The Moneychanger
Weekly Commentary
Friday, 31 October a.d. 2014 Browse the commentary archive
Here's the weekly scorecard:
  24-Oct-14 31-Oct-14 Change % Change
Silver, cents/oz. 1,763.60 1,607.70 -155.90 -8.8
Gold, dollars/oz. 1,231.20 1,171.10 -60.10 -4.9
Gold/silver ratio 69.812 72.843 3.031 4.3
Silver/gold ratio 0.0143 0.0137 -0.0006 -4.2
Dow in Gold Dollars (DIG$) 282.16 306.97 24.81 8.8
Dow in gold ounces 13.65 14.85 1.20 8.8
Dow in Silver ounces 952.90 1,081.70 128.80 13.5
Dow Industrials 16,805.41 17,390.52 585.11 3.5
S&P500 1,964.58 2,018.05 53.47 2.7
US dollar index 85.79 86.97 1.18 1.4
Platinum 1,251.40 1,236.20 -15.20 -1.2
Palladium 780.05 791.45 11.40 1.5

There's an old time song from 1910 entitled "I wished I'd a bought me a half-pint and stayed in the wagon yard." A country boy laments that he loaded up his year's harvest, a bale of cotton, & drove to town to sell it, but instead of staying with his team in the wagon yard (think "truck stop") he went out on the town and bought a bottle of gin. One by one the city folks helped themselves to his money. He laments,

"Don't monkey with them city ducks, you'll find them slick as lard.

"Just go and get you a half a pint, and stay in the wagon yard."

Mercy! Don't I feel that way now, a-tangling with them clever central bank city ducks! Slick as lard don't half describe it. 'Pears they could get away with knifing their mamas in front of a cop. Latest lunacy poured forth from the Land of the Rising Sun while this mother's son was still sleeping peacefully. Seems the Bank of Japan is going to accelerate its government bond purchases and triple (yup, multiply three times) its purchases of ETFs and real estate investment trusts.

Folks, this morning the Japanese yen gapped down from 91.56 yesterday to 89.62 on open today, a 2.1% drop before you ever pulled your hand out of your pocket to shade your eyes. You can't trade markets like that. And how are markets "free" if folks who can legally create money out of thin air jes' buy & buy & buy?

It's the durnedest old lunatic asylum I ever saw.

But it don't do no good to complain. They got the key to the money pump, & they're gonna pump it dry for their friends. Rest of us just have to sit and suffer, till one of us works up nerve enough to say NO.

On to markets: It was the worst week silver & gold have had since April 2013. Stocks left an "Icicle" behind on the charts, falling straight down and climbing straight back up (yeah, I'm sure there ain't no Nice Government Men fingerprints on that job!). I won't say another word about it, it'll just make me sound like a sourpuss.

Key to this'yer puzzle is the US dollar. The FOMC announcement persuaded that market that the dollar was going to get stronger. Today it hit 87.25 at its high, but settled back only 0.82% up (71 basis points) at 86.97. Indicators point to higher prices, so my double top theory will probably be proven wrong Monday with a close above 87. Keep it in the back of your mind, however, because it ain't as crazy as it sounds. Should the dollar falter, everything changes.

I already told y'all that the yen fell plumb out of bed this morning, gapping way, way below the last low (90.93) and closing at 89.04, down 2.75%, a gargantuan move for a currency. Euro did not so badly crumble. It lost 0.75% to $1.2519, but that's still above its last low at $1.2501. Indicators point to the cellar.

Yields on US government paper left a carrot or icicle on the chart, too, along with stocks. Flight to safety that sent money out of stocks & into the "safety" of US government debt has passed for a while.

After crashing like the Russians were on Wall Street decorating lampposts with stockbrokers, stocks came roaring back on whatever that news was out of the FOMC (durned if I know yet why anybody would pay any mind to them criminals, but I just keep my mouth shut). Dow closed at a new high, 17,390.52, up 195.1 (1.13%). S&P500 made a new high, too, up 23.4 (1.17% to 2,018.05. Nasdaq 100 made a new high as well, as did the Nasdaq 100. Them stocks is flyin' high.

All that business I mentioned about B-waves is still sticking in my head, how they can be so strong they can fool you into thinking a whole new leg up is starting when it's the dying gasp instead. Unless the Fed miscreants can manipulate a perpetual bull market, this ought to be over in a week or so. Stocks are rolling over, believe it or not.

