The Moneychanger
Daily Commentary
Thursday, 16 October a.d. 2014 Browse the commentary archive

Sorry I was short on details yesterday, but I was short on time.

The mess in the bond market yesterday really was a throat-crusher. Yield on the 10 year treasury fell as low as 1.86% at one point. It was the largest one-day fall in yields since Lehman Brothers bankrupted in September 2008. If that doesn't grab your attention, it ought. And oil crashed for the second day running.

Atop all this comes a storm of bear market news: Ebola, Ukraine, Middle East, ISIS, Greek stocks crashed 9%, bad winter forecast. Nasty.

I was a little irritated yesterday, & when I am I tend to blame things on the Nice Government Men. We know they're there, but like the Yeti, we can only follow their tracks in the snow. But given that Old Bulls Die Hard, it could have been speculators thinking, "That's dropped enough! Time for me to jump in for bargains." That's possible. Yeah, sure.

I also find it tough to parse that gold has not yet caught some bid in this turmoil. Oh, sure, gold has labored away and steadily if not spectacularly climbed. But it keeps pushing against the ceiling. That makes me suspicious, although I'm sure natural causes might explain that, too. (Sure -- like the Abominable Snowman has been selling?)

Okay, Okay, I'll straighten up, I promise. Just this little added piece of data. The stock bust is propagating internationally. Add these to the casualty list, all below their last low and below their 200 DMAs & looking sick as a dog hawking up poisoned meat:

French CAC

German DAX

European STOXX

Dow Jones World Index

Japanese Nikkei

London FTSE

Seoul KOSPI

Now, today's markets:

US DOLLAR INDEX has established an unarguable downtrend with lower lows and lower highs. Today it lost another 4 basis points (0.05%) to close 85.04. Whoops -- slipped beneath the 20 DMA (85.57). Nothing suggests this downtrend has turned around yet.

Yen backed off today, 0.32% after piercing the 50 DMA (94.32) yesterday, and closed 94.06. It rallieth still, but is liable to run into trouble at the bottom of the former resistance range, 96.

Try to get this picture. In June 2013 the 10 year treasury note yield broke out upside from a long downward trend. Since the first of 2014 the yield traded lower, and in the past few days it has cascaded down from about 2.280% to a low yesterday at 1.868%. It has wiped out all the gains of the last 16 months. Reckon Janet Yellum is grinnin' like a mule eating sawbriars, but all those speculators who have been betting on the Fed raising interest rates soon have in the last couple of days changed their minds. Chart is here, http://scharts.co/1rgzn42

And don't you all think for a minute the Fed is finished with Quantitative Easing. If stocks fall enough, they'll start printing that money so fast it'll jerk a knot in your neck. The Fed follows, it doesn't lead. And while some of the benighted world may count central bankers as celebrity rock stars, the truth is they're just a bunch of chunky, clueless academics or worn-out banking apparatchiki. That's what so frustrating about watching them, it's like being basketed to death by a WalMart greeter -- No, No! That's an insult to WalMart greeters. They would never hit anybody with a basket.

Stocks didn't fall today, at least, not much, and from where they've been the last 10 days, that's success. Dow lost 24.5 (0.15%) to 16,117,24, but the S&P500 gained 0.27 (0.01%) to 1,862.76.

Stay tuned: more crash will come, and deeper.

The Dow in Gold continues to plunge/plummet/nosedive. It has crashed through the top of the even-sided triangle it broke out of in September. Then it made a top at G$295.19 gold dollars (14.28 oz) on 3 October and has plunged straight down ever since, back into that triangle and today almost through the triangle. It only stopped at the lower boundary and the 200 DMA (G$267.29 or 12.93 oz). That lower boundary is also the uptrend from August 2013. You can look at the chart here, http://scharts.co/1rgAqB8

Dow in silver has plunged, too, since its 3 October high at S$1,305.57 silver dollars (1.009.78 oz). Down today another 0.34%, it has now crashed back into the rising wedge formation it "threw over" from. Nearing the 50 DMA (S$1,181.89 or 914.12 oz), it still stands relatively higher than the Dow in Gold. 200 DMA lies beneath at S$1,088.83 (842.14 oz). Chart is here, http://scharts.co/1rgCkBw

Silver lost 2.7 cents on Comex to close at 1738.8 cents. Gold lost $3.60 and close at $1,240.50. Gold Silver Ratio at close was 71.342 oz of silver to buy one ounce of gold.

