The Moneychanger
Daily Commentary
Tuesday, 4 November a.d. 2014 Browse the commentary archive

Well, I feel better today. After all, ain't none of us getting out of here alive, so we might as well enjoy it while we're here. Also, I got to thinking about that silver & gold & it may not look so hopeless after all.

US dollar index, measure of the ineffable because immaterial value of the US dollar against other immaterial currencies, "fell" today 25 basis point (0.29%) to 87.16. That does nothing to disturb the working technical hypothesis that it's going higher.

Did y'all ever wonder what would happen if we all stopped pretending the US dollar had value?

Euro rose 0.51% to $1.2546, but don't know no more about rallying than a cat knows about integral calculus. Judging from now, euro'll be lucky if it don't fall below $1.00. But the euro ain't near about as sick at the yen. It rose 0.28% today to 88.02 cents/Y100. Since its high on 15 October, the yen has lost 7.4% to its lowest level since January 2008. Nothing to catch it above 80.55.

Stocks slept again today. Dow added 17.6 (0.1%) to 17,383.84 but the S&P500 lost 5.71 (0.28%) to 2,012.10. They will rise further. The Fed by extending this artificial rally has only guaranteed the eventual decline will be more catastrophic.

Dow in Gold skootched down 0.14% to G$307.60 gold dollars (14.88 oz). It's nearly as overbought as it has been at any time in the last five years. The MACD is high, rate of change enormous, and stochastics ready to turn down. It is beginning to appear that its next big move will be down, not up.

Dow in silver rose 0.82% to end the day at S$1,403.87 silver dollars or 1,085.81 troy ounces. Everything I said about the Dow in Gold goes for the Dow in Silver, only more so.

Sounds nuts, but we may look back here and ask, "Why in the world couldn't we see that was a bottom?"

Comex gold lost $2.00 (0.17%) to $1.167.40; silver lost 24.8 cents (1.5%) to 1592.7 cents.

Before I launch in to hopeful signs for metals, here's a little explanation.

Bollinger Bands are a technical indicator that measure a market's volatility. The lines are marked usually at one standard deviation on either side of a moving average. (Standard deviation measures variability, leave it at that.) In a normal distribution of readings, 68% of all readings fall within two standard deviations of an average, plus or minus. So if Bollinger Bands cover two standard deviations around a moving average, they should contain about 2/3 of all possible readings (or prices, in this case).

Hence the Bollinger Bands' value as a technical indicator: Whenever a market leaps outside those bounds, it is surpassingly low or surpassingly high.

An article today brought to my attention today gold's performance against its Bollinger Bands: day before yesterday it punched out the bottom. Even if you expand the BB to four standard deviations, which covers 95% of what you expect to see, it just about touched that.

First point is, that makes gold way oversold.

Second point is, that when gold punches that line, it usually turns around in a few days.

Let's pile up a third point. The RSI is monstrously oversold & the full stochastic is turning up. And volume has dried up on the downside moves.

Don't misunderstand me. There are signs gold is about to turn up, but even if it rises, it might merely stage a corrective rally, then drop more. We have to see yet what gold makes out of any rally.

To this picture silver adds dropping downside volume and an oversold RSI. More, that premium on US 90% silver coin keeps rising, a harbinger of higher silver prices.

But whenever the last bottom comes, it draweth nigh, I believe.

On 4 and 5 November 1864 Confederate Major General Nathan Bedford Forrest capped a 23 day raid through West Tennessee by attacking the huge Union supply base at Johnsonville. On 29 & 30 October by artillery fire he captured three steamers and a Union gunboat. He repaired the boats to use attacking Johnsonville. Forrest later lost the boats but established artillery positions on the Tennessee River so strong that no Union gunboats could reach and rescue Johnsonville.

Forrest positioned artillery across the river. At one point in the battle he got so excited he shouted, "Elevate that gun lower!" His men understood him, though. Forrest's artillery commander, Captain John Morton, was so effective that the wharves for nearly a mile up and downriver were one solid sheet of flame.

At a cost of only 2 killed and 9 wounded, Forrest cost the Union 4 gunboats, 14 transports, 20 barges, 26 pieces of artillery, and 150 prisoners. A union officer estimated the destroyed supplies' value at $2,200,000, or at then-current gold prices, about 106,425 ounces of gold. At today's prices, that's $124,251,187.50.

You can visit the Nathan Bedford Forrest State Park today and see where Forrest's artillery was emplaced.

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
4-Nov-14 Price Change % Change
Gold, $/oz 1,167.40 -2.00 -0.17%
Silver, $/oz 15.93 -0.25 -1.53%
Gold/Silver Ratio 73.297 1.000 1.38%
Silver/Gold Ratio 0.0136 -0.0002 -1.36%
Platinum 1,225.60 -18.10 -1.46%
Palladium 790.30 -13.75 -1.71%
S&P 500 2,012.10 -5.71 -0.28%
Dow 17,383.84 17.60 0.10%
Dow in GOLD $s 307.83 0.84 0.27%
Dow in GOLD oz 14.89 0.04 0.27%
Dow in SILVER oz 1,091.47 17.82 1.66%
US Dollar Index 87.16 -0.25 -0.29%
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: 1,167.50      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,199.02 1,208.36 1,208.36
1/2 AE 0.50 600.75 615.86 1,231.71
1/4 AE 0.25 300.37 313.77 1,255.06
1/10 AE 0.10 122.48 127.84 1,278.41
Aust. 100 corona 0.98 1,136.37 1,148.37 1,171.57
British sovereign 0.24 276.48 288.48 1,225.48
French 20 franc 0.19 219.61 222.77 1,193.21
Krugerrand 1.00 1,181.51 1,191.51 1,191.51
Maple Leaf 1.00 1,182.50 1,197.50 1,197.50
1/2 Maple Leaf 0.50 671.31 612.94 1,225.88
1/4 Maple Leaf 0.25 297.71 312.31 1,249.23
1/10 Maple Leaf 0.10 123.76 127.26 1,272.58
Mexican 50 peso 1.21 1,396.28 1,420.28 1,177.97
.9999 bar 1.00 1,171.59 1,183.50 1,183.50
SPOT SILVER: 15.97      
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 12,276.55 12,562.55 17.57
US 40% silver 1/2s 0.30 4,519.40 4,669.40 15.83
100 oz .999 bar 100.00 1,587.00 1,647.00 16.47
10 oz .999 bar 10.00 164.70 165.70 16.57
1 oz .999 round 1.00 16.07 16.57 16.57
Am Eagle, 200 oz Min 1.00 17.72 18.97 18.97
SPOT PLATINUM: 1,225.60      
PLATINUM Fine Tr.Oz. BID ASK $/oz
Plat. Platypus 1.00 1,250.60 1,290.60 1,290.60
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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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