The Moneychanger
Daily Commentary
Wednesday, 7 January a.d. 2015 Browse the commentary archive

Steve Saville has written an especially good article )with a link to an even better one): "Tell me, again, how the end of the Fed's QE program will be bearish for gold?" The fundamental principle he presents, that gold's price moves opposite to confidence in the financial system, helps explain a lot. Read the article at http://bit.ly/14oKSCq It wouldn't hurt y'all a bit to subscribe to his free blog or to subscribe to his excellent paid newsletter, The Speculative Investor. He will teach you well & he can write a correct & complete English sentence. Course, he's from Australia, so that probably explains it.

The infamous criminals at the Federal Reserve were at it again today, roiling markets and supporting their favorites with the hot-&-cold-out-of- both-sides-of-your-mouth December Fed Open Market Committee meeting. This act is as bad as Alan Greenspan's, just a different approach. However, the Fed's seeming nod of the head to raising rates later not sooner was enough to breath hope back into stock buyers.

Wow, saith the hayseed, that Dow rose 212.88 (1.23%) today to 17,584.52! And the S&P500 rose 23.29 (1.16%) to 2,025.90.

Right, and they remain a right smart below their 50 day moving averages. And they burned a lot of buying power to get there. Mmmm.

What next? Stocks may rise for a day or three, but gravity is calling. Of course, I am always looking over my shoulder for the surprise, which would be continued stock market strength, hanging on near the highs or pushing to new ones. Listen, the bull market's not based on economic outlook or any meaty reason, just on injections of new money creating a bubble. Bubbles get crazy, & take longer than you imagine to pop. Quite literally, anything can happen.

But before this twelvemonth has passed, stocks will have fallen much, much lower & silver & gold will be higher.

FOMC minutes sent the US dollar index higher, but why I don't know. I'm sure somebody on TV can tell you, but I can't. Primary determinant of exchange rates is interest rates, and although real US rates may be higher than yen and euro rates, speculators are buying "on the come," sure the Fed will raise interest rates. In a pig's eye, I say, because raising rates will burn down the Potemkin stock market they have spent so much time building. Not only will they keep rates low for the stock market, they will also crank up QE5 quick as stocks begin to reek of death.

THAT'S when it will get interesting.

Euro keeps on sinking, down another 0.19% today to $1.1842. Yen lost 0.6% to 83.90, but that's just a kiss back to break out. US dollar index rose 39 basis points (0.42%) to 92.21

Everybody has to get accustomed to markets swinging back & forth, & learn to tell when the moves mean something and when they don't, & Mercy! all that's a lot tougher than it sounds. Today stocks rose strongly, but look at the context of indicators pointing down, a long preceding drop, negative internal strength measures, and old age. Likewise, silver & gold today fell back as attention turned to stocks & the dollar, but they fell not beneath critical support/resistance at 1650 and $1,210.

Silver today lost 0.6% or 9.3 cents to close Comex at 1651c. Gold gave back 0.75 or $8.70 to end at $1,210.60.

Gold's range was a pitiful $10, which encourages the conclusion that nobody was playing today. Silver range was a tee-tiny 34 cents,

Now look back four days. Of those, three were strong upmoves, so a breather here shouldn't shock anyone. And both remain way above their 20 & 50 DMAs. So against all that background, today's little slides in silver & gold don't mean much. Now if they slide a lot further, say to $1,189 and 1600c, there's a problem, but not until then.

Gold/Silver ratio today closed slightly lower, 73.325 against yesterday's 73.439. It literally lies right on the support line of the diamond. A breakdown here would be very positive for silver & gold.

On 7 January 1982 the Bank of North America, intended to be a sort of central bank for the US, opened in Philadelphia. Apparently they had so little specie (gold & silver) that they hired two men to send bags of coins up on a dumbwaiter that opened into the lobby, then wheel those bags across the lobby on a dolly, carry them downstairs, load them in the dumbwaiter again, & repeat the exercise, creating the impression that the bank was moving a lot of money around. Banks're still doing the selfsame thing, just with different methods of deceit. Same outcome, better technology.

On 7 January 1901 New York Stock exchange trading exceeded 2 million shares for the first time in history. Today it traded 77.8 million shares.

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
7-Jan-15 Price Change % Change
Gold, $/oz 1,210.60 -8.70 -0.71%
Silver, $/oz 16.51 -0.09 -0.56%
Gold/Silver Ratio 73.325 -0.113 -0.15%
Silver/Gold Ratio 0.0136 0.0000 0.15%
Platinum 1,220.70 -0.10 -0.01%
Palladium 792.45 -7.95 -0.99%
S&P 500 2,025.90 23.29 1.16%
Dow 17,584.52 212.88 1.23%
Dow in GOLD $s 300.27 5.75 1.95%
Dow in GOLD oz 14.53 0.28 1.95%
Dow in SILVER oz 1,065.08 18.79 1.80%
US Dollar Index 92.20 0.39 0.42%
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SPOT GOLD: 1,613.20      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,655.14 1,669.66 1,669.66
1/2 AE 0.50 830.28 850.96 1,701.93
1/4 AE 0.25 415.14 433.55 1,734.19
1/10 AE 0.10 169.28 176.65 1,766.45
Aust. 100 corona 0.98 1,567.03 1,579.03 1,610.92
British sovereign 0.24 382.03 394.03 1,673.86
French 20 franc 0.19 303.44 305.98 1,638.91
Krugerrand 1.00 1,632.56 1,642.56 1,642.56
Maple Leaf 1.00 1,628.20 1,643.20 1,643.20
1/2 Maple Leaf 0.50 927.59 846.93 1,693.86
1/4 Maple Leaf 0.25 411.37 431.53 1,726.12
1/10 Maple Leaf 0.10 171.00 175.84 1,758.39
Mexican 50 peso 1.21 1,935.15 1,959.15 1,624.91
.9999 bar 1.00 1,618.85 1,629.20 1,629.20
SPOT SILVER: 16.52      
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 12,844.98 13,202.48 18.47
US 40% silver 1/2s 0.30 4,680.18 4,830.18 16.37
100 oz .999 bar 100.00 1,641.50 1,701.50 17.02
10 oz .999 bar 10.00 170.15 171.15 17.12
1 oz .999 round 1.00 16.62 17.17 17.17
Am Eagle, 200 oz Min 1.00 18.27 18.92 18.92
SPOT PLATINUM: 1,220.70      
PLATINUM Fine Tr.Oz. BID ASK $/oz
Plat. Platypus 1.00 1,245.70 1,285.70 1,285.70
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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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