Wednesday, February 26, 2014

The Gold Price Gave Up $14.80 or 1.1% to End Comex at $1,328.20

Gold Price Close Today : 1328.20
Change : -14.80 or -1.10%

Silver Price Close Today : 21.254
Change : -0.709 or -3.23%

Gold Silver Ratio Today : 62.492
Change : 1.343 or 2.20%

Silver Gold Ratio Today : 0.01600
Change : -0.000352 or -2.15%

Platinum Price Close Today : 1428.20
Change : -13.85 or -0.96%

Palladium Price Close Today : 731.50
Change : -4.60 or -0.62%

S&P 500 : 1,845.16
Change : 0.00 or 0.00%

Dow In GOLD$ : $252.11
Change : $ 3.07 or 1.23%

Dow in GOLD oz : 12.196
Change : 0.148 or 1.23%

Dow in SILVER oz : 762.13
Change : 25.46 or 3.46%

Dow Industrial : 16,198.41
Change : 18.75 or 0.12%

US Dollar Index : 80.440
Change : 0.250 or 0.31%

Silver and GOLD PRICES fell back sharply today. Silver lost 70.9 cents or 3.23% to 2125.4 cents. The gold price gave up $14.80 (1.1%) to end Comex at $1,328.20.

The GOLD PRICE reach roughly it's October high ($1,361.80) with today's intraday high at $1,345.60. Whither from here? The 200 DMA stands at $1,305, major support/resistance at $1,300, and the neckline of the upside down head and shoulders gold broke out of stands about $1,380. Any of those might be targets, but gold will likely see several days of correction. A 50% correction of the end-December intraday low ($1,181.40) to today's intraday high ($1,345.60) would take the gold price to $1,263.50.

Biggest nailbiter is whether Gold will hold on here, or make one last plunge below the double bottoms of June and December. I don't expect that, but it is a possibility that I must confess.

The SILVER PRICE rising flag was already making me nervous yesterday, and I should have paid closer attention, especially with the RSI overbought. Today it dropped all the way down to the 200 DMA (2106c).

A 50% correction from the December low (1872c) to the move's high (2218) would pull silver back to 2045c. Coincidentally, 2050 is where silver made its giant breakout on 14 February. A 62% correction would send silver to 2000c.

These aren't prophecies, only forecasts and thinking out loud.

Right now we just wait to see where this will stop.

One good thing about this drop: it took the GOLD/SILVER RATIO up to 62.492, so you have a little more time to swap gold for silver above 60:1. I heartily recommend that swap.

A reader asked me to explain why some bullion coins, like Mexican 50 pesos and Austrian 100 coronas) are cheaper than others (like American Eagles and Maple Leaves, etc.).

The simple answer is found in the immortal words of Yogurt in the movie Space Balls: "Moichandizing!"

Copying the Krugerrand's success, all the modern coin mints distribute through 20 or 25 major wholesalers, and enforce a high premium (profitable to the mint) on the coins, higher as the coins get smaller. Without this cartel enforcing those high premiums, they collapse, as we saw in early 2000 after pre-Y2K buyers sold back all those American Eagles they had bought, knocking premiums down to zero.

If you remember nothing else, remember this: OVER TIME PREMIUM ALWAYS DISAPPEARS. As a bull market keeps sending silver or gold up, it also grinds away at those premiums. At the market peak (I've been there) NO COIN carries a premium. At peak, nobody asks what KIND of ounces you have, only "How many?"

Therefore you are throwing away money when you buy premium, like the higher premium on American Eagles and other modern issue coins. You will NOT recoup that premium when you sell. Same applies to so-called numismatic coins like US $20s and $10s. I have, by the way, charts of those premiums back to 1998 to prove that numismatic coins DO NOT outperform bullion. ("Numismatic" here means the common, plentiful semi-numismatic stuff some companies companies push, like US $20 golds. It doesn't include genuinely scarce coins like an 1804 dollar.) Generally they mark those coins up 45% so they can pay the salesman a 25% commission, unlike bullion dealers who work on a 3.5% to 1% markup.

Don't bother sending me emails correcting me with some boiler room salesman's sales pitch about confiscation, non-taxability, numismatic outperformance, non-reportability and other myths. I have 34 years' experience in this business, not one year's experience thirty-four times.

So why are Austrian 100 coronas and Mex 50s cheaper? Because their premiums are not supported by a marketing cartel. Those were the most popular gold coins in the world until the Krugerrand was introduced in 1968 with one marketing ploy: it contained an exact ounce of gold, not 0.9802 oz (A100c) or 1.2057 oz (Mx50p).

A coin can lose all its premium on the sell side, but arbitrage keeps them up on the buy side. If they fall much below their spot gold value, dealers will begin buying and melting them. That's why at wholesale no gold coin every falls much below a 2% discount (98% of melt value), since they're profitable to melt about there.

Often dealers "talk their inventories." If you ask about the lower premium coins, they'll badmouth them because they don't stock them and want to sell you what they have in stock. (Sorry, it's a fallen world.) But it's always in your interest to buy the lowest cost silver and gold you can get, because OVER TIME PREMIUM ALWAYS DISAPPEARS.

And no matter how many times I explain all this, some people still buy high premium American Eagle gold and silver coins, and that's fine. I tell people, "I'm your servant, not your master. Buy what you're comfortable with, not what I'm comfortable with."

How much do you save with the Austrian or Mexican coins? Today about $40 an ounce. Not much if you're buying one ounce, but you get nearly a quarter ounce free on ten ounces, nearly three ounces free on a hundred.

Some dealers will also say that the Austrian or Mexican or other coins are hard to sell back (aren't liquid). That is not true. Also, they'll tell you the Mexicans have been heavily counterfeited. There have been a few counterfeits, but not good enough to fool any dealer worth his scale, so that's no problem.

Stocks were flat today. S&P500 rose 0.04 to 1,845.16 against yesterday's 1,845.12. Who-hoo. Dow rose 18.75 (0.12%) to 16,198.41. Dow is refusing to confirm new highs in other indices, and those others are stuck.

Today's tumbles in silver and gold took the Dow in metals up. Dow in gold rose 1.08% to 12.18 oz (G$251.78 gold dollars). Dow in silver rose sharply, 3.62% or 26.68 oz, to 763.36 oz and above the 742.91 oz 200 DMA.

US dollar index awoke today, but not like a giant refreshed with wine. Climbed 25 basis points (0.31%) to 80.44. It is still range trading in the lower third of its range, below all its moving averages. Today may mark a change in attitude, but the dollar index will have to show us.

Didn't take much from the dollar to knock the stuffing out of the euro. It fell 0.43% to $1.3686 and trying to turn down. Yen dropped 0.22% to 97.7 cents/Y100 and no change.

Argentum et aurum comparenda sunt -- -- Gold and silver must be bought.

- Franklin Sanders, The Moneychanger

© 2014, The Moneychanger. May not be republished in any form, including electronically, without our express permission. 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 is up targeting 16:1 gold/silver ratio or $195.66; stocks' primary trend is down, targeting Dow under 2,900 and worth only one ounce of gold or 18 ounces of silver. or 18 ounces of silver. US $ and US$-denominated assets, primary trend down; real estate bubble has burst, primary trend down.

WARNING AND DISCLAIMER. 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 one 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.

One final warning: NEVER insert a 747 Jumbo Jet up your nose.