The Moneychanger
Daily Commentary
Wednesday, 8 October a.d. 2014 Browse the commentary archive

Very strange action in today's markets. FOMC minutes of last month's meeting were published today and roiled markets. Stocks ended up, dollar ended down, and metals sprang high after stooping low.

The FOMC published minutes of its last meeting today & they implied (this is like reading sheep guts to tell the future), at least in the eyes of people buying stuff today, that (1) the FOMC are in no hurry to raise rates, and (2) they weren't too keen on a strong dollar, either.

About the time that news broke the US dollar index fell off a cliff. It lost 43 basis points (0.51%) to end at 85.33. This is good news for gold, but it played out oddly as I'll explain below.

The euro woke up enough to rise 0.6% to $1.2740, still below its 20 DMA ($1.2774). However, it has floated up out of the oversold zone and its MACD has turned up, so you can expect higher prices. Despite the Bank of Japan's announcing on 7 October that it would significantly increase its monetary base, from $550 billion to $655 billion or 17.27%, the yen rose 0.4% to 92.50 cents per 100 yen. Yen has now climbed over its 20 DMA and appears set to rally. We'll see how efficiently the BoJ can poison that rally.

Bond prices rose in spite of dollar woes. Yield on the 10 year treasury fell 0.85% to 2.330%. Looks like that interest rate increase all those wise speculators & hedge fund managers were betting on isn't coming true after all. Shucks. Reading sheep guts to tell the future beats parsing the Fed's intention any day.

Stock charts look like somebody had a little advance notice how those Fed minutes might read, as stocks climbed just above unchanged & hovered, but rose as 2:00 p.m. drew closer. At the announcement stocks shot up. Dow rose 274.83 (1.64%) to 16,994.22. S&P500 gained 33.79 (1.75%).

Now I ask you, just because I like to pose as sane every now and then: Did the US economy really become 1.64% more valuable today because the Fed might suppress interest rates a little longer? To ask the question is to spotlight the mindless gullibility ruling markets, the economy, & the Fed.

Looking closer, all today's huge rise accomplished was to boost the Dow above its 50 DMA, but not the S&P500. In both cases buying trampolined off the last low. This volatility reflects bears and bulls wrestling & struggling for the prize.

The Dow is below & outside its uptrend line from March 2009. The S&P500's analogous line not stands at 1,904. Broken uptrend lines are almost as easy to repair as eggshells.

Of course the Dow in Metals rose today. Dow in silver rose to S$1,286.59 silver dollars (995.91 oz), but this sawing back and forth looks like a top running shy of momentum. All indicators still point to the earth's core.

Dow in gold rose back above its 20 DMA (G$288.99 gold dollars or 13.98 oz) to end at G$291.27 (14.09 oz). All indicators point steadily, stubbornly down.

On Comex today, gold closed down $6.40 (-0.53%) at $1,205.30. Silver was 17.6 cents lower at 1701.50 cents.

Here's what's odd. Comex closes at 1:30, but all the damage the FOMC minutes might have down had already been done. Then a little after 3:30. long after the news had broken, gold gapped up $6 and launched heavenward. In the aftermarket it's trading at $1,223.60, $18.30 (1.5%) higher! Silver is selling for 1745c, 43.5 cents higher than the close -- 2.6% higher!

But look here. Gold had crucial support at $1,206, and despite the Nice Government Men's best efforts -- whoops, I didn't mean to write that. The reader will please ignore that remark. Anyway, gold HELD that critical support, then sprang higher.

We work with a convention of market "closes" that hardly applies in these days of 24-hour markets. How important is the Comex closing when you can still trade later all around the world? Today makes that plain. Gold's $1,205.30 close looks weak, but in fact it ran up to $1,223.60, the next resistance area, nearly $20 higher, AND above the $1,218.70 20 DMA. At 1745c, silver stands only ten cents from punching through the downtrend line, and only 30 cents from its 20 DMA. Indicators have all turned up, pointing to higher prices.

Now 'tis the time to swap gold for silver, & capture this high premium.

My nightmare is that metals would stage a big rally here, but then fail to get through $1,350 on the rally, then fall back for one last swoon. Problem is, I can't read the future. Despite the dollar's fall now, it appears to be headed much higher. That contrary wind doesn't exactly fill gold's sails. However, if the stock market has topped, gold will begin to shine much brighter. And metals have been correcting for three years, surely long enough.

