The Moneychanger
Weekly Commentary
Thursday, 5 February a.d. 2015 Browse the commentary archive
Here's the weekly scorecard:
  30-Jan-15 5-Feb-15 Change % Change
Silver, cents/oz. 1,719.20 1,718.00 -1.20 -0.1
Gold, dollars/oz. 1,278.50 1,262.00 -16.50 -1.3
Gold/silver ratio 74.366 73.458 -0.908 -1.2
Silver/gold ratio 0.0134 0.0136 0.0002 1.2
Dow in Gold Dollars (DIG$) 277.54 292.96 15.42 5.6
Dow in gold ounces 13.43 14.17 0.75 5.6
Dow in Silver ounces 998.43 1,041.03 42.60 4.3
Dow Industrials 17,164.95 17,884.88 719.93 4.2
S&P500 1,994.99 2,062.52 67.53 3.4
US dollar index 94.96 93.68 -1.28 -1.3
Platinum 1,239.20 1,251.70 12.50 1.0
Palladium 772.70 794.10 21.40 2.8

I'm one day shy of a week, but I'll be out of the office tomorrow so I am sending this today.

Odd scoreboard: silver 1.2 cents lower, gold $16.50 lower, Dow 720 higher, but the US dollar index 1.3% lower. Are stocks striking out on their own trail now & leaving the dollar behind? Are gold and the dollar holding hands? Don't bet on it for long, not till the lion lies down with the lamb.

Both the Dow & the S&P500 had been working to penetrate that overhead resistance posed by the downtrend line from the December high -- unsuccessfully. Today they did, but whether that will lead to much more than another exercise in volatility futility remains to be seen.

Dow added 211.86 (1.2%) and ended at 17,844.88 (just for reference, the December high close was 18,053). S&P500 jumped 21.01 to 2,062.52 (December high 2,093.55). Possible is a test of that is a test of that last high, much less likely it will be exceeded.

Dow in gold rose 1.55% to end the day at G$292.30 gold dollars (14.14 troy ounces). That leaves it above the 20 dma (G$286.92 or 13.88 oz) and barely back withi the Gator Jaws it fell out of in mid January. May rally all the way to the 50 dma G$298.29 (14.43 oz), but that will require much higher stocks or lower gold.

Dow in silver ascended 1.87% for a day-ending S$1,340.51 silver dollars (1,036.80 oz). In about the same case as the Dow in Gold, maybe aiming for the 50 DMA at $1,369.78 (1,059.36 oz).

I remind y'all that a Gator Jaws pattern, though near universally fatal, can frustrate the sanctity right out of you. You think they've broken down for good, then they trade all the way back up to the top jaw. I don't expect that this move, because it would require either a huge upmove in stocks or huge fall in gold and silver. I repeat: The roll-over downwards in the Dow in Gold and Dow in Silver both switness that stocks' trned against gold & silver has turned down. That implies that stock price highs ande sivle r& gold price lows lie behind us, and that metals will gain very strongly against stocks in coming years. Last time that happened stocks lost over 85% against metals.

US Dollar Index showed today it ain't feeling chipper. Fell all day & closed near the low, losing 58 basis points (0.62%) along the way to roost at 93.68. Dollar index is still an iffy deal here. Id like to see it bust clean through that 20 DMA (93.71) to confirm a correction. I reckon that's coming, I just want to see it. I trust my friends, but I still count my change.

I had the Euro's price wrong yesterday. It cllosed $1.1339, not $1,1534. Forgive me

Today the euro flew like, flew like, well, flew like a turkey up 1.23% to $1.1478. Still wasn't stong enough to breach its 20 DMA at 115.06, but it does have a cute leetle uptrend going. Angle of ascent ain't nothing to brag about, but it is positive.

For 5 days the yen has been squnched and flat. Hardly moving, although last three days it has spent outside the downtrend line. Just walked through, then sat down. Lost 0.26% to 85.07 today.

Catches my eye that the US 10 year treasury not yield has been rising for three days. Apparently complacency has returned & investors want something other than safe haven US dollar bonds. (When a yield riseth, the bond price falleth.) Speaking of yields & interest rates, yen & euro government bonds are offering NEGATIVE interest rates. You give the German government $100 to hold for a year, and get back $98. Person would only pay a govenrment to hold his money if (1) he was stone-post dumb or (2) he felt it safer there than in a bank. Dollar bonds don't pay much more. That takes the sting out of the reproof often thrown in gold's face that it "pays no interest." Now 'tis a different question. Do you want to guaranteed lose a little money in "safe" bonds, or own gold that might rise?

