On Friday I warned y'all it could be a bloody week. The bloodletting started early.

US DOLLAR INDEX continues to rise. During the day it added 34.2 basis points (0.44%) to trade at 80.643, and in the last couple of hours in the aftermarket it has risen to 80.696. Dollar strength stabbed the euro today. It lost 0.74% for a new 4-1/2 month low. 'Twas only lower at the bottom it made middle of January ($1.2624). Euro gapped down today & wound up at $1.2824. Watch out! Everybody in the world is short euros, which sets the market up for a sudden, sharp (as in knife in your back) rally. The yen temporized, rose 0.9% to 125.23c (Y79.85/US$1). Trending treetop-ward.

Between the dollar index and 89 stands only thin resistance about 81.75. Of course, who can scope out, much less foretell, what will move the minds of central banking Nice Government Men? Today they're all strong dollar, tomorrow without warning they go weak dollar. This is not a rational undertaking, so we just look at the chart & watch.

Folks are confused about why stocks & silver & gold are moving together. Life is more subtle than you might expect. Inflation drives both stocks & silver & gold as people run to buy real things to escape depreciating currency. At some remove, stocks do represent the brick and mortar of the underlying firm (if they have any bricks or mortar & not merely software and a website), but because stocks' performance is bound to the economy & because inflation wrecks an economy, stocks never perform as well as silver & gold over the life of an inflation. Far less profitable.

However, that's the long term & in the short term investors have convinced themselves that the dollar (in the teeth of the European crisis) is "low risk" and everything else is "high risk," and they are running for cover. This will pass, and stocks & metals again decouple when inflation perceptions again rise.

Proof that stocks underperform is found on the Dow/Gold or Dow/Silver chart. So far stocks have lost about 80% of their value against metals. They will lose another 80% or more before this inflationary episode or Depression ends.

Look at the five-day Dow chart at http://quotes.ino.com/chart/?s=INDEX_DJI You can plainly see that it breached support put in place from Wednesday to Thursday around 12,800. Thence it fell nearly to 12,650, so 12,800 now becomes resistance to any Dow rally.

Dow closed today at 12,695.35, down 125.25 or 0.98%. S&P 500 lost 15.4 (1.11%) to 1,338.35.

Dow in Gold Dollars offers the only question mark here. It has NOT been falling. That is, both stocks and gold have fallen, but gold has fallen minutely more. This sends the DiG$ bumping against its last high. Why doesn't that signal it is about to break higher? Because it has formed a diamond, a topping formation, & these frustrating patterns, especially in slow turning stocks, can take a long time to finish.

GOLD lost $23 today and ended at $1,560.60. Silver lost 53.9 cents to close at 2831.9c. Bloody, as I warned.

Gold's high today at $1,582 never even reached Friday's $1,583.6 close. Gold posted a new low for the move, and of course these lower prices have demolished any thought of a rally from that now spoiled falling wedge. Gold stopped today at a $1,556.10 low, about the location ($1,562.50) of its next to the last December low. Ultimate low came at $1,523.90. Most likely this gold decline, which has lasted now 11 weeks, is nearing its completion. Still, that last (December) low at $1,523.90 is the next logical stopping place. RSI is more oversold than it was at the December low.

Silver's 2819c low today matched its early December 2312c low. Comparing silver's position against its 300 day moving average today shows it at the same percentage asat the December low. Nothing says it cannot tumble more, but that number & other moving averages suggest silver will find its feet sometime soon. Ultimate December low was 2615c, making that the logical target. Personally I am guessing it will stop around 2800c.

GOLD/SILVER RATIO today inched over 55 to stop at 55.107. If you still have gold to swap for silver & no longer want to wait for my 57.5 target, I wouldn't blame you for swapping here.

Have y'all ever watched a cat staring at a mouse hole in the woodwork? He stares & stares with infinite patience, until at last he snares a mouse. Right now, silver & gold investors have to possess that selfsame patience.

On 14 May 1643 at age 4 Louis XIV became King of France. Known as the Sun King for his vainglorious displays, his reign would leave the nation bankrupt, and set the stage for the French Revolution. He reigned longer than any other king in European history, 72 years 110 days, and centralized power in the state/himself. His absolutism paid off at the guillotine.

On 14 May 1878 Robert A Chesebrough registered the name "Vaseline." At first the patent office thought it was the name for a small flower holder.

Please note that I will be travelling from 19 May through 1 June, and will not be publishing commentaries during that time. I will, however, have prices sent to y'all daily. Yes, I am taking a vacation with my wife, doing something we never before have done: taking a cruise.

Argentum et aurum comparanda sunt —
Silver and gold must be bought.

— Franklin Sanders, The Moneychanger

Copyright Notice

© 2015 Little Mountain Corporation, d.b.a. The Moneychanger. All rights reserved. May not be republished in any form, including electronically, without our express permission.

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.

Other Important Information

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