The Moneychanger
Daily Commentary
Thursday, 30 October a.d. 2014 Browse the commentary archive

Y'all are gonna think I've gone crazy as a Betsy-bug, but wait till I explain.

First, the FOMC meeting yesterday confused the stock market but enthused the US dollar index. For the life of me I can't gulp down the titles "dovish" and "hawkish" when it comes to the Fed cause th'only word that pops to my mind is "swinish" Still I struggle through to try to understand what all these clowns mean. I think by "dovish" they mean that the central bank criminals favor more inflation, by "hawkish" less.

Rather than trying to figure out the mental transmission by which Fed watchers & markets draw their conclusions, I would rather point out their actions, for buried within those actions are their conclusions.

Stocks sold off. Dollar rose. Whatever the FOMC statement (using that word to describe a Fed utterance is an insult to the English language) said, stock investors took it to mean their gravy train had derailed, and dollar investors thought it meant the dollar would become worth more. The Dow fell 0.18% (31.44 points), the S&P500 slid 0.14%. US dollar index added 83 basis points, a huge 0.74%.

Today, however, stock buyers re-thought (or Nice Government Men re-bought) and the Dow jumped 221.11 (1.3%) to 17,195.42. S&P500 added 12.35 (0.62%, not quite as much enthusiasm there) to close 1,994.65. US dollar Index rose 0.18 to 86.26. Yesterday gold & silver held on, today they took their big hit.

Think about the whole mess around the dollar. The Fed has been pouring into the financial system as much as $85 billion a month, now suddenly all that's vamoosed. But that extra money was sloshing around the system to finance the $50 billion of new yankee government debt every month, as well as push up stocks. Now that the slosh is squeezed down to a drip, whoops, now that the trough is dry, what happens? The yankee government is GONNA get that deficit financed, and that will be sucking slosh away from stocks. Not a pretty picture, Miss Janet.

Technically the dollar index might look strong, especially with a two day breakout above the downtrend line, but step back from that chart. Chart is at Look at that rise from 1 July, practically straight up, then a peak in October and decline. Standard correction behavior is an A-Wave down, a B-wave up, then a C-Wave down. Often the B-wave can be stronger than a garlic milkshake, only to fool you and drop dead in a C-wave. The long preceding hyperbolic rise argues the dollar must correct for quite some time -- that is always the outcome of such spectacular rises. So perhaps the dollar is merely putting in a double top.

What makes all this so irksome is that the Nice Government Men manipulate currencies more than any other market, so technical conclusions might be precisely correct, only to be defeated by the NGM's manipulations. Hence I always tremble to say anything about currencies, not being privy to whatever secret deals they have made at the BIS over rubber chicken in their monthly meetings.

But for a moment, till disproved by a higher high in the dollar index, I am willing to work on this theory, that the US dollar index is making a double top that may even reach a leetle higher than the previous 86.87 top.

Today the US dollar index added 18 basis points (0.21%) to 86.26.

Stocks may be on their way to a double top which may include a higher high, or simply correcting on adrenalin. Either way, it mattereth not. Their next big move is rugward, for a long time.

Dow in Gold chart is at The last two days have taken it above its previous (early October) high at 14.28 oz (G$295.19) to a new high today at 14.34 oz (G$296.43 gold dollars). Here's another place where we either get a double top and a collapse, or go much higher. No way to chocolate-coat it.

Dow in silver is at It has reached way above the early October high at 1,009.78 oz (S$1,305.57 silver dollars) to a new high today at 1,045.31 oz (S$1,351.51). This is the same situation as gold's: either it reverses near here or rises much higher.

I spoke about the US dollar index above, but didn't mention the other scrofulous parasitic blood-sucking fiat currencies, the yen & euro. Euro today broke down from an even-sided triangle, so it should drop more. The answer to the US dollar riddle I laid out above will control here. Euro lost 0.15% to close $1.2611. Yen broke its uptrend yesterday, punching through its uptrend line and plummeting hard. Ended down today 0.30% at 91.55.

Today gold lost $26.20 (2.14%) to close 1,198.10 on Comex. Silver lost 83.3 cents (4.84%) to close at 1639.1c.

