The Moneychanger
Daily Commentary
Thursday, 3 December a.d. 2015 Browse the commentary archive

Today Gravity re-appeared, with a vengeance, holding hands with Reality, & they kissed.

Markets were expecting the European Criminal Bank to lower interest rates deeper into negative territory AND to increase the free money to speculators through Quantitative Easing. Head mafiosi Mario Draghi didn't deliver. They lowered rates 0.1% to negative 0.3% and left the QE program at 60 billion euros a month.

Today's dollar index chart measures how much hot money was in the dollar, how many crowd-following smarties were in the same exact trade (short euros, long dollars), and what happens when everybody on one side of the rowboat suddenly jumps to the other side: it sank like an anvil pushed out of a 747 Jumbo Jet. Dollar index lost an enormous 239 basis points (2.39%) to end the day at 97.63. Friends, it broke down out of that rising wedge like roaches running from Raid. Y'all have to look at this chart, slicing through the wedge's bottom boundary, through the 20 day moving average, and skidding to a stop at the low just above the 50 DMA. Oooooo. That's what you call "technical damage."

Meanwhile, all those investment genii and gurus who jes' KNEW the ECB malefactors would keep the party going & keep gutting the euro, found themselves SHORT a skyrocketing euro. Nothing concentrates the mind like your own imminent hanging or a short in a runaway rally, so they panicked. Euro shot up 3.05% to $1.0938. Here's a picture of zillions of dollars in losses,

Yen skyed only 0.53% to 81.57, enough to take it above its 20 DMA.

As the dollar sank, folks sold dollars, driving UP the yield and DOWN the bond price. US 10 year treasury note shot up 6.98% [sic] to 2.330%. Closed above (slightly, but above) the Downtrend line from 2007 [sic].

Yas sir, yas sir, them central banks are GREAT tools for stabilizing markets & economies.

I used to know a long-time stockbroker of solemn & tested wisdom-- an old dog. For decades he did all his investing based on whether the money supply was rising or falling. Why? Because new inflationary money always goes into financial markets first. Likewise, when the Fed tightens money supply (yes, they used to do such things in ancient times), money comes out of financial markets, particularly stocks. This is why I have kept pounding and pounding on y'all's heads that the stock market rise since 2009 has been built on newly created money, AND NOT ECONOMIC OUTLOOK.

Here's another Basic Fact of Mathematics. When interest rates rise, bond prices fall, and when interest rates fall, bond prices rise. Simple math. A $100 bond that pays 10% is worth $90 today, $100 one year from now. A $100 bond that pays 20% is worth $80 today.

A share of stock is only another form of a bond, an principal investment expected to pay a stream of "interest payments" as dividends. So like bonds, stocks are "discounted" by the prevailing interest rate to determine their present value. It follows then -- stay with me, don't lag behind -- it follows then that WHEN INTEREST RATES RISE, STOCK VALUES FALL. The Fed raising interest rates has never helped the stock market, and never will. Mathematics says, Absolutely not.

Stock markets threw a temper tantrum complete with heads butting the floor & puking in the wastebasket. London FTSE stumbled 2.27%, French CAC fell 3.58%, German DAX plopped 3.58%.

Dow lost a massive 252.01 (1.42%) to 17,477.67. S&P500 dove 29.89 (1.44%) to 2,049.62. Today's submersion took both indices solidly below their 200 DMAs (17,582 & 2,065). Also establishes an embryonic downtrend with lower highs and a lower low.

Today's mayhem was just what the Dow in Gold & Dow in Silver have been promising, a big reversal dirtward. DiG lost 2