The Moneychanger
Weekly Commentary
Friday, 5 December a.d. 2014 Browse the commentary archive
Here's the weekly scorecard:
  28-Nov-14 5-Dec-14 Change % Change
Silver, cents/oz. 1,548.90 1,619.60 70.70 4.6
Gold, dollars/oz. 1,175.20 1,190.10 14.90 1.3
Gold/silver ratio 75.873 73.481 -2.392 -3.2
Silver/gold ratio 0.0132 0.0136 0.0004 3.3
Dow in Gold Dollars (DIG$) 313.60 311.94 -1.66 -0.5
Dow in gold ounces 15.17 15.09 -0.08 -0.5
Dow in Silver ounces 1,151.03 1,108.84 -42.18 -3.7
Dow Industrials 17,828.24 17,958.79 130.55 0.7
S&P500 2,067.56 2,075.37 7.81 0.4
US dollar index 88.41 89.36 0.95 1.1
Platinum 1,240.00 1,219.00 -21.00 -1.7
Palladium 812.40 803.20 -9.20 -1.1

Following appeared yesterday on Zero Hedge at http://bit.ly/12sE2L1 & I couldn't resist opening with it today. Kyle Bass said, "Buying gold is just buying a put against the idiocy of the political cycle. It's that simple."

The week ended in much higher silver & gold prices, but a disappointment today. Stocks are inching toward the cliff-edge ("Yeah, I know, Moneychanger, I've heard that before!" Well, just wait.) and the white metals, platinum & palladium lost traction. Big gainer was the US dollar, parasite of nations, vector & carrier of monetary disease.

Stocks are pushing farther and farther into never-never land. I don't think they will be easily weaned off their addiction to Quantitative Easing, since that's the only force that's been driving them the past five years. I'm just a nat'ral born durn fool from Tennessee, but I am a realist. Think about somebody addicted to meth, a housewife, say. Man, when she first gets started on meth, she has the CLEANEST house in town. She's got everything in order, and she's scurrying around with efficiency born of speed. She manages this for a while very well, but then the meth starts taking its toll. She slows down, & now she has to have it. She starts scratching herself and gets scabs all over her face, then her teeth start falling out. The collapse of this addiction is not far off.

That's about where I figure stocks are. The house is still spotless, the meals still cooked, the kids still picked up on time, but the scabs are starting to show. It won't be long now. But it looks bang-up till it crashes.

Dow today made a new high, up 58.69 (0.33%) to 17,958.79, blowing its hot breath on the back of 18,000's neck. S&P500 rose 3.45 (0.17% to a marginal new high at 2,075.37.

Silver & gold disappointed me today, but little of that showed in the Dow in Gold & Dow in Silver. DiG rose 1.46% to G$311.31 (15.06 oz). Worst thing about that? It cut into & through the 20 DMA at G$309.04 (14.95 oz). DiG is working a megaphone or broadening top, and could rise as high as G$314.3 (15.22 oz) without breaking out of that megaphone.

Dow in Silver also punched into its 20 DMA, but less so. Closed up 1.59% to S$1,425.82 silver dollars (1,102.78 troy ounces) against the 20 DMA at S$1,422.02 (1,099.84 oz). DiS could rise over S$1,486.87 (1,150 oz) without breaking out of that megaphone.

I repeat, these are the indicators that tell us when stocks have peaked against silver & gold. And when stocks have peaked, silver & gold will have made their price lows.

The US dollar index, hamstringer of nations, crusher of hopes, economic vampire, scourge of the globe reversed yesterdays downward course and rose 72 basis points (0.81%) to 89.36, a new high. Behold! The dollar index hath formed a rising wedge formation, which usually ends with an earthward breakdown. Closed today at the upper boundary of that wedge. You can see the chart at http://scharts.co/105jV4J

That wedge implies the dollar is nearing the end of its upthrust, and should soon correct downward. This doesn't say anything about the dollar's performance next year, which the chart presently forecasts as much higher.

Does a higher dollar seal silver & gold's fate? Not necessarily. They can rise right along with the dollar if stocks are tanking and wallowing.

