The Moneychanger
Weekly Commentary
Friday, 2 January a.d. 2015 Browse the commentary archive
Here's the weekly scorecard:
  26-Dec-15 2-Jan-15 Change % Change
Silver, cents/oz. 1,611.20 1,573.40 -37.80 -2.3
Gold, dollars/oz. 1,195.30 1,186.00 -9.30 -0.8
Gold/silver ratio 74.187 75.378 1.191 1.6
Silver/gold ratio 0.0135 0.0133 -0.0002 -1.6
Dow in Gold Dollars (DIG$) 312.23 310.83 -1.40 -0.4
Dow in gold ounces 15.10 15.04 -0.07 -0.4
Dow in Silver ounces 1,120.51 1,133.40 12.89 1.2
Dow Industrials 18,053.71 17,832.99 -220.72 -1.2
S&P500 2,088.77 2,058.20 -30.57 -1.5
US dollar index 90.32 91.43 1.11 1.2
Platinum 1,218.50 1,203.00 -15.50 -1.3
Palladium 818.60 794.85 -23.75 -2.9

Ooooo . . . Looks like the trouble in Greece is beginning to bite. US dollar index (a trade-weighted average hit its highest level since December 2005 while the Euro reached a low not seen in the depths of the 2011 Crisis, indeed, not since June 2010. More: US stock indices all dropped today, save the Dow. Silver & gold remain listless & range-bound and have lost ground in the last week.

The problem with rising wedges on a chart is that every book proclaims "they usually resolve downward." In my experience, however, rising wedges in bull markets sometimes -- often -- break out to the upside, & throw sand in your face to boot. Today the US dollar index broke out above that rising wedge and added 81 basis points (0.9%) to 91.43. Nor did the side of the upside-down head & shoulders the dollar formed from January through August 2014 point to a rise higher than 84.35. Clearly, something we are not seeing is driving the dollar index higher. I say that because US exporters cannot view with glee the dollar rising out of sight, pricing their products out of the market against their European & Japanese competitors.

One driver may be fear, now crystallizing around a renewed debt crisis in Greece. Will the Greeks default, or worse (for the Eurocrats), withdraw from the euro currency system? Or how about a war in eastern Europe with Russia over Ukraine? How about fear of stock markets around the world? I mention that because the yield on the US 10 year treasury note today dropped 2.17%. When bond yields drop, bond prices rise, so somebody was buying US bonds today. They'd have to be buying them for a safe haven, because they don't carry enough interest to make a cat sneeze, thanks to the Fed's Zero Interest Rate Policy.

Finally, last time the US dollar was anything like this high was during & after the 2008 financial panic. None of this leaves me feeling warm and cozy. And with the whole world universally bullish on the US dollar, it would be the perfect time for it to turn down. Monthly chart is hitting the 200 month average from below.

Euro hit a low of $1.1996 today and closed down 0.8% at $1.2002, lowest since June 2010. It won't stop tumbling and now the Jawbone of the Draghi has been overused so much the market isn't paying attention to him, smile he never so toothily. Japanese yen dropped 2/3 of 1% to 83 cents/Y100.

Stocks opened the day succumbing to gravity and never recovered. Dow managed to add 9.92 (0.06%) right before it closed at 17,832.99. All other indices fell, including the S&P500 that dropped 0.07 (0.03%) to 2,058.20.

Dow in metals remains in a Gator Jaws topping pattern. Dow in gold lost 0.5% today to G$309.87 gold dollars (14.99 troy ounces). Needs to confirm its earthward intention by closing below the 20 DMA (G$306.15 or 14.81 oz). After dropping 1.12% Dow in Silver closed at S$1,460.57 silver dollars or 1,129.74 troy ounces. Momentum is downward, but needs to cross that 20 DMA (S$1,418.29 or 1,096.96) and 50 DMA (S$1,401.22 or 1,083.76 troy ounces). Indicators for both point to lower prices.

