The Moneychanger
Weekly Commentary
Friday, 10 October a.d. 2014 Browse the commentary archive
Here's the weekly scorecard:
  3-Oct-14 10-Oct-14 Change % Change
Silver, cents/oz. 1,678.00 1,725.20 47.20 2.8
Gold, dollars/oz. 1,192.20 1,221.00 28.80 2.4
Gold/silver ratio 71.049 70.774 -0.274 -0.4
Silver/gold ratio 0.0141 0.0141 0.0001 0.4
Dow in Gold Dollars (DIG$) 294.93 280.10 -14.84 -5.0
Dow in gold ounces 14.27 13.55 -0.72 -5.0
Dow in Silver ounces 1,013.69 958.97 -54.72 -5.4
Dow Industrials 17,009.69 16,544.10 -465.59 -2.7
S&P500 1,967.90 1,906.13 -61.77 -3.1
US dollar index 86.81 86.06 -0.75 -0.9
Platinum 1,226.00 1,261.10 35.10 2.9
Palladium 753.70 784.20 30.50 4.0

Before I address markets, I need to repeat something. Please pay careful attention:

EBOLA. I strongly recommend you get Dr. Thomas Levy's book, Curing the Incurable: Vitamin C, Infectious Diseases, & Toxins. High dose vitamin C by IV, IM, or oral has been around a long time, and massive doses have been shown to cure infections. The body absorbs liposomal Vitamin C even better than IV. You can buy liposomal Vitamin C from or from Amazon. Fail not to research it, for your sake and your family's. Please.

Now to markets:

It seems the waterfall has begun in stocks. They had a frightful week. Here are some statistics:

Dow, loss since last high, 4.6%; loss this week 2.7%; below 200 DMA

S&P500, loss since last high, 5.6%; loss this week, 3.1%; barely above 200 DMA

Nasdaq Comp, loss since last high, 7.3%; loss this week, 4.5%; below 200 DMA

Nasdaq 100, Loss since last high, 6.0%; loss this week, 3.9%; still above 200 DMA

Russell 2000, loss since last high, 13.2%; loss this week, 4.7%; below 200 DMA

Wilshire 5000, loss since last high, 6.3%; loss this week, 3.6%; below 200 DMA

NYSE, loss since last high, 7.3%; loss this week, 3.2%; below 200 DMA

In the arbitrary and goofy way the media do things, they now claim that 10% is a "correction." You can see all these indices pushing toward that mark, and the Russell 2000 well past it. Most significant is sinking below the 200 DMA. Markets often reach toward the 200 DMA in a correction, and when an upmarket touches it, that's a pretty good place to buy a correction. However, remember that by definition a bull or rising market is generally rising, so generally above its 200 day moving average, and vice versa for a falling market, that usually stays below its 200 day moving average. So that 200 DMA is a meaningful milestone.

This is about as bad as a correction gets, but 'twill get worse yet. And although it has been terribly steep, it won't prove stock markets saw their ultimate top on 19 September until we see further confirmations. That is a good first approximation, though.

Most of these indices (except for the S&P500 & N-100) have broken their uptrend lines from 2009, when the uptrend began. The S&P500 stands right at it (1906.13 vs. 1905.22) and the N-100 (3870.85 today vs. 3761.05). Hard for me to overstate the importance of breaking that uptrend line. Of course, markets often do that & recover, but seldom after a five year advance. It was the worst week for the S&P500 since May 2012.

So far the Dow in Gold & Dow in Silver are pinpointing the downturn in stocks & upturn in metals. I know that mathematically they are bound to do that, but I mean that when they speak, they speak not with forkéd-tongue but reliably.

Dow in gold fell 0.64% to G$279.48 gold dollars (13.52 oz). Already way below its 20 DMA, it stands only G$1.24 above the 50 DMA at G$278.24 (13.46 oz). This is free fall.

Dow in Silver hath piercéd its 20 DMA (S$1,224.22 silver dollars or 964.86 oz) and today lost 0.95% to close at $1,230.39 (951.63 oz). The DIS lost 5.4% in one week.

For both the DiG & DiS all indicators point down, calling for the move to continue.

Like a kid stealing cookies who aims one eye always on the door watching for his mom, I have one eye peeled for the US dollar index. That rascal's liable to come back and lay a baseball bat over our head when we're not looking. It peaked this week with a high at 86.87, but sank and cut into its 20 DMA. Rallied back 28 basis points (0.33%) today and ended at 86.06. This calleth not the peak into question, but seem no more than ordinary up and down action. Indicators still call loudly for lower prices.

That sorry euro touched its 20 DMA yesterday and it scared it so bad that today it fell back 0.53% to $1.2623. It helped not the euro (or US Stocks) that S&P today announced it was downgrading France's credit outlook as its budget & spending portended fatter deficits. Over in Japan, now in the sights of a super-typhoon, has a yen at least wanting to rise. Yen climbed 0.16% today and has begun a rally. Where it goes and how quickly the BOJ tries to kill it, we'll see.

