The Moneychanger
Daily Commentary
Monday, 9 February a.d. 2015 Browse the commentary archive

AIN'T NOBODY IN CHARGE DEPARTMENT: Reuters reported today that Charles Plosser, Philadelphia Fed President, said that the Federal reserve does not fully understand why long-term borrowing costs are so cheap.

I find that puzzling. If the folks who have manipulated the interest rates down nearly to zero don't know why borrowing costs are so cheap, then who in creation does?? Have they pushed themselves into an unsuspected trap?

The new Greek government is demanding a better deal, the Germans don't want to give one, and the euro is suddenly at risk of blowing apart. Stocks do not like such uncertainty, so made their displeasure known by dropping today, the Dow by 95.08 (.53%) to 17,729.21 and the S&P500 by 8.73 (0.42%) to to 2,046.74.

Both indices broke through the downtrend line from the December highs and after three days outside the fence, have since jumped back in. Both are hovering above 50 DMA's. Both declined today on rising volume, which reinforces the price trend. A failed breakout is like ordering an expensive wine at a restaurant to impress your date, only to realize at check time that you have not enough dough to pay for it.

Dow in gold and Dow in silver have fish-hooked back down, having hit their 50 day moving averages and bounced off. May be the last of the correction, may not be. One day to early to say, judging from the MACD.

Dow in Gold fell 1.19% to G$295.19 gold dollars (14.28 troy ounces). Dow in Silver tumbled 2.6% to S$1,324.86 silver dollars (1,038.62 tr. Oz).

Friday the US dollar index tried to recover & rose 108 basis points (1.16%). Whoops, today it lost 10 basis points (0.11%) to 94.66. Not a big drop, but portentous, like vultures following your car.

Euro rose 0.09% to $1.1325, but ain't going nowhere as long as the Greeks are restive. Yen broke its own back on Friday by punching through the uptrend line as well as both the 20 & 50 DMAs. No rally now.

US 10 year treasury note yield rose 0.52% today after a bigger rise Friday that took it clean past its 20 DMA. Since yields only rise when bond prices fall, that seems odd to me. How could that happen with the US dollar receiving a "safe haven" bid? More people sold bonds today than bought: where are they sending the money, given that stocks markets look as green as my dear wife flying in an airplane?

West Texas Intermediate Crude rose 0.99% to $52.86. Trending up.

Silver & gold recovered today. Silver added 37.6 cents (2.25%) to 1705.4c while gold rose 0.56% or $6.90 to $1,240.80. After shooting up to 73.78 on Friday, the old/silver ratio dropped to 72.757, beneath both the 50 & 20 DMAs.

Been studying this gold & silver correction. Friday took Gold all the way to its neckline (of the Nov - January upside-down head & shoulders), a common touchback for a final kiss good-bye. Also coincided with a break through the 200 DMA ($1,253.53) & support $1,255 (last high). Now if that really was an upside-down H&S, and it's certainly been acting like one, that is about as low as gold is allowed to fall. A deeper fall through the neckline negates its meaning. However, that $1,255 area that formerly furnished support now opposes gold with resistance.

If gold cannot hold that neckline, then we have to reckon with a visit to the uptrend line off the November low, today about $1,190. However, $1,208 would probably stop it before it reaches there.

Me, I think a H&S is a H&S, and I'm counting on that neckline holding.

Silver presents another case. Silver is much more volatile than gold, & often breaks trend lines and then immediately negates the break. Silver Friday broke the neckline, but not by much. It might reach 1638c, but really shouldn't dip below it more than one or two days. Otherwise it gainsays the whole H&S formation.

So I am sticking with what I wrote Friday, namely, I believe Friday marked the low of the correction that began with the January highs on 22 January.

Unlike the moiling crowd, I am not uncertain which way silver & gold are moving. They remain in an overall uptrend from the November & December lows. I may be wrong, but I am not uncertain.

On 9 February 1861 Jefferson Davis and Alexander Stephens were elected the first President and Vice President of the Confederate States.

On 9 February 1825 the US house of Representatives elected John Quincy Adams the 6th US president after no candidate received a majority of electoral votes. Adams had won fewer votes than Andrew Jackson in the popular election.

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
9-Feb-15 Price Change % Change
Gold, $/oz 1,240.80 6.90 0.56%
Silver, $/oz 17.05 0.38 2.25%
Gold/Silver Ratio 72.757 -1.227 -1.66%
Silver/Gold Ratio 0.0137 0.0002 1.69%
Platinum 1,222.40 -1.20 -0.10%
Palladium 779.95 -1.65 -0.21%
S&P 500 2,046.74 -8.73 -0.42%
Dow 17,729.21 -95.08 -0.53%
Dow in GOLD $s 295.37 -3.24 -1.09%
Dow in GOLD oz 14.29 -0.16 -1.09%
Dow in SILVER oz 1,039.59 -29.14 -2.73%
US Dollar Index 94.76 1.08 1.15%
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SPOT GOLD: 1,241.70      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,269.02 1,285.16 1,285.16
1/2 AE 0.50 632.76 658.10 1,316.20
1/4 AE 0.25 319.48 333.71 1,334.83
1/10 AE 0.10 130.27 136.59 1,365.87
Aust. 100 corona 0.98 1,208.59 1,217.59 1,242.19
British sovereign 0.24 294.49 299.49 1,272.25
French 20 franc 0.19 233.56 237.56 1,272.44
Krugerrand 1.00 1,257.84 1,267.84 1,267.84
Maple Leaf 1.00 1,256.70 1,271.70 1,271.70
1/2 Maple Leaf 0.50 713.98 651.89 1,303.79
1/4 Maple Leaf 0.25 316.63 332.15 1,328.62
1/10 Maple Leaf 0.10 131.62 135.35 1,353.45
Mexican 50 peso 1.21 1,485.02 1,496.02 1,240.79
.9999 bar 1.00 1,246.05 1,257.70 1,257.70
SPOT SILVER: 17.03      
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 80,097.88 80,455.38 112.53
US 40% silver 1/2s 0.30 4,830.63 4,980.63 16.88
100 oz .999 bar 100.00 1,692.50 1,752.50 17.53
10 oz .999 bar 10.00 175.25 176.25 17.63
1 oz .999 round 1.00 17.13 17.68 17.68
Am Eagle, 200 oz Min 1.00 18.53 19.38 19.38
SPOT PLATINUM: 1,222.40      
Plat. Platypus 1.00 1,247.40 1,287.40 1,287.40
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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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