Face it: either silver & gold are making double bottoms, or they will fall a lot further.

The last lows came on 3 October at 1678c and $1,192.20. This carries all the more meaning since these were the lowest closes in the 3+ year correction. Intraday low came for gold at $1,183.30 on 6 October (the following Monday; today's low hit $1,195.50. Silver's intraday low on 6 October was 1660 against 1633 today.

In itself silver's weaker performance says nothing. More volatile than gold, it always falls further on the downside.

Charts don't look quite the same, either. Gold's low today was higher than the early October low, silver's was not. Today's silver close was also lower.

Technically the picture is grim. Silver & gold rallied off those early October lows, but without conquering many technical targets. Now they've fallen off, and it would take a lunatic like me to say, this is one of those places that you puke in your wastebasket and buy. Why? Either this is the touchback low that proves the early October bottom, or it is the breakdown that will trim another $100 off of gold and $2.00 off silver.

Oh, I won't pull the deus ex machina of Nice Government Men out of the box and blame it on them, but I do muse in the back of my mind. How would I react if stocks were tanking & an FOMC announcement didn't quite bail 'em out? If I wanted stocks to keep floating, would I want silver or gold levitating? Or would I hit weaker silver as hard as I could and sell a batch of gold, too?

Y'all know that story about Joe the great fisherman who would never take anybody else fishing with him? His friend Fred finally wheedled him into a fishing trip. They motored out to the middle of the lake, Joe stopped the boat, reached down in his bag, and pulled out a stick of dynamite and started stuffing a fuse in it. He handed it to Fred, who turned greed and said, "You can't do that! That's illegal."

Fred never missed a beat. He pulled out another stick of dynamite & said, "You gonna fish, or talk?"

Folks, today y'all got to decide whether to fish or talk, cause the fuse is burning.

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
30-Oct-14 Price Change % Change
Gold, $/oz 1,198.10 -26.20 -2.14%
Silver, $/oz 16.39 -0.83 -4.84%
Gold/Silver Ratio 73.095 2.014 2.83%
Silver/Gold Ratio 0.0137 -0.0004 -2.76%
Platinum 1,246.90 -23.10 -1.82%
Palladium 780.35 -20.00 -2.50%
S&P 500 1,982.30 -2.75 -0.14%
Dow 17,195.42 221.11 1.30%
Dow in GOLD $s 296.69 10.08 3.52%
Dow in GOLD oz 14.35 0.49 3.52%
Dow in SILVER oz 1,049.08 63.57 6.45%
US Dollar Index 86.26 0.18 0.21%
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GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,230.00 1,242.00 1,242.00
1/2 AE 0.50 617.49 633.00 1,266.00
1/4 AE 0.25 308.74 322.50 1,290.00
1/10 AE 0.10 125.90 131.40 1,314.00
Aust. 100 corona 0.98 1,168.01 1,180.01 1,203.84
British sovereign 0.24 284.17 296.17 1,258.18
French 20 franc 0.19 225.72 228.84 1,225.71
Krugerrand 1.00 1,213.20 1,223.20 1,223.20
Maple Leaf 1.00 1,215.00 1,230.00 1,230.00
1/2 Maple Leaf 0.50 690.00 630.00 1,260.00
1/4 Maple Leaf 0.25 306.00 321.00 1,284.00
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Mexican 50 peso 1.21 1,435.15 1,459.15 1,210.21
.9999 bar 1.00 1,204.20 1,216.00 1,216.00
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SILVER Fine Tr.Oz. BID ASK $/oz
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VG+ Peace dollar 0.77 19.00 22.50 29.41
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US 40% silver 1/2s 0.30 4,690.50 4,840.50 16.41
100 oz .999 bar 100.00 1,645.00 1,705.00 17.05
10 oz .999 bar 10.00 170.50 171.50 17.15
1 oz .999 round 1.00 16.65 17.15 17.15
Am Eagle, 200 oz Min 1.00 18.30 19.55 19.55
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Plat. Platypus 1.00 1,271.90 1,311.90 1,311.90
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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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