In this every-changing sublunary world, the only constant is change. Overnight whole civilizations can collapse. I was reminded today that the Stock Market peaked on 9 October 2007 at 14,164.53 and a year later in September & October was ravaged by the Panic of 2008. On 9 October 2008 the Dow closed at 8,579.19, 39.4% off it 2007 peak. And similar carnage was wreaked on silver & gold.

In this sea of change, how do we find any lasting value? I might take that off into a philosophical or theological direction, but I will forebear & restrict myself to the secular world. When the guarantors of value and guardians of the law depreciate and undermine every value, what do you do? Till memory runneth not to the contrary, men have valued silver & gold. I won't say they have intrinsic value, only that men have always valued them. Also, today silver & gold are the only values that keep value OUTSIDE THE SYSTEM. Since the hilariously mis-named Bank Secrecy Act of 1970 the US government has been constructing a world-wide police state. They can cut off all your electronic credits at the flip of an electron, but that silver & gold are OUTSIDE their system. If they can't find it, they can't steal it.

But what do I know, a nat'ral born durned fool from Tennessee?

On 8 October 1906 in London Karl Ludwig Nessler first demonstrated a machine to put permanent waves in hair. The victim wears a dozen brass curlers, each weighing two pounds, for the six hour process.

On 8 October 1918 US Army Corporal Alvin C. York in the Argonne Forest killed 28 German soldiers and captured 132. He was promoted to sergeant and awarded the US Medal of Honor and the French Croix de Guerre. Did I mention that Alvin York was from Tennessee? He was. If you have never seen the 1941 movie Sergeant York with Gary Cooper, you have missed it. Cooper's east Tennessee accent is not the best, but he still does a superb job still.

On 8 October 1862 Confederate General Braxton Bragg lost the battle at Perryville, Kentucky. He just couldn't carry out a plan. That defeated the South's attempt to free Kentucky from yankee occupation. Bragg starred in almost as many disasters for the South as Gen'l. P.G.T. Beauregard.

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
8-Oct-14 Price Change % Change
Gold, $/oz 1,205.30 -6.40 -0.53%
Silver, $/oz 17.02 -0.18 -1.02%
Gold/Silver Ratio 70.837 0.353 0.50%
Silver/Gold Ratio 0.0141 -0.0001 -0.50%
Platinum 1,266.10 5.00 0.40%
Palladium 795.60 9.45 1.20%
S&P 500 1,935.10 29.72 1.56%
Dow 16,994.22 274.83 1.64%
Dow in GOLD $s 291.46 6.23 2.18%
Dow in GOLD oz 14.10 0.30 2.18%
Dow in SILVER oz 998.78 26.21 2.70%
US Dollar Index 85.33 -0.43 -0.50%
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: 1,223.60      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,251.74 1,266.43 1,266.43
1/2 AE 0.50 629.64 645.45 1,290.90
1/4 AE 0.25 314.82 328.84 1,315.37
1/10 AE 0.10 128.37 133.98 1,339.84
Aust. 100 corona 0.98 1,188.58 1,200.58 1,224.83
British sovereign 0.24 289.76 301.76 1,281.92
French 20 franc 0.19 230.16 233.25 1,249.31
Krugerrand 1.00 1,234.61 1,244.61 1,244.61
Maple Leaf 1.00 1,238.60 1,253.60 1,253.60
1/2 Maple Leaf 0.50 703.57 642.39 1,284.78
1/4 Maple Leaf 0.25 312.02 327.31 1,309.25
1/10 Maple Leaf 0.10 129.70 133.37 1,333.72
Mexican 50 peso 1.21 1,463.37 1,487.37 1,233.62
.9999 bar 1.00 1,227.88 1,239.60 1,239.60
SPOT SILVER: 17.45      
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 12,476.75 13,048.75 18.25
US 40% silver 1/2s 0.30 4,956.00 5,106.00 17.31
100 oz .999 bar 100.00 1,735.00 1,795.00 17.95
10 oz .999 bar 10.00 179.50 180.50 18.05
1 oz .999 round 1.00 17.55 18.05 18.05
Am Eagle, 200 oz Min 1.00 19.20 20.45 20.45
SPOT PLATINUM: 1,266.10      
PLATINUM Fine Tr.Oz. BID ASK $/oz
Plat. Platypus 1.00 1,291.10 1,331.10 1,331.10
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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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