The Moneychanger
Daily Commentary
Tuesday, 21 July a.d. 2015 Browse the commentary archive

I have the oddest feeling I am witnessing 2008 in slow motion. I mean the metals markets, of course. During that fall panic premiums on all forms of silver shot up and physicals prices de-coupled from futures prices. It didn't matter that the futures price was 880c, you couldn't buy any physical silver at all for less than 1320c, a 50% premium or higher. Delivery was delayed for eight weeks. Gold premiums weren't as strongly affected, but gold deliveries were as badly delayed.

Now US90% is carrying a 23.5% premium (350 cents/oz) at wholesale, more expensive even than silver American Eagles. The US mint has suspended silver American Eagle deliveries, and other privately minted silver rounds are two to three weeks out. I feel lucky to have a few in stock.

Maybe I've been listening to the wind in the tulip poplars too long, but a weird urgency hangs over things.

Somebody asked me about rumors of China dumping gold. Me, I have no way of knowing, but I doubt it. China ain't gold's problem, western central banks, and especially the Fed and US government, are.

I've been thinking about that Gold, and I got to looking at the Relative Strength Index. Invented by the great commodity trader Welles Wilder, it's a momentum oscillator that measures speed and change of price movements. RSI oscillates between zero & 100, but is overbought above 70 and oversold below 30.

Yesterday, 20 July 2015, the gold RSI was more oversold at 18.46 than at any time since the fiasco days of 2013 when the nearest RSI reading to the bottom was 19.71 (15 April 13 read 15.3). Before that, you have to stretch back to 19 July 1999 bottom with an RSI at 26.26. (Readings in June 1999 were lower).

Another odd thing: the RSI sometimes makes it low a day before, the price low. Yesterday the RSI closed at 18.46, today it's at 21.16. That caught my eye.

So backing off from the RSI trees, here's the forest: gold's RSI is lower than at any time since the 1999 lows, except for the 2013 waterfall. Those low readings coincided with bottoms.

Today on the Comex gold closed at $1.103.40, $3.30 lower than yesterday. But on an End of Day chart it closed $3.50 higher. Either way today's low at $1,095.90 was higher than yesterday's $1,080.00. http://schrts.co/CIgMn2

Comex silver today gained a meaningless 2.4 cents to 1476.9c. Low today at 1461c was higher than yesterday's 1449c. http://schrts.co/oxbvzX

Unlike gold, silver's RSI is not oversold, although it was more oversold than today at the 7 July low. As volume was also significantly higher on the 7 July low and lower yesterday, that's the sort of thing that suggests a double bottom, but no confirmation yet.

The Gold/Silver Ratio fell another 1/2% today to 74.711. That does not support any expectation of a further plunge, since the ratio is moving exactly the opposite way it would in a plunge. It closed below its 20 day moving average today and the uptrend line from the April 2011 low. It's MACD has turned down. Go look at it: http://schrts.co/kh9gOy It's set to fall further, which argues that it's whispering that silver & gold will turn around.

Silver & gold need to show a sharp reversal, preferably a drop into a slightly new low with a higher close for the day. Or a nice big jump over 1500c and $1,130 would do, too.

Stocks lost all their gas today and crumpled like a leaky dirigible. Dow lost 181.12 (1%) to 17,919.29, below the morale-bustin' 18,000 line. S&P500 gave up 9.07 (0.43%) to 2,119.21. Dow closed below its 50 DMA.

Dow in gold and Dow in silver turned sharply down. See http://schrts.co/47R5we and http://schrts.co/ohwLZP

Dollar index crashed out of that bearish rising wedge today in a textbook downside resolution. Fell 72 basis points (0.73%) to 97.44 like your Grandpa's upper plate falling down the well. Doesn't say the dollar index can't rally higher later, only that it will take a rest for a few days now. Only a close below 93.15 would turn the dollar unarguably down. http://schrts.co/OkJ5UT

One day soon stocks will begin coming apart and silver & gold rising. Sometimes you don't even know the turnaround day when you see it.

On 21 July 1861 the Confederate States Army with 34,000 troops scattered the Union Army with 35,000 at First Manassas. A brigade of Virginians under an unknown brigadier general from Virginia Military Institute, Thomas Jonathan Jackson, stood their ground when South Carolina troops under General Bee began to break. Bee rallied his troops by shouting, "There stands Jackson like a stone wall. Let us determine to die here, and we will conquer. Rally behind the Virginians! Thus the obscure general earned a nickname for himself and his brigade: "Stonewall." Bee was mortally wounded immediately after that.

Unhappily, the Confederacy's great victory was not exploited because General PGT Beauregard, the nemesis of the Confederacy, was in charge and neglected to press on toward Washington, managing to snatch defeat from the jaws of victory.

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
21-Jul-15 Price Change % Change
Gold, $/oz 1,106.70 -3.30 -0.30%
Silver, $/oz 14.75 0.02 0.16%
Gold/Silver Ratio 75.056 -0.347 -0.46%
Silver/Gold Ratio 0.0133 0.0001 0.46%
Platinum 986.00 -4.20 -0.42%
Palladium 628.45 17.40 2.85%
S&P 500 2,119.21 -9.07 -0.43%
Dow 17,919.29 -181.12 -1.00%
Dow in GOLD $s 334.71 -2.38 -0.71%
Dow in GOLD oz 16.19 -0.12 -0.71%
Dow in SILVER oz 1,215.28 -14.28 -1.16%
US Dollar Index 97.44 -0.72 -0.73%
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: 1,101.60      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,135.75 1,140.16 1,140.16
1/2 AE 0.50 561.31 581.09 1,162.19
1/4 AE 0.25 283.40 296.06 1,184.22
1/10 AE 0.10 115.56 120.63 1,206.25
Aust. 100 corona 0.98 1,072.23 1,081.23 1,103.07
British sovereign 0.24 261.26 274.26 1,165.09
French 20 franc 0.19 207.21 211.21 1,131.29
Krugerrand 1.00 1,121.43 1,131.43 1,131.43
Maple Leaf 1.00 1,109.60 1,125.60 1,125.60
1/2 Maple Leaf 0.50 633.42 578.34 1,156.68
1/4 Maple Leaf 0.25 280.91 294.68 1,178.71
1/10 Maple Leaf 0.10 116.77 120.07 1,200.74
Mexican 50 peso 1.21 1,321.45 1,332.45 1,105.12
.9999 bar 1.00 1,105.46 1,113.60 1,113.60
SPOT SILVER: 14.87      
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 12,634.05 13,134.55 18.37
US 40% silver 1/2s 0.30 4,194.90 4,344.90 14.73
100 oz .999 bar 100.00 1,477.00 1,527.00 15.27
10 oz .999 bar 10.00 147.70 153.20 15.32
1 oz .999 round 1.00 14.97 15.47 15.47
Am Eagle, 200 oz Min 1.00 16.37 17.22 17.22
SPOT PLATINUM: 986.00      
PLATINUM Fine Tr.Oz. BID ASK $/oz
Plat. Platypus 1.00 1,001.00 1,031.00 1,031.00
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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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