Gold rose $2.10 (0.17%) to $1,186 on Comex; silver climbed 16.9 cents (1.1%) to 1573.4c. Prices have spent two weeks burning over the same range, 1650c - 1550c for silver & $1,170 - $1,210. Weekly charts are sideways, with a lower week this week. Monthly charts show two months running higher, which encourageth slightly, but only slightly.

Looking steely-eyed, gold must close above its 20 DMA (1,199.09) and really, $1,210 before it can eve take its hand off its ashamed mouth. Momentum indicators are slightly negative but might be turning up. We are just watching a box where it makes no sense to buy until silver breaks about 1650c or below 1550c, or gold breaks above $1,210 or below $1,170.

I continue to watch a potential upside-down head and shoulders pattern in gold. You can see that chart here,

I was reading across the internet today and I saw that most folks who were predicting were looking for higher stock prices in 2015. May or may not have influenced their opinion that all of 'em either wrote for stock sites or sold stocks. That near universal opinion is what's necessary for a reversal, but ain't much good for timing, cause it can persist quite some time.

On 2 January 1492 the last Moorish stronghold in Spain, the Alhambra of Granada, surrendered to King Ferdinand & Queen Isabella. The Spanish had been fighting 700 years to clear the Moors out of their country. Coincidentally, that very year the Italian adventurer Cristobal Colombo approached Queen Isabella with a scheme to sail west to reach the Indies, and she backed him. It offered an opportunity for the Spanish people, refined and toughened in the teeth of losing battles for 700 years without surrendering, to build an empire. They rose to the occasion.

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
2-Jan-15 Price Change % Change
Gold, $/oz 1,186.00 2.10 0.2
Silver, $/oz 15.73 0.17 1.1
Gold/Silver Ratio 75.378 0.125 0.2
Silver/Gold Ratio 0.0133 0.0001 1.1
Platinum 1,203.00 -5.90 -0.5
Palladium 794.85 3.55 0.4
S&P 500 2,058.20 -0.07 -0.0
Dow 1,832.99 9.92 0.5
Dow in GOLD $s 31.95 0.12 0.4
Dow in GOLD oz 1.55 0.01 0.4
Dow in SILVER oz 116.50 -0.63 -0.5
US Dollar Index 91.43 0.81 0.9
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: 1,186.10      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,218.12 1,227.61 1,227.61
1/2 AE 0.50 610.33 625.67 1,251.34
1/4 AE 0.25 305.16 318.76 1,275.06
1/10 AE 0.10 124.44 129.88 1,298.78
Aust. 100 corona 0.98 1,152.15 1,164.15 1,187.67
British sovereign 0.24 280.88 292.88 1,244.19
French 20 franc 0.19 223.11 226.24 1,211.81
Krugerrand 1.00 1,200.33 1,210.33 1,210.33
Maple Leaf 1.00 1,201.10 1,216.10 1,216.10
1/2 Maple Leaf 0.50 682.01 622.70 1,245.41
1/4 Maple Leaf 0.25 302.46 317.28 1,269.13
1/10 Maple Leaf 0.10 125.73 129.28 1,292.85
Mexican 50 peso 1.21 1,422.81 1,446.81 1,199.98
.9999 bar 1.00 1,190.25 1,202.10 1,202.10
SPOT SILVER: 15.70      
SILVER Fine Tr.Oz. BID ASK $/oz
VG+ Morgan $B4 1905 0.77 19.50 22.50 29.41
VG+ Peace dollar 0.77 16.50 18.50 24.18
90% silver coin bags 0.72 12,079.93 12,437.43 17.40
US 40% silver 1/2s 0.30 4,438.28 4,588.28 15.55
100 oz .999 bar 100.00 1,559.50 1,619.50 16.20
10 oz .999 bar 10.00 161.95 162.95 16.30
1 oz .999 round 1.00 15.80 16.35 16.35
Am Eagle, 200 oz Min 1.00 17.45 18.10 18.10
SPOT PLATINUM: 1,203.00      
Platinum Platypus 1.00 1,228.00 1,268.00 1,268.00
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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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