The Moneychanger
Daily Commentary
Monday, 29 December a.d. 2014 Browse the commentary archive

Silver & gold moves over the last week displayed, as I warned y'all, not a lick of sense. More below.

Stocks have been eking out new highs day by day, without much meaning. Today the Dow lost 15.48 (0.90%) to 18,038.23 while the S&P500 made a new high at 2,090.57, up 1.8 (0.09%). This hovering to new highs only shows that the sellers are all on vacation. Now it might be that after the adults come back after New year stocks might make significant new highs, although they look so tired and are carrying so many inward signs of exhaustion that doesn't seem likely to me. Or, it might just be that all the pure fiction of a "recovering economy" might begin to evaporate, like the mental hoarfrost it is, in the harsh sunlight of economic reality. I have in mind, of course, the hash the Fed has made of the US economy by keeping alive the vampire businesses that ought to have had wooden stakes put thru their hearts two or three panics ago. When the Fed tries to "normalize" interest rates, skeletons are liable to come tumbling out of closets.

Dow in gold hit overhead resistance near the old low, bounced down, then up. Ended today at G$315.24 (15.25 troy ounces), up 1.03%. Chart is here, http://scharts.co/1soU67t

Dow in silver is tracking along with gold, sawing back and forth. Both remain in a Gator Jaws pattern, which eventually will snap shut and send them both plunging. Dow in silver chart is at http://scharts.co/1sHAvQ1

Greece is falling apart again, but in this Best of All Possible Worlds nobody seems to notice. Greek Prime Minister called elections for next month, but it looks like the socialists will win, who threaten to back out of austerity measures and probably default on some of the debt. Strategic question is, will they withdraw from the euro, or will the Germans keep on passing them dough to keep them in the euro and to keep European banks solvent?

Gold took no safe heaven benefit from all this, but the yield on US government treasuries sank, indicating bond prices were rising because somebody is buying them. Merciful heaven! What kind of world do we live in where the scrofulous US dollar looks like a safe haven?

Speaking whereof, the US dollar index today traded up 21 basis points (0.23%) to 90.53. All these little daily gains have pushed the US dollar index back up into the rising wedge it once tried to fall out of. Chart's here, http://scharts.co/1tvzNLY

Wow, what wondrous markets. Breakouts that start but never finish, collapses that mysteriously reverse, markets that just never can seem to advance. What? What do you mean, Nice Government Men's fingerprints?

Euro sank to a new low, $1.2152, down 0.41% but no evidence of a panic out of euros. Probably too late to panic anyway. Yen closed down 0.32% at 90.53 cents/y100. Probably getting ready for the next plunge. Abenomics, which is the same old Keynesian folly, ain't working for the economy but it is gutting the yen jes' fine.

I'll never forget a remark the late Harry Browne made to me in 1993 when I was interviewing him for Silver Bonanza. We were talking about the gold & silver runs in the 1970s, and he made this point: "It's the preceding government price suppression that really drove those markets, years and years of suppression. The price snaps back all at once." Corollary is, that the longer gold & silver are suppressed, the greater the eventual snapback.

Silver & gold trading over Christmas week made no sense at all. Down $16.20 on the 22nd, down $1.80 on the 23rd, Down $4.40 on the 24th, up $21.80 on the 26th. That looks likefloor traders pushing a thin market around. And today gold lost $13.60 (1.1%) to end at the equivocal $1,181.70, a price that blows hot and cold out of both sides of its mouth. Silver lost 36.8 cents or 2.3% to 1574.4 cents. These are about the prices posted on 19 December.

But looking at the chart, they may make some sense. Gold might -- might -- be forming an upside-down head and shoulders with a right shoulder bottom at $1,183, and a left shoulder bottom about 1170, and the bottom of the head at that $1,130.40 intraday low on 1 December. Neckline runs from $1,255 through the last peak at $1,239 and today stands about $1,230. If that is what gold is up to, it should take another two to three weeks to round out the shoulder and reach the neckline. A close below $1,170.70 invalidates this pattern. Here's a picture of that, http://scharts.co/1tvDPnr

Meanwhile gold stands below its 20 ($1,200.31) & 50 ($1,196.54) day moving averages, and the path of least resistance is down. Thus if it holds on here & keeps rising, my upside down H&S makes more sense.

