The Moneychanger
Daily Commentary
Wednesday, 25 February a.d. 2015 Browse the commentary archive

Two worried looking dogs are sitting on a street corner while grimfaced people walk by. One dog says to the other, "What's all this I hear about global worming?"

First the investigation, then the cover-up: Zero Hedge reported yesterday that the US "Justice" (their fame begs the quotation marks) Department is investigating ten megabanks for gold price rigging.

Janet Yellen spoke to congress yesterday, & generally pushed off into the future's dim mists any raising of interest rates. That didn't work as well for stocks as it usually does, raising the Dow 95 and the S&P500 5.8 Today they went nowhere: Dow climbed up 15.38 (0.08%) to 18,224.05 but the SUP500 backed up 1.82 (0.08%). Whoops! Apple dropped 2.5% today, probably on news they lost $583 million in a lawsuit.

Many stock indices have in recent days broken through resistance points to new highs. That can mean two things: stocks either WILL, or WILL NOT extend their long bull market with another leg. The WILL side says that having broken through resistance of long standing, they must now continue. Right, except that often at the VERY top markets will overthrow their upper resistance in a breakout that fizzles into a fakeout. That's the reason we want to see them pass that resistance by 2 or 3% before they confirm a breakout upside.

The WILL NOT side says, let's see that confirmation, first. Then there will be plenty of time to talk about new legs up.

I don't say a durned thing, 'cause I'm just a nat'ral born durned fool from Tennessee, & not fit to rub my overalled shoulders with them silk Armanis on Wall Street.

Dollar dropped 29 basis points (0.31%) to 94.22, below the 20 DMA but not enough to break it down out of that triangle. That needs a close below 94 and might come tomorrow. Sorry Euro rose 0.14% to $1.1359. Yen can't move much, rose 0.09% to 84.12. Both of 'em waiting on a dollar plunge.

That tide moving out of US government securities has turned the other way and the yield is falling again. WTIC rose 3.8% to $51.03, which makes its dip through the uptrend line look like a fakeout.

Gold and silver are confusing me, blowing hot and cold out of both sides of their mouth. Gold rose $4.10 (0.34%) today to $1,201 but silver climbed 24.2 cents (1.5%) to 1642.4c.

My first bewilderment arises from the Gold/Silver ratio. It made a diamond reversal, and has respected the downtrend line from that reversal. Now today it closes a at new low for the move (73.125), and below the intertwined 20 & 50 DMAs. Normally a falling gold/Silver ratio accompanies RISING metals. Why is the ratio calling for higher metals' prices? Anomaly?

Both the Dow in Gold & Dow in Silver are reaching for the top of their Gator Jaws formations. Sure, if stocks rose much higher or if silver & gold plummeted, they could reach that top jaw & shoot right through. However, broadening tops are generally quite reliable & don't behave that way.

After two days puncturing but not closing below the uptrend line from early November, gold spent the whole day above that line. Admittedly, it didn't pull away from that line or close much higher, but it stopped the bleeding. Also possible that gold rallies from here, but can't make it past its 200 day moving average (1,249) or last high ($1,307.80). However it eventually turns out, it appears the next gold move will be up and not down, if gold keeps hanging on by its fingernails tomorrow.

Silver jumped above an internal downtrend line. Not bad. Just above is the 50 DMA at 1674c. Here, too, we have to be careful not to confound a short reaction rally with a longer, genuine rally.

Yesterday I was sour on silver & gold, but they dropped to new lows day before yesterday, and fiddled yesterday, but recovered today. Momentum & trend indicators seem to want to turn up, although they haven't yet. I think a little rally is building, lasting or not.

The more things change, the more they stay the same. On 25 February 1791 President Washington signed a bill creating the Bank of the United States, which the Hamiltonians wanted to turn into a central bank. First & Second Banks of the US (they had charters that expired after 20 years in those days, not like the Fed today) caused political & economic turmoil for nearly the next half century.

Which just goes to show, a country without a central bank is like boar hog without a curling iron.

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
25-Feb-15 Price Change % Change
Gold, $/oz 1,201.00 4.10 0.34%
Silver, $/oz 16.42 0.24 1.50%
Gold/Silver Ratio 73.125 -0.840 -1.14%
Silver/Gold Ratio 0.0137 0.0002 1.15%
Platinum 1,172.80 6.20 0.53%
Palladium 807.30 18.05 2.29%
S&P 500 2,113.86 1.82 0.09%
Dow 18,224.05 15.38 0.08%
Dow in GOLD $s 313.68 -0.81 -0.26%
Dow in GOLD oz 15.17 -0.04 -0.26%
Dow in SILVER oz 1,109.60 -15.64 -1.39%
US Dollar Index 94.22 -0.29 -0.31%
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SPOT GOLD: 1,203.50      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,233.59 1,245.62 1,245.62
1/2 AE 0.50 619.29 634.85 1,269.69
1/4 AE 0.25 309.64 323.44 1,293.76
1/10 AE 0.10 126.26 131.78 1,317.83
Aust. 100 corona 0.98 1,170.23 1,179.23 1,203.05
British sovereign 0.24 285.43 290.43 1,233.77
French 20 franc 0.19 226.38 230.38 1,233.95
Krugerrand 1.00 1,220.35 1,230.35 1,230.35
Maple Leaf 1.00 1,211.50 1,228.50 1,228.50
1/2 Maple Leaf 0.50 692.01 631.84 1,263.68
1/4 Maple Leaf 0.25 306.89 321.94 1,287.75
1/10 Maple Leaf 0.10 127.57 131.18 1,311.82
Mexican 50 peso 1.21 1,440.78 1,451.78 1,204.10
.9999 bar 1.00 1,207.71 1,219.50 1,219.50
SPOT SILVER: 16.49      
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 12,505.35 12,862.85 17.99
US 40% silver 1/2s 0.30 4,672.80 4,822.80 16.35
100 oz .999 bar 100.00 1,639.00 1,699.00 16.99
10 oz .999 bar 10.00 169.90 170.90 17.09
1 oz .999 round 1.00 16.59 17.09 17.09
Am Eagle, 200 oz Min 1.00 17.99 18.79 18.79
SPOT PLATINUM: 1,172.80      
Plat. Platypus 1.00 1,187.80 1,217.80 1,217.80
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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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