The Moneychanger
Weekly Commentary
Friday, 20 February a.d. 2015 Browse the commentary archive
Here's the weekly scorecard:
  13-Feb-15 20-Feb-15 Change % Change
Silver, cents/oz. 1,727.80 1,626.30 -101.50 -5.9
Gold, dollars/oz. 1,226.50 1,204.40 -22.10 -1.8
Gold/silver ratio 70.986 74.058 3.071 4.3
Silver/gold ratio 0.0141 0.0135 -0.0006 -4.1
Dow in Gold Dollars (DIG$) 303.70 311.36 7.65 2.5
Dow in gold ounces 14.69 15.06 0.37 2.5
Dow in Silver ounces 1,042.91 1,115.44 72.54 7.0
Dow Industrials 18,019.35 18,140.44 121.09 0.7
S&P500 2,096.99 2,110.30 13.31 0.6
US dollar index 94.22 94.43 0.21 0.2
Platinum 1,210.50 1,172.90 -37.60 -3.1
Palladium 794.75 779.20 -15.55 -2.0

Great week for paper investments, ending with a deal between Greece & the Europeans. Dow & S&P500 hit new highs, & will probably rise more still. Silver & gold have stalled & are living under a cloudy question mark. US dollar index can't rise but won't fall. White metals got clubbed all week. Whew. I'm looking forward to some quiet this weekend.

Greece's newly-elected socialists climbed down off their high horse and hat in hand took whatever deal they could get. European finance ministers agreed to extend Greece's bailout for four months, but the Greeks have only until Monday to outline what measures they intend to take & show they are not abandoning "austerity." For the Greeks, there is some hope it can ease the conditions of its bailout loans. In other words, this is the typical "Made in Europe" deal that solves nothing and merely kicks the can of Kalamata olives down the road a little further.

What's that proverb that keeps rattling in my head? "The borrower is the lender's slave." That one holds always & everywhere.

The Greek "deal" (deal-ette?) sent Candide on a buying spree in the stock market, driving both the Dow & the S&P500 to new all time highs. Dow rose 154.67 (0.86%) to close at 18,140.44, versus 18,053.71 on 26 December. S&P500 added 12.85 (0.61%) for a 2,110.30 close against the last high at 2,100.34 on 17 February. Look at the Dow chart here, http://scharts.co/1zUjdRS

Those new highs are cleanly above the old & point to higher prices still as economic reality fades further and further away in the rearview mirror.

Dow in Gold rose 1.01% to G$311.32 (15.06 troy oz), headed for the top Gator Jaw. Look at the chart here, http://scharts.co/1657Y1x

Dow in silver is playing the same game, rising toward that top jaw. Reached S$1,441.31 silver dollars (1,114.76 tr. Oz), rising 1.31%. Chart's at http://scharts.co/1FEzUcg

US dollar index has traded out into a long narrow even-sided triangle. Looks like this, http://scharts.co/1FECcYL A triangle like that tells you nothing about which way it will run, only that it will. However, the dollar has been trending up since July, & hasn't managed much of a correction yet, so it's more likely to break out up than down. Needs to close well below 94 to fall out of bed. A close above 95.25 sends it higher.

Even with the Greek deal the scabby euro did no more than rise 0.12% & close at $1.1380, barely above its 20 DMA ($1.1352). It has sketched out a timid uptrend, but needs a close above $1.1500 to reach escape velocity.

Yen has traded sideways long enough to intertwine its 50 & 20 day moving averages, but could close above neither today. Dropped 0.02% to 84.03 cents/Y100. No direction.

West Texas Intermediate crude is climbing an uptrend line, but acts like it might want to give it up. Fell 2.61% today to $50.81/barrel.

On Comex today gold dropped $2.70 (0.22%) to $1,204.40 while silver peeled off 0.66% or 10.8 cents to perch at 1626.3.

Time to look 'em in the eye and talk serious. Go look at gold, http://scharts.co/1yVVNjn It stands at a make or break cliff: either that blue uptrend line off the November low will hold or it will drop and re-visit one of those previous lows, December's $1,167 or November's $1,130. Indicators are indecisive & only one is whispering "Higher -- maybe." Gold stand below its 20, 50, & 200 day moving averages and the 20 today crossed beneath the 200. Momentum is down, as we look behind us. Most of the time looking at these charts I feel like I am driving a pick-up 100 mph down a road by looking in the rearview mirror. I look for some sign the road aims to turn, and just hope I don't miss it. But at the turns, up or down, you're still looking in that rearview mirror. Just hope you don't wreck the truck.