I had to laugh when I looked at monthly charts. Every index looked the same with a break of the uptrend line but a close back above the line. Mighty pretty.

Dow in silver made a new high and moved into very overbought territory (78.56 vs. "overbought" at 70). Moved up 2.89% to 1,075.48 oz (S$1,390.52 silver dollars). Looks to have begun another leg up, but as overbought as it is, surely not.

Dow in Gold rose 3.33% today to 14.82 oz (G$306.36 gold dollars), also a new high for the move and also taking it into overbought land. That reaches the top of an internal trading channel that began early this year, so it ought to react back from that on Monday.

I can't remember where I read it now, but somebody was speculating on the Nice Government Men holding up the stock market to brew better election results for the incumbents. Naww! Perish the thought. They wouldn't do that!

Gold's monthly chart shows it closing just below the long term uptrend line; silver's right on the uptrend line.

Gold/Silver ratio hit a new high for the move yesterday at 73.095, but it backed off strongly today and ended at 72.843. It's no more than a straw in the wind hinting at a turnaround, but it's about the most we've got.

On Comex gold dove $27.00 (2.25%) to end at $1,171.10. Silver plunged 1.92% or 31.4 cents to 1607.7. Silver's low today came about 9:30 a.m. at 1564c. High was 1651c Gold's low was $1,160.50.

Both silver & gold have re-entered RSI oversold territory, but as we have so often experienced, oversold, like overbought, can get oversolder. We've seen the waterfall days, two of them, so are probably near the end of this for the short term. It has done a lot of damage to the technicals and to morale. We have to reckon with the possibility of gold dropping down to $1,100 and silver to 1490 - 1465c.

So for a while central banking is wearing her silver slippers & riding high. I hope Janet fills her size 12 up with champagne & enjoys it, because sooner or later all that hot money's coming home to roost. That's when THEY'LL wish they'd a bought a half pint and stayed in the wagon yard.

Y'all enjoy your evening!

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
31-Oct-14 Price Change % Change
Gold, $/oz 1,171.10 -27.00 -2.3
Silver, $/oz 16.08 -0.31 -1.9
Gold/Silver Ratio 72.843 -1.665 -2.2
Silver/Gold Ratio 0.0137 -0.0003 -1.9
Platinum 1,236.40 -10.70 -0.9
Palladium 791.45 11.10 1.4
S&P 500 2,018.05 23.40 1.2
Dow 17,390.52 195.10 1.1
Dow in GOLD $s 306.97 10.32 3.5
Dow in GOLD oz 14.85 0.50 3.5
Dow in SILVER oz 1,081.70 32.62 3.1
US Dollar Index 86.97 0.71 0.8
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: 1,173.20      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,207.22 1,214.26 1,214.26
1/2 AE 0.50 603.68 618.86 1,237.73
1/4 AE 0.25 301.84 315.30 1,261.19
1/10 AE 0.10 123.08 128.47 1,284.65
Aust. 100 corona 0.98 1,141.92 1,153.92 1,177.23
British sovereign 0.24 277.83 289.83 1,231.22
French 20 franc 0.19 220.68 223.84 1,198.91
Krugerrand 1.00 1,186.11 1,196.11 1,196.11
Maple Leaf 1.00 1,188.20 1,203.20 1,203.20
1/2 Maple Leaf 0.50 674.59 615.93 1,231.86
1/4 Maple Leaf 0.25 299.17 313.83 1,255.32
1/10 Maple Leaf 0.10 124.36 127.88 1,278.79
Mexican 50 peso 1.21 1,403.09 1,427.09 1,183.62
.9999 bar 1.00 1,177.31 1,189.20 1,189.20
SPOT SILVER: 16.19      
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 12,326.60 12,612.60 17.64
US 40% silver 1/2s 0.30 4,584.30 4,734.30 16.05
100 oz .999 bar 100.00 1,609.00 1,669.00 16.69
10 oz .999 bar 10.00 166.90 167.90 16.79
1 oz .999 round 1.00 16.29 16.79 16.79
Am Eagle, 200 oz Min 1.00 17.94 19.19 19.19
SPOT PLATINUM: 1,236.40      
Platinum Platypus 1.00 1,261.40 1,301.40 1,301.40
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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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