By the way, looking at a chart for the last three days, I simply would NEVER have expected the Dollar Index to rise. Looked like it was in the middle of an unfinished correction, but the Official Lies from the Labor Department today, the (un-)jobs report, goosed the dollar index higher. Yeah, buddy! That there's rational, ain't it?

The euro yesterday appeared ready to rally, but today gave up all yesterday's game and then some, posting a new low close for the move, $1.2288, down 0.74%. As the dollar hath formed a rising edge, so hath the euro formed a falling wedge, which genrally breaks out upward. So the dollar rising/euro falling game has just about played out.

Anybody still care about the yen? It dropped 1.42% to 82.31, and Abe is in a fight for his political life. He is likely to win on 14 December, which means the yen will sink like an iron anvil pushed overboard in the South China Sea.

Gold fell $17.40 (1.44%) to close Comex at $1,190.10. Silver lost 32.4 cents or 1.96% to 1619.6.

This looks and sounds rotten till looking closer you observe that neither closed below its 20 day moving average, so momentum remains upward. Yes, today disappointed me and looks rotten, but think back on silver's spectacular performance Monday. It was driven down to 1415c and rose back as high as 1681c, a 19% range on the low! I don't believe I have ever seen an exhibition of strength quite like that.

Nor did gold lag far behind. That day it ranged from $1,141.70 to $1,221.00, 7%, crashing resistance at $1,177.50, $1,205, and only skidding to a stop at $1,218.

All this, believe it or not, leaves an uptrend, however uninspiring. Since silver on that wild day exceeded the lowest price I could envision, 1465c, for the time being I am accepting that as the price low for the entire correction -- I mean the LAST one. But that doesn't mean silver & gold will take off from here, because after 3-1/2 years' damage, they have a lot of rebuilding to do.

So I think we've seen the lows, but silver & gold have to confirm that by throwing a leg over those levels where they broke down this fall, that is, $1,200 & 1860c.

Now that I think about it, metals' performance on Monday was the exact opposite of that crushing attack in April 2013. Mmmm.

On 5 December a.d. 771 Charlemagne became the sole King of the Franks after the death of his brother Carloman (they suffered a severe royal name shortage in those days and were forced to ration both vowels & consonants.)

Charlemagne would later revive the Roman Empire when he was crowned Holy Roman Emperor. It's one of those persevering oddities of history that the Franks who settled in France were really Germans. Then the present English ruling house since mid-18th century has been German, too, so they are the English-Germans. To make it worse, the German Kaiser Wilhelm II was Queen Victoria's nephew, making him a German-German Then in World War II the French Germans united with the English Germans to fight the German-Germans. That don't make a bit of sense.

Y'all enjoy your weekend!

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
5-Dec-14 Price Change % Change
Gold, $/oz 1,190.10 -17.40 -1.4
Silver, $/oz 16.20 -0.32 -2.0
Gold/Silver Ratio 73.481 -1.059 -1.4
Silver/Gold Ratio 0.0136 -0.0003 -1.9
Platinum 1,223.10 -26.40 -2.1
Palladium 803.30 1.75 0.2
S&P 500 2,075.37 3.45 0.2
Dow 12,958.79 58.69 0.5
Dow in GOLD $s 225.09 4.27 1.9
Dow in GOLD oz 10.89 0.21 1.9
Dow in SILVER oz 800.12 19.25 2.5
US Dollar Index 89.36 0.72 0.8
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GOLD Fine Tr.Oz. BID ASK $/oz
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British sovereign 0.24 282.35 294.35 1,250.43
French 20 franc 0.19 224.27 227.40 1,218.01
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VG+ Peace dollar 0.77 18.50 22.00 28.76
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US 40% silver 1/2s 0.30 4,593.15 4,743.15 16.08
100 oz .999 bar 100.00 1,612.00 1,672.00 16.72
10 oz .999 bar 10.00 167.20 168.20 16.82
1 oz .999 round 1.00 16.32 16.87 16.87
Am Eagle, 200 oz Min 1.00 17.97 18.97 18.97
SPOT PLATINUM: 1,223.10      
PLATINUM Fine Tr.Oz. BID ASK $/oz
Platinum Platypus 1.00 1,248.10 1,288.10 1,288.10
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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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