Gold has progressed up into the trading channel it fell out of as September began. Crossing $1,237 resistance helped, but now gold must conquer $1,260. All this pales next to $1,296, which is the half-way point of the gold gain from 2008 to 2011. Volume yesterday, by the way, was huge.

Silver's big challenges are 1760 and 1800c. Right now, 1775c has it stalled, but 1800 makes the decline from mid-September look like an inverted head and shoulders, with a neckline at 1800c.

Both silver & gold will move higher, soon. I would buy some. Well, I already have.

I saw a chart that really helped put things in perspective. Stocks have really gained against silver and gold since 2011, but look before that. Stocks lost about 85% of their value against gold and 90% against silver from 1999 & 2001. Earlier you bought, better off you are, but stocks' rally since 2011 has only been an ordinary reaction, and early gold & silver buyers still have strong profits.

But the latter half will be better than the first, and stocks will lose another 85% to silver & gold before the metals bull market ends.

On 16 October 1555 Protestant bishops Hugh Latimer and Nicholas Ridley were burned at the stake in Oxford. As they walked to their appointment with death, Latimer turned to Ridley and said, "Be of good cheer, Master Ridley, and play the man, for we shall this day light such a candle in England as I trust by God's grace shall never be put out." Within three years Queen Mary who burned them was dead and the Reformation restored in England.

On 16 October 1859 the murderer John Brown, his pockets full of money from the Secret Six New England preachers and abolitionists, led a small group in a raid on the US government arsenal at Harper's Ferry. Brown had learned butchery and murder in Kansas, where the New Englanders also supplied arms. His crazy plan called for a raid to seize weapons and retreat to the mountains of Maryland and Virginia to establish an abolitionist republic. The first casualty of their raid was a free black man. Col. Robert E. Lee was called in to lead a detachment of Marines that ousted Brown from the main building. Brown was later hanged for treason.

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
16-Oct-14 Price Change % Change
Gold, $/oz 1,240.50 -3.60 -0.29%
Silver, $/oz 17.39 -0.03 -0.16%
Gold/Silver Ratio 71.342 -0.096 -0.13%
Silver/Gold Ratio 0.0140 0.0000 0.13%
Platinum 1,252.40 -9.00 -0.71%
Palladium 745.15 -18.25 -2.39%
S&P 500 1,862.49 -15.21 -0.81%
Dow 16,117.24 -24.50 -0.15%
Dow in GOLD $s 268.58 0.37 0.14%
Dow in GOLD oz 12.99 0.02 0.14%
Dow in SILVER oz 926.92 0.03 0.00%
US Dollar Index 85.04 -0.04 -0.05%
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: 1,239.95      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,274.67 1,283.35 1,283.35
1/2 AE 0.50 638.06 654.07 1,308.15
1/4 AE 0.25 319.03 333.24 1,332.95
1/10 AE 0.10 130.09 135.77 1,357.75
Aust. 100 corona 0.98 1,204.46 1,216.46 1,241.03
British sovereign 0.24 293.64 305.64 1,298.37
French 20 franc 0.19 233.23 236.30 1,265.66
Krugerrand 1.00 1,254.83 1,264.83 1,264.83
Maple Leaf 1.00 1,254.95 1,269.95 1,269.95
1/2 Maple Leaf 0.50 712.97 650.97 1,301.95
1/4 Maple Leaf 0.25 316.19 331.69 1,326.75
1/10 Maple Leaf 0.10 131.43 135.15 1,351.55
Mexican 50 peso 1.21 1,484.42 1,508.42 1,251.07
.9999 bar 1.00 1,244.29 1,255.95 1,255.95
SPOT SILVER: 17.39      
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 12,791.35 13,077.35 18.29
US 40% silver 1/2s 0.30 4,938.30 5,088.30 17.25
100 oz .999 bar 100.00 1,729.00 1,789.00 17.89
10 oz .999 bar 10.00 178.90 179.90 17.99
1 oz .999 round 1.00 17.49 17.99 17.99
Am Eagle, 200 oz Min 1.00 19.14 20.39 20.39
SPOT PLATINUM: 1,252.40      
PLATINUM Fine Tr.Oz. BID ASK $/oz
Plat. Platypus 1.00 1,277.40 1,317.40 1,317.40
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© 2015 Little Mountain Corporation, d.b.a. The Moneychanger. All rights reserved. May not be republished in any form, including electronically, without our express permission.

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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