Today silver lost 0.23% or 11.5 cents to close Comex at 1725.2c. Gold backed up 0.3% or $3.60 to $1,221.00. For the week, however, silver rose 2.8% and gold 2.4%.

All right!

On the weekly chart gold poked its head above the downtrend line and closed there. Tis interesting as well that the Gold/Philadelphia Bank Index spread gapped up this week, indicating that confidence in financial markets is waning & turning to gold.

Gold has crossed above its 20 DMA, the first hurdle of a rally, but needs now to beat that last high at $1,237.00. Gold made a key reversal on Monday, then confirmed it on Tuesday, Wednesday, and Thursday by closing higher. Resistance above stands at $1,300, then $1,325, but the Test will come at $1,350. There gold must prove whether it means business or not.

Silver had been trading down to the downtrend line on a weekly chart, hit it last week & bounced up this week. Silver's goals now are (1) close above the downtrend line from the end-August high about 1750c. Above that next big resistance is 1875c, but 1900c also stands in the way. At 2153c, the last high, silver faces its last high, but the year's high has been 2218c, so silver must swing over that.

Two interpretations are possible: the washout low last week exhausted and ended the precious metals correction that has lasted since 2011, and they will slowly advance & resume their primary uptrend from here. Alternatively, we will see a vigorous rally, but that will fail and take metals to one last low. Of the two I favor the first, but no one can tell until we see what gold does at $1,350.

Watch for higher silver & gold prices next week. Gold/Silver Ratio remains high and it is time to swap gold for silver.

On 10 October 732 Charles Martel ("The Hammer"), the mayor of the palace of the Merovingian Kings of France, halted the Moslem expansion into Western Europe by defeating Saracen troops at the Battle of Tour. You will be startled when you look at a map of France & grasp that Tours is almost as far north as Paris, which is in northern France. Had Charles Martel not stop the Saracens there, you might be speaking Arabic today.

On 10 October 1911 Revolutionaries under Sun Yat-sen overthrew China's Manchu or Ch'ing dynasty. Ultimately it would overthrow a culture two millennia old. Looking at China's history in the last 100 years, maybe it wasn't such a great trade. There's a fascinating Chinese movie about the turn of the century and the revolution called Empire of Silver. It involves a Chinese banking family when China was on the silver standard.

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
10-Oct-14 Price Change % Change
Gold, $/oz 1,221.00 -3.60 -0.3
Silver, $/oz 17.25 -0.12 -0.7
Gold/Silver Ratio 70.774 -0.204 -0.3
Silver/Gold Ratio 0.0141 -0.0001 -0.7
Platinum 1,261.10 -16.70 -1.3
Palladium 784.20 -15.45 -1.9
S&P 500 1,906.13 -22.08 -1.1
Dow 16,544.10 -115.15 -0.7
Dow in GOLD $s 280.10 -1.09 -0.4
Dow in GOLD oz 13.55 -0.05 -0.4
Dow in SILVER oz 958.97 -0.28 -0.0
US Dollar Index 86.06 0.41 0.5
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: 1,224.50      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,252.66 1,267.36 1,267.36
1/2 AE 0.50 630.10 645.92 1,291.85
1/4 AE 0.25 315.05 329.08 1,316.34
1/10 AE 0.10 128.47 134.08 1,340.83
Aust. 100 corona 0.98 1,189.45 1,201.45 1,225.72
British sovereign 0.24 289.98 301.98 1,282.82
French 20 franc 0.19 230.33 233.41 1,250.21
Krugerrand 1.00 1,235.52 1,245.52 1,245.52
Maple Leaf 1.00 1,239.50 1,254.50 1,254.50
1/2 Maple Leaf 0.50 704.09 642.86 1,285.73
1/4 Maple Leaf 0.25 312.25 327.55 1,310.22
1/10 Maple Leaf 0.10 129.80 133.47 1,334.71
Mexican 50 peso 1.21 1,464.45 1,488.45 1,234.51
.9999 bar 1.00 1,228.79 1,240.50 1,240.50
SPOT SILVER: 17.41      
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 12,448.15 13,020.15 18.21
US 40% silver 1/2s 0.30 4,944.20 5,094.20 17.27
100 oz .999 bar 100.00 1,731.00 1,791.00 17.91
10 oz .999 bar 10.00 179.10 180.10 18.01
1 oz .999 round 1.00 17.51 18.01 18.01
Am Eagle, 200 oz Min 1.00 19.16 20.41 20.41
SPOT PLATINUM: 1,261.10      
Platinum Platypus 1.00 1,286.10 1,326.10 1,326.10
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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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