The Moneychanger
Daily Commentary
Wednesday, 11 March a.d. 2015 Browse the commentary archive

Rather than answer this question many times, why don't I economically tell everybody now why I believe the dollar is rising, some fact, some opinion.

Main determinant of currency exchange rates is relative interest rates. Other things being equal (OTBE), the currency paying the highest interest rate will have the highest exchange rate -- just a matter of equalizing prices.

But other things never are equal (OTNAE), because central banks depreciate ("inflate") their currencies at different speeds. Generally, the market discounts currencies they expect to depreciate.

Right now European & Japanese short term rates are actually negative. This is so stupid, so outlandish, that it could only arise from central banking. If a bond pays negative 4%, you give some government $1000 today & a year from now they give you $960. Right, they actually CHARGE you for holding your money.

Low as the Fed has screwed them down, US interest rates are still higher than negative, and higher also than long term rates in Europe or Japan. Therefore, folks dump euros & yen and buying dollars, i.e., dollar bonds.

More than that, the guaranteed low interest and erstwhile steady exchange rates for years gave speculators a green light on the carry trade: sell euros or yen for dollars to invest in the Wall Street Casino. Only problem there is you have "borrowed" dollars and must pay them back. When the dollar begins rising, your short dollar position goes against you fast, and hell hath no torment like a short squeezed in a rising market.

Now the loudly & publicly proclaimed intent of the Euros & Japanese to depreciate their currencies AND relatively higher US interest rates are driving the dollar higher, not to mention whatever crowd of losing dollar carry trade shorts remain.

One last thing: demand for dollars is rising because corporations want to finance in euros or yen to take advantage of lower rates there. But to do that without currency exchange rate risk, they have to find dollar swaps from somewhere to hedge that risk. More upward pressure on the dollar's price.

And who knows what other Central-Bank-spawned cancers are eating at the economy's vitals and working out as symptoms in the currency market.

Whoops! And the Mexican peso is falling out of bed. Dollar has risen from 13.65 pesos when November began to about 15.65 today, a 12.8% loss. And Mexican authorities are making noises about selling US$52 million a day to "stabilize" the peso. No surer sign of a crisis than that.

Fellow Mushrooms, as part of its propaganda campaign today the blackhearted Federal Reserve criminals announced they had administered a "stress test" to all ("31") of the large US banks (fellow criminals) and all passed. "I dunno about you, Margaret, but that cinches it fer me -- if them starchy examiners at the Fed say the big banks is good, I reckon they is good." Look at the propaganda: "stress test," to resonate with the test the doctor gives you to check your heart. Clean bill of health!

There's a word for this cheap propaganda, but it's too scatological for me to use and remain a gentleman.

Stocks inched lower today, pausing in their earthward trajectory. Looking at today's chart, www.nasdaq.com, you might spy the fingerprints of the Nice Government Men preventing the plunge.

Dow fell only 27.55 (0.16%0 to 17,635.39. S&P lost 3.92 (0.19%) to 2,040.24. No panic yet, no blood on the floor, but the rally is broken. Panic erupts when the Dow closes below 17,037.76, the 1 February low.

Soaring dollar & plummeting stocks make me feel like a goldfish at an otter convention. Makes me think of September 2008.

Drops in silver & gold today sent the Dow in Gold & Dow in Silver back up to touch the top gator jaw again. Need confirmation before we can call an end to their upward travel.

US dollar index soared 115 basis points (1.17%) to reach 99.75 at close. Touched 99.97 high. Y'all remember back in mid-January when the dollar broke out upside again, I told y'all that when a market exceeds a top boundary line like that, you can double the size of the channel. That pointed the dollar index to 100. Here's a chart. http://scharts.co/1HEYhF1

Euro might as well go home. Lost another 1.26% to close at $1.0546, closing in on parity with the dollar. Ne'er a sign of turning up.

Yen lost 0.26% to end at 82.35. It has broken down out of its sidewise range, but the bottom line of that range might as well be 82.20.

WTIC remains in its range although it fell 1.21% to $48.17/barrel.