The Dow in Gold is telling us something, too, namely that stocks will outrun silver & gold for another month or more. That doesn't necessarily mean the dollar gold price will drop, but strongly suggests that. A gold price break of $1,202 - $1,997 shouts it.

Silver formed a bullish falling wedge, broke out of that upside, on 13 February, then the following Tuesday gave back all that gain and fell clean to the bottom of that wedge. Failed breakout. Now it's riding along the bottom boundary of that wedge, making me remember there's no law that says a falling wedge can't surprise & break out downside.

Assuming there's a normal distribution in statistics (a BIG assumption with any market), then two standard deviations (standard deviation or sigma measures how variable the data are) plus or minus the mean will catch 95% of all the readings. Push that out to 3 sigma or standard deviations, and you'll catch 99.7% of the possible readings. Bollinger bands use the 20 day moving average as that mean, and usually uses 2 sigma. Push it out to three & you plumb near embrace everything that can happen.

So I tried that with silver and that 3 sigma on the low side stands today at 1541c. Look here, http://scharts.co/1FEJoUK I say that not to set a target, but merely to point out that's near the lowest price we might expect from silver. Of course, it could surprise and turn around & climb out of that wedge.

All this will come plain next week. Should gold hold that uptrend line then silver won't fall out of bed either. If gold breaks, so will silver. For some reason not present in my conscious mind, I expect that uptrend line to hold, but I sure wouldn't swing over hell using that for a rope.

If silver & gold do break next week, y'all have a buying opportunity a little later in your future. If they give us some confirmation they intend to hang on here, then that's another reason to buy. As I said, this is a make or break point.

On 20 February 1839 Congress prohibited duelling in the District of Columbia. Personally, I think they ought to un-prohibit it. That's break up that log-jam in congress, or at least sprinkle in some new faces.

On 20 February 1862 Texas Rangers won a victory for the South in the Battle of Val Verde, New Mexico.

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
20-Feb-15 Price Change % Change
Gold, $/oz 1,207.10 -2.70 -0.2
Silver, $/oz 16.37 -0.11 -0.7
Gold/Silver Ratio 73.734 -0.160 -0.2
Silver/Gold Ratio 0.0136 -0.0001 -0.7
Platinum 1,172.90 -2.90 -0.2
Palladium 779.20 -7.60 -1.0
S&P 500 2,110.30 12.85 0.6
Dow 18,140.44 154.67 0.9
Dow in GOLD $s 310.66 3.37 1.1
Dow in GOLD oz 15.03 0.16 1.1
Dow in SILVER oz 1,108.08 16.65 1.5
US Dollar Index 94.43 -0.06 -0.1
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SPOT GOLD: 1,201.80      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,233.05 1,243.86 1,243.86
1/2 AE 0.50 612.41 636.95 1,273.91
1/4 AE 0.25 309.21 322.98 1,291.94
1/10 AE 0.10 126.08 132.20 1,321.98
Aust. 100 corona 0.98 1,169.76 1,178.76 1,202.57
British sovereign 0.24 285.03 290.03 1,232.05
French 20 franc 0.19 226.06 230.06 1,232.24
Krugerrand 1.00 1,216.22 1,226.22 1,226.22
Maple Leaf 1.00 1,216.80 1,231.80 1,231.80
1/2 Maple Leaf 0.50 691.04 630.95 1,261.89
1/4 Maple Leaf 0.25 306.46 321.48 1,285.93
1/10 Maple Leaf 0.10 127.39 131.00 1,309.96
Mexican 50 peso 1.21 1,438.75 1,449.75 1,202.41
.9999 bar 1.00 1,206.01 1,217.80 1,217.80
SPOT SILVER: 16.20      
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 12,298.00 12,655.50 17.70
US 40% silver 1/2s 0.30 4,587.25 4,737.25 16.06
100 oz .999 bar 100.00 1,610.00 1,670.00 16.70
10 oz .999 bar 10.00 167.00 168.00 16.80
1 oz .999 round 1.00 16.30 16.85 16.85
Am Eagle, 200 oz Min 1.00 17.70 18.55 18.55
SPOT PLATINUM: 1,172.90      
PLATINUM Fine Tr.Oz. BID ASK $/oz
Platinum Platypus 1.00 1,197.90 1,237.90 1,237.90
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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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