I read an interesting article a few days ago that presented me with an idea that was new. Interest rates have been dropig for about 30 eyars. For the last almost 7 years they've been near zero. Doesn't that imply that capital has been consumed as what would otherwise have been interest collectors have been forced to live off their capital? Just low rates over a long period might be enough to shrink their capital.

Makes my head hurt like somebody hit it with an ax, just to ponder how much damage governments & central banks do to us.

Gold backpedalled $1.80 (0.14%) to close Comex at $1,262. Silver stumbled 19.9 cents (1.15%) to 1718c.

Gold's weekly chart shows it has boroken its downtrend from the October 2012 high and closed above its 20 week movingg average ($1,218) but not quite above its 50week, now at $1,266.35. Still, it has begun a rally from a falling wedge & broken that downtrend. Gold has barely broken out to the upside on a monthly chart.

Silver's weekly isn't quite so good. It, too, is hovering between its 20 & 50 week Mas, but has not yet punched through that downtrend line. On a monthly chart silver got near its 200 week MA (1374c) at the 1 December loow of 1415c, but has move away from that toward that tough resistance at 1860c.

On five day charts silve r& gold still appear to be correcting in a rally, nothing more.. Silver today slosed on the neckline from the upside-down head & shoulders formed November through December. Today's low was higher than 29 January's. Long as silver holds this line, it has no problem.

In all this correcting since the 22 Janaury high at $1,307.80, gold has never closed below its 200 day moving average, now $1,254. It could trade as low as $1,225, and remain above its neckline and 50 DMA. That I am not waiting for, but I would welcome it to clear out these doldrums & the short chance to buy metals cheaper.

Stocks may spend half a year rolling over and down, but this won't be their eyar. This year silver & gold return to their uptrends. Don't know that they'll gain hugely the year end, but they'll be higher, and they have begun the next and greatest rise.

On 5 February 1777 Georgia became the first American colony to abolish both entail and primogeniture. Primogeniture provided the first born son only inherited all the estate; entail laid restrictions on inheriting the land. Both operated to maintain large estates and to send younger sons overseas to make their fortunes.

On 5 Feburary 1901 JP Morgan started US Steel by cartelizing several steel concerns. At one time it was the laergest steel producer and largest corporation in the world, and was the world's first billion dollar corporation. Y'all thought corporate gigantism started yesterday in the US?

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-Feb-15 Price Change % Change
Gold, $/oz 1,262.00 -1.80 -0.1
Silver, $/oz 17.18 -0.20 -1.1
Gold/Silver Ratio 73.458 -0.096 -0.1
Silver/Gold Ratio 0.0136 -0.0002 -1.1
Platinum 1,251.70 10.80 0.9
Palladium 796.00 5.50 0.7
S&P 500 2,062.52 21.01 1.0
Dow 17,884.88 211.86 1.2
Dow in GOLD $s 292.96 3.91 1.4
Dow in GOLD oz 14.17 0.19 1.4
Dow in SILVER oz 1,041.03 24.11 2.4
US Dollar Index 93.68 -0.58 -0.6
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SPOT GOLD: 1,264.90      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,291.46 1,309.17 1,309.17
1/2 AE 0.50 644.59 670.40 1,340.79
1/4 AE 0.25 325.45 339.94 1,359.77
1/10 AE 0.10 132.71 139.14 1,391.39
Aust. 100 corona 0.98 1,231.18 1,240.18 1,265.23
British sovereign 0.24 299.99 304.99 1,295.63
French 20 franc 0.19 237.93 241.93 1,295.81
Krugerrand 1.00 1,281.34 1,291.34 1,291.34
Maple Leaf 1.00 1,279.90 1,294.90 1,294.90
1/2 Maple Leaf 0.50 727.32 664.07 1,328.15
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Mexican 50 peso 1.21 1,512.76 1,523.76 1,263.80
.9999 bar 1.00 1,269.33 1,280.90 1,280.90
SPOT SILVER: 17.26      
SILVER Fine Tr.Oz. BID ASK $/oz
VG+ Morgan $B4 1905 0.77 23.00 26.00 33.99
VG+ Peace dollar 0.77 19.00 22.00 28.76
90% silver coin bags 0.72 12,980.83 13,338.33 18.66
US 40% silver 1/2s 0.30 4,898.48 5,048.48 17.11
100 oz .999 bar 100.00 1,715.50 1,775.50 17.76
10 oz .999 bar 10.00 177.55 178.55 17.86
1 oz .999 round 1.00 17.36 17.91 17.91
Am Eagle, 200 oz Min 1.00 18.76 19.61 19.61
SPOT PLATINUM: 1,251.70      
Platinum Platypus 1.00 1,276.70 1,316.70 1,316.70
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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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