Gold lost $9.40 (0.8%) for a Comex close at $1,150.70. Silver gave up 26.8 cents (1.72%) to 26.8.

Gold/Silver Ratio closed at 74.989, up only 0.9% from yesterday, but clearly broken out above the downtrend line. This is, or could be, a stout blow to our hopes. Silver's greater resilience than gold has been an upholder of optimism throughout this decline. Now it appears to have broken. Look at the chart, http://scharts.co/1Fq4lmt

I won't repeat all I've said about Bollinger bands, but silver closed below its 2 standard deviation BB today, not below 3 sigma. Clearly wants to break down & unless it turns up immediately, it will. Oddly enough, the 3-sigma BB today is at 1504c, the November low.

Gold's 3 sigma BB stands at $1,139. today, against a low of $1,146.50. Gold is heavily oversold (RSI at 25 today where 30 is oversold), but there is precious little other evidence it might turn around. We just have to watch and wait. Closing in on a bottom..

On 11 March 1918 the first case of Spanish flu was reported at Fort Riley, Kansas. An estimated 10 to 20% of those infected died. 3% to 6% of the entire world population died, 50 - 100 people. Influenza may have killed more than the Black Death. By 1920 it had burned itself out.

Oddly, it killed mostly young adults (20-40). Most likely to die were pregnant women. God preserve us from another epidemic like the flu!

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
11-Mar-15 Price Change % Change
Gold, $/oz 1,150.70 -9.40 -0.81%
Silver, $/oz 15.35 -0.27 -1.72%
Gold/Silver Ratio 74.989 0.685 0.92%
Silver/Gold Ratio 0.0133 -0.0001 -0.91%
Platinum 1,120.50 -14.10 -1.24%
Palladium 789.05 -14.70 -1.83%
S&P 500 2,040.24 -3.92 -0.19%
Dow 17,635.39 -27.55 -0.16%
Dow in GOLD $s 316.81 2.08 0.66%
Dow in GOLD oz 15.33 0.10 0.66%
Dow in SILVER oz 1,149.26 17.96 1.59%
US Dollar Index 99.75 1.15 1.17%
IMPORTANT NOTE: The following are wholesale, not retail, prices. To figure our retail selling price, multiply the "ask" price by 1.035. To figure our retail buying price, multiple the "bid" price by 0.97. Lower commissions apply to larger orders, higher commissions to very small orders.
SPOT GOLD: 1,153.80      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,183.80 1,194.18 1,194.18
1/2 AE 0.50 593.69 608.63 1,217.26
1/4 AE 0.25 296.85 310.08 1,240.34
1/10 AE 0.10 121.04 126.34 1,263.41
Aust. 100 corona 0.98 1,121.91 1,130.91 1,153.75
British sovereign 0.24 273.64 278.64 1,183.69
French 20 franc 0.19 217.03 221.03 1,183.88
Krugerrand 1.00 1,167.65 1,177.65 1,177.65
Maple Leaf 1.00 1,161.80 1,178.80 1,178.80
1/2 Maple Leaf 0.50 663.44 605.75 1,211.49
1/4 Maple Leaf 0.25 294.22 308.64 1,234.57
1/10 Maple Leaf 0.10 122.30 125.76 1,257.64
Mexican 50 peso 1.21 1,381.28 1,392.28 1,154.75
.9999 bar 1.00 1,157.84 1,169.80 1,169.80
SPOT SILVER: 15.47      
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 11,811.80 12,169.30 17.02
US 40% silver 1/2s 0.30 4,371.90 4,521.90 15.33
100 oz .999 bar 100.00 1,537.00 1,597.00 15.97
10 oz .999 bar 10.00 159.70 160.70 16.07
1 oz .999 round 1.00 15.57 16.07 16.07
Am Eagle, 200 oz Min 1.00 16.97 17.77 17.77
SPOT PLATINUM: 1,120.50      
PLATINUM Fine Tr.Oz. BID ASK $/oz
Plat. Platypus 1.00 1,135.50 1,165.50 1,165.50
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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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