The Moneychanger
Daily Commentary
Wednesday, 8 July a.d. 2015 Browse the commentary archive

Y'all remember those old cartoons from the 1930s & 1940s when some character would hit a clock with a hammer & springs & clock parts would fly out of the clock? Imagine somebody like that hitting the world's stock markets & economy with a hammer.

It gets worse. Shanghai composite lost another 5.9% today & from the 11 June high has now fallen 32%. Like King Canute trying to command the sea, today the Chinese suspended trading in at least a third of the companies listed on the major exchanges. And Brokerage houses have been ordered to pump billions back into the market. The fun part is that most of the investors are retail investors, small time folk investing their life savings in the market for the first time. That promises a deep well of social unrest and further economic troubles.

It gets worse still. From about 11:30 todayfor 4 hours the New York Stock Exchange halted trading due to a "computer glitch". Exchange officials were quick to deny it was a cyber attack, which forces me to recall the French proverb, "Nothing is confirmed until officially denied." Truth is, business & government officials in the US have told so many lies for so long that you never know what to believe: is it real, or Memorex? Oddly enough, the Wall Street Journal experienced computer troubles, too, and United Airlines was forced to ground all US flights because of, you guessed it, computer issues.

If you were going to wage war, what a efficient way to wage it, crippling your enemy's economy without his ever knowing where the attack comes from, leaving him absolutely defenseless.

Enough of this fun, let me share something with y'all. Day before yesterday an overseas friend sent me a summary of gold's summer seasonal rallies from 2001 through 2014. Now y'all listen, this is important: from the summer low in June, July, or August to the next peak, gold has rallied every single year an average of 14.9%. Yes, that does include the last 4 bear years.

I couldn't resist doing the same for silver. Every single year 2001 - 2014 silver rallied off summer lows (one on 30 May, rest June, July) substantially -- an average 26.9%. No exceptions.

I checked year-end prices, too. On average from the summer silver low to year-end silver gained 15.6%. In only 5 years was the year-end price not higher than the summer low: 2008 (financial crisis), 2011, 2013, & 2014, those last bear market years.

I'm counting that as supporting my presupposition we are seeing summer lows, or at least decreasing the riskiness of it.

The halt on the NYSE did not mean stocks could not be traded on other exchanges, so investors took advantage of that flexibility to SELL elsewhere. Dow waterfalled 261.49 (-1.47%) to 17,515.42 -- the lowest close since 3 February. S&P500 cascaded 34.66 (-1.53%) to 2,046.68.

You are seeing gator jaws within gator jaws within gator jaws snapping shut.

Dow is now firmly below its 200 DMA. So, too, is the S&P500, at its lowest since March. Ditto for the Dow Jones Composite, Dow Transports, & Dow Utilities. It's a breakdown whichever way you look.

WHOOOOEE! If you were here you would hear my Rebel yell when I looked at the Dow in Gold, which plunged straight down today from yesterday's 15.41 oz double top above the top gator jaw & ended below its 20 & 50 DMAs. See I've been telling y'all, The Gator Don't Lie. DiG ended at 15.13 oz.

Dow in silver punched through the top jaw yesterday, too, but today only fell back to it. It will follow through lower soon.

US dollar index - Thanks to the Nice Government Men?? -- fell back today below 96.50 to 96.47, losing a large 60 basis points (0.62%). Odd, but it doesn't invalidate the uptrend, or even the breakout. It fell barely back into the even-sided triangle, & should continue rising.

Raising more suspicions, the euro, which has all the same charms going for it as the anthrax bacillus, rose 0.66% today to $1.1076. In currency markets, when things don't trade as expected, there's a reason, & usually it's political.

Treasury yields fell slightly today (bond prices rose slightly), with no sign of reversing. Uptrend has been broken in the yield.

Silver climbed 17 cents (0.8%) to 1514.7 & gold regained $9.10 (1.14%) to close Comex (where, oddly enough, there was no computer glitch today) at $1,163.30. The Gold/Silver Ratio fell sharply during the day but ended down only 0.4%.

