Dow, S&P500. Ain't that what they call "across the board"? Dow lost 17.78 (0.1%), not much but enough to crack the 17,000 level upon which investor moral hangeth. S&P500 lost 3.08 (0.16%) to 1,964.82.

Owch. Dow reached up and punched its 20 DMA today, but fell back. S&P500 didn't do that well and ended below its FIFTY day moving average. Durn! Did I forget to remind y'all the Dow is trading BELOW its uptrend line from March 2009? I did, didn't I.

Dow in gold jerked back Friday's gains and fell to 14.07 (G$290.85 gold dollars). That's below the previous (19 September) high at 14.20 oz (G$293.54). Looks like that and Friday have left a double top, but that will not be confirmed until the DiG again closes below its 20 DMA, now 13.95 oz (G$288.37).

Too early to declare certainly, but that 19 September peak in stocks may have been the Big One.

Dow in Silver has also left a double peak, 30 September at S$1,298.86 silver dollars (1,004.59 troy ounces) & 3 October at S$1,305.57 (1,009.78 oz.). Today the DiS lost S$38.23 (29.57 oz or 2.93%) & ended at S$1,267.34 (980.21 oz). Needs to fall through the 20 DMA at S$1,231.35 (952.37 oz) to confirm reversal, but presumption already lies with gravity.

Gold sprang up $14.50 (1.19%) to $1,206.70. I'll fret & fume about the ambiguity of that close in a second. Silver rose 40 cents (2.4%) to 1718 cents.

Both planted the clear first half of a key reversal, viz., a break into new low ground with a higher close for the day. That first half is useless & a liar unless followed by the 2nd half, a higher close tomorrow. Third day's higher close offers more proof still.

Look at the changes inside silver & gold. Silver came out of an oversold fever that began 10 September. Other indicators have turned up. The downtrend line from they end-August high lies above at 1765, and silver's high today reached 1736c. If fuelled by short-covering, silver could o'erleap that tomorrow. As yet this turn is no more than a small cloud on the horizon, but it has all the elements of a turnaround -- except confirmation, which only tomorrow can give.

Zut alors! Donnerwetter! Gold's low today -- really over the weekend -- came at $1,183.30, pennies above the June & December 2013 low. Observe that the ever-more-volatile silver cracked those lows (1860c) while gold has not. That would be typical behavior, with silver always weaker on the downswing but often outpacing gold on the upswing.

The ratio confirmed that by gapping down today. It has painted a classic complete gapped movement with breakaway gap, exhaustion gap, island top, and gap down from the island. Look at That argues that the recent highs in the ratio also mark the lows in silver & gold.


What next? Gold must close -- not tomorrow, but soon -- above $1,225, then $1,237. then $1,237. $1,300 is the first big goal.

Silver needs to climb above 1800c, then 1875 where it fell down. In the aftermarket silver was trading at 736c, 18 cents above its close, a sign that shorts are covering. Platinum and palladium also shot up.

Call me a nat'ral born durned fool from Tennessee, but I bought silver & gold today. I'll buy more if it keeps rising, though I am careful to note that it must keep rising or gainsay today's signal.

On 6 October 1781 Americans & their French allies began a siege of the British under Cornwallis at Yorktown. Thanks to the French fleet, that siege would eventually defeat the British and win the American Revolution for the colonists. Only a year earlier, after warfare for four years, did Southerners on 7 October 1780 win the key victory at Kings Mountain that began deflecting the British northward. That was followed by the American victory at Cowpens, South Carolina in January 1781.

Y'all think about it. The Americans only won the battle of Kings Mountain because the British Col. Ferguson made the deadly mistake of picking a fight with the Scotch-Irish, notably the Over The Mountain Men in Tennessee. They mustered in and slaughtered Ferguson and his Tory troops. So, it would not be an exaggeration to say that Tennesseans actually won the American Revolution for all y'all.

It's okay. We don't want no prizes, no pay. Just leave us alone, that's all.

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
6-Oct-14 Price Change % Change
Gold, $/oz 1,206.70 14.15 1.19%
Silver, $/oz 17.18 0.40 2.38%
Gold/Silver Ratio 70.239 -0.831 -1.17%
Silver/Gold Ratio 0.0142 0.0002 1.18%
Platinum 1,248.40 22.40 1.83%
Palladium 765.25 11.55 1.53%
S&P 500 1,964.82 -3.08 -0.16%
Dow 16,991.91 -17.78 -0.10%
Dow in GOLD $s 291.09 -3.76 -1.28%
Dow in GOLD oz 14.08 -0.18 -1.28%
Dow in SILVER oz 989.05 -24.64 -2.43%
US Dollar Index 85.89 -0.92 -1.06%
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: 1,207.50      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,235.27 1,249.76 1,249.76
1/2 AE 0.50 621.35 636.96 1,273.91
1/4 AE 0.25 310.67 324.52 1,298.06
1/10 AE 0.10 126.68 132.22 1,322.21
Aust. 100 corona 0.98 1,172.94 1,184.94 1,208.87
British sovereign 0.24 285.95 297.95 1,265.72
French 20 franc 0.19 227.13 230.24 1,233.21
Krugerrand 1.00 1,218.37 1,228.37 1,228.37
Maple Leaf 1.00 1,222.50 1,237.50 1,237.50
1/2 Maple Leaf 0.50 694.31 633.94 1,267.88
1/4 Maple Leaf 0.25 307.91 323.01 1,292.03
1/10 Maple Leaf 0.10 128.00 131.62 1,316.18
Mexican 50 peso 1.21 1,444.12 1,468.12 1,217.65
.9999 bar 1.00 1,211.73 1,223.50 1,223.50
SPOT SILVER: 17.36      
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 12,412.40 12,984.40 18.16
US 40% silver 1/2s 0.30 4,929.45 5,079.45 17.22
100 oz .999 bar 100.00 1,726.00 1,786.00 17.86
10 oz .999 bar 10.00 178.60 179.60 17.96
1 oz .999 round 1.00 17.46 17.96 17.96
Am Eagle, 200 oz Min 1.00 19.11 20.36 20.36
SPOT PLATINUM: 1,248.40      
Plat. Platypus 1.00 1,273.40 1,313.40 1,313.40
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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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