Silver, too, remains below its 20 & 50 day moving averages (1628c & 1634c). No sign it intends to go anywhere. Yes, you have two lows separated by a spike low, but no successful upward force yet.

In other words, both metals look just as sorry as they looked this time last year, right before they went on an upward tear that lasted till March.

Eventually the snapback will come. Be patient.

On 29 December 1170 Archbishop of Canterbury Thomas Becket was assassinated by followers of King Henry II.

On 29 December 1835 the US government and the Cherokee nation signed the Treaty of New Echota, ceding all Cherokee lands east of the Mississippi River to the United States & giving them land in Oklahoma. The US Army's enforcement of the Treaty became the genocide called the Trail of Tears between 1836 & 1839. From the 16,000 Cherokees in the 1835 census, some 4,000 to 6,000 died.

On 29 December 1890 at Wounded Knee Creek in South Dakota the US 7th Cavalry, trying to disarm Chief Big Foot and his Sioux followers, opened fire from all sides and killed men, women, and children, an estimated 300 in all.

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
29-Dec-14 Price Change % Change
Gold, $/oz 1,181.70 -13.60 -1.14%
Silver, $/oz 15.74 -0.37 -2.28%
Gold/Silver Ratio 75.057 0.870 1.17%
Silver/Gold Ratio 0.0133 -0.0002 -1.16%
Platinum 1,201.70 9.60 0.81%
Palladium 812.00 -1.20 -0.15%
S&P 500 2,090.57 1.80 0.09%
Dow 18,038.23 -15.48 -0.09%
Dow in GOLD $s 315.55 3.32 1.06%
Dow in GOLD oz 15.26 0.16 1.06%
Dow in SILVER oz 1,145.72 25.21 2.25%
US Dollar Index 90.53 0.21 0.23%
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: 1,181.40      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,213.30 1,222.75 1,222.75
1/2 AE 0.50 607.91 623.19 1,246.38
1/4 AE 0.25 303.95 317.50 1,270.01
1/10 AE 0.10 123.94 129.36 1,293.63
Aust. 100 corona 0.98 1,147.59 1,159.59 1,183.01
British sovereign 0.24 279.77 291.77 1,239.47
French 20 franc 0.19 222.22 225.37 1,207.11
Krugerrand 1.00 1,195.58 1,205.58 1,205.58
Maple Leaf 1.00 1,196.40 1,211.40 1,211.40
1/2 Maple Leaf 0.50 679.31 620.24 1,240.47
1/4 Maple Leaf 0.25 301.26 316.02 1,264.10
1/10 Maple Leaf 0.10 125.23 128.77 1,287.73
Mexican 50 peso 1.21 1,417.17 1,441.17 1,195.30
.9999 bar 1.00 1,185.53 1,197.40 1,197.40
SPOT SILVER: 15.76      
SILVER Fine Tr.Oz. BID ASK $/oz
VG+ Morgan $B4 1905 0.77 22.75 26.50 34.64
VG+ Peace dollar 0.77 19.00 22.00 28.76
90% silver coin bags 0.72 12,126.40 12,483.90 17.46
US 40% silver 1/2s 0.30 4,457.45 4,607.45 15.62
100 oz .999 bar 100.00 1,566.00 1,626.00 16.26
10 oz .999 bar 10.00 162.60 163.60 16.36
1 oz .999 round 1.00 15.86 16.41 16.41
Am Eagle, 200 oz Min 1.00 17.51 18.16 18.16
SPOT PLATINUM: 1,201.70      
PLATINUM Fine Tr.Oz. BID ASK $/oz
Plat. Platypus 1.00 1,226.70 1,266.70 1,266.70
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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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