The Moneychanger
Daily Commentary
Tuesday, 28 October a.d. 2014 Browse the commentary archive

Since the long shadow of the Federal Open Market Committee (FOMC) meeting Wednesday hath put all markets but stocks to sleep, let's think on other things.

Stocks' recovery from their October waterfall plunge (down 8.6% from September highs) illustrates behavior you ought to come to expect. Bear markets exhibit sudden, sharp rallies often driven by short covering. They can recover a large percentage of lost territory, but in the end fail because they are only correcting the foregoing fall. Bear market rallies evaporate as fast as they materialize.

Seems to me -- although I never underestimate the clever central bank criminals -- that the Fed has worked its way into a corner with only two ways out. If they really stick with no more quantitative easing, then they risk what they call a "deflationary collapse" & face unemployment rates of 50%. On the other hand the stock market has clearly turned down & needs another dose of Quantitative Easing to ease its levitating. It's pretty late in the game to do that, so observers are liable to punish the dollar (and reward gold and silver) for more QE. Since it's hard to imagine the Fed not "doing SOMETHING," one assumes they will dive in with more QE as soon as the stock market shoe begins to pinch.

Now, it's possible to drag this out, which is the Fed's usual tactic, but basically they face these two choices, either [what they call] "deflation" or hyperinflation. Whenever y'all get confused by the trees, just back off and view the forest from this perspective.

Stocks are demanding perfection in their anticipation of the FOMC announcement, and some of us already suspect that no quasi-government agency is perfect. Today the Dow jumped 187.81 (1.12%) to 17,005.75. S&P500 jumped 23.42 (1.19%) to 1,985.05. That takes both indices above their 50 day moving averages.

Now I suppose it is possible (but I count it unlikely) that stocks might reach up and make one last high for an enormous double top -- those indices, that is, that haven't already done that. Maybe the FOMC has some trick up its atherosclerotic sleeve that might do that, but I don't know what. Rather, I think all this anticipation will end in disappointment that grabs hold of stocks about Thursday.

US dollar index closed today down 15 basis points (0.17%) to 85.45. That's plumb on the line of support, so much lower and it falls over an edge.

Both the euro and the yen are trying to rally and have established if none to convincing uptrends. Yen has fallen back in the last 2 weeks & now is crawling under its 20 DMA like it wants to turn down. Euro is pushing the upper boundary of a little triangle. It gained 0.30% to $1.2737 today while the yen fell 0.33% to 92.46.

FOMC pronouncement will affect all this. If they push any rise in interest rates out further, it would hurt the dollar.

It's hardly worth writing about silver & gold today. Silver added seven cents to close Comex at 1718.5. Range was 1740c to 1706c. Gold ranged from $1,222.20 to $1,235.50 and for a whole day's trading gained exactly 10 cents to $1,229.20.

Looking at the one day chart, it doesn't look quite so boring. Gold shot up at 10:100, even gapped up, reached $1,235, traded up there about an hour, then was slapped down just as fast as it has risen. Silver behaved the same way. One wonders whether the Nice Government Men are nervous about possible gold and silver reactions to the FOMC tomorrow. If, as I suspect, stocks advance on whatever the goofs announce, silver & gold should take a hit, then turn around Thursday or Friday.

Here's another piece of the puzzle. Gold forward rates have moved into backwardation, signifying a push on for physical metal.

Just be patient. Gravity still operates. Not even the almighty yankee government & the all-knowing Fed can defeat gravity.

I chose not to market my At Home In Dogwood Mudhole books on Amazon.com because I don't want to feed their monopoly, tiny pismire that I be. So I was surprised today to search it on Amazon and see that AHIDM Vol. 2 is selling for prices from $49.49 to $69.19.

Durn! Shows you what a nat'ral born durned fool I am. I sell 'em at www.dogwoodmudhole.com for $22.95. In fact, if you order Volume I & II when you check out your use the Discount Code "dogwooddeal" you can get both volumes for only $30.

I have to take my wife Susan up to Nashville for some medical tests tomorrow so I won't be publishing a commentary tomorrow. Y'all will have to suffer the FOMC announcement in my silence.

One goal of my commentary is to make the silver & gold markets transparent by publishing genuine wholesale prices. As far as I know, the wholesale prices I offer y'all everyday are not published anywhere else in the world. I hope they benefit you.

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
28-Oct-14 Price Change % Change
Gold, $/oz 1,229.20 0.10 0.01%
Silver, $/oz 17.19 0.07 0.41%
Gold/Silver Ratio 71.527 -0.287 -0.40%
Silver/Gold Ratio 0.0140 0.0001 0.40%
Platinum 1,267.10 11.90 0.95%
Palladium 792.50 6.20 0.79%
S&P 500 1,985.05 23.42 1.19%
Dow 17,005.75 187.81 1.12%
Dow in GOLD $s 285.99 3.14 1.11%
Dow in GOLD oz 13.83 0.15 1.11%
Dow in SILVER oz 989.57 6.93 0.70%
US Dollar Index 85.45 -0.15 -0.18%
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: 1,228.30      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,259.01 1,271.29 1,271.29
1/2 AE 0.50 632.06 647.93 1,295.86
1/4 AE 0.25 316.03 330.11 1,320.42
1/10 AE 0.10 128.87 134.50 1,344.99
Aust. 100 corona 0.98 1,195.55 1,207.55 1,231.94
British sovereign 0.24 290.88 302.88 1,286.65
French 20 franc 0.19 231.04 234.12 1,254.01
Krugerrand 1.00 1,243.04 1,253.04 1,253.04
Maple Leaf 1.00 1,243.30 1,258.30 1,258.30
1/2 Maple Leaf 0.50 706.27 644.86 1,289.72
1/4 Maple Leaf 0.25 313.22 328.57 1,314.28
1/10 Maple Leaf 0.10 130.20 133.88 1,338.85
Mexican 50 peso 1.21 1,468.99 1,492.99 1,238.28
.9999 bar 1.00 1,232.60 1,244.30 1,244.30
SPOT SILVER: 17.15      
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 12,941.50 13,227.50 18.50
US 40% silver 1/2s 0.30 4,867.50 5,017.50 17.01
100 oz .999 bar 100.00 1,705.00 1,765.00 17.65
10 oz .999 bar 10.00 176.50 177.50 17.75
1 oz .999 round 1.00 17.25 17.75 17.75
Am Eagle, 200 oz Min 1.00 18.90 20.15 20.15
SPOT PLATINUM: 1,267.10      
PLATINUM Fine Tr.Oz. BID ASK $/oz
Plat. Platypus 1.00 1,292.10 1,332.10 1,332.10
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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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