Bounce in the metals today tells us nothing, really. Day after a huge drop a bounce often happens. Dead cats bounce when you drop 'em off a 40 story building, but that's not a sign of life. I need proof.

Gold is certainly at a place where it might have stopped falling, given the summer seasonal pattern. But it could just as well fall further. Silver's low yesterday was 1462c, not far from that 1416c December 2015 low. Still, we need to see some technical sign it has turned. Certainly, hitting the 3-sigma Bollinger Bands yesterday points to a reversal, but now price action has to confirm. That means a two-day key reversal or a sudden climb above $1,170 & 1550c.

Since the US Mint suspended (not often I get to use that word twice in one commentary) deliveries of silver American Eagles, premium at wholesale has risen from $2.30 to $2.75. Interesting that the better alternative, US 90% silver coin, has been gaining premium and now is at $2.60 an ounce over spot at wholesale sell. That rising 90% premium also promises good days for silver.

And the reason yesterday's commentary was late reaching y'all? You guessed it, computer glitch on my website.

The year 1816 saw such record icy temperatures across the Northern Hemisphere that it was called the Year without a Summer. On 8 July 1816 frost was reported in Waltham, Massachusetts.

On 8 July 1889 the Wall Street Journal began publishing.

On 8 July 1896 presidential candidate William Jennings Bryan gave his famous cross of gold speech at the Democratic Convention in Chicago. Arguing for a return to gold/silver bi-metallism and away from the gold standard that had been imposed on the US, Bryan concluded his speech, "You shall not press down upon the brow of labor this crown of thorns; you shall not crucify mankind upon a cross of gold."

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
8-Jul-15 Price Change % Change
Gold, $/oz 1,163.30 9.10 0.79%
Silver, $/oz 15.15 0.17 1.14%
Gold/Silver Ratio 76.801 -0.264 -0.34%
Silver/Gold Ratio 0.0130 0.0000 0.34%
Platinum 1,036.10 -5.00 -0.48%
Palladium 652.50 1.10 0.17%
S&P 500 2,046.68 34.66 1.72%
Dow 17,515.42 -261.49 -1.47%
Dow in GOLD $s 311.25 -7.14 -2.24%
Dow in GOLD oz 15.06 -0.35 -2.24%
Dow in SILVER oz 1,156.36 -30.59 -2.58%
US Dollar Index 96.47 -0.60 -0.62%
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: 1,160.80      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,195.62 1,201.43 1,201.43
1/2 AE 0.50 591.50 612.32 1,224.64
1/4 AE 0.25 298.65 311.97 1,247.86
1/10 AE 0.10 121.78 127.11 1,271.08
Aust. 100 corona 0.98 1,132.13 1,141.13 1,164.18
British sovereign 0.24 275.30 288.30 1,224.73
French 20 franc 0.19 218.35 222.35 1,190.93
Krugerrand 1.00 1,177.05 1,187.05 1,187.05
Maple Leaf 1.00 1,168.80 1,184.80 1,184.80
1/2 Maple Leaf 0.50 667.46 609.42 1,218.84
1/4 Maple Leaf 0.25 296.00 310.51 1,242.06
1/10 Maple Leaf 0.10 123.04 126.53 1,265.27
Mexican 50 peso 1.21 1,392.46 1,403.46 1,164.02
.9999 bar 1.00 1,164.86 1,172.80 1,172.80
SPOT SILVER: 15.19      
SILVER Fine Tr.Oz. BID ASK $/oz
VG+ Morgan $B4 1905 0.77 23.00 26.00 33.99
VG+ Peace dollar 0.77 18.50 21.00 27.45
90% silver coin bags 0.72 12,362.35 12,719.85 17.79
US 40% silver 1/2s 0.30 4,289.30 4,439.30 15.05
100 oz .999 bar 100.00 1,509.00 1,559.00 15.59
10 oz .999 bar 10.00 150.90 156.40 15.64
1 oz .999 round 1.00 15.29 15.79 15.79
Am Eagle, 200 oz Min 1.00 16.69 17.54 17.54
SPOT PLATINUM: 1,036.10      
Plat. Platypus 1.00 1,051.10 1,081.10 1,081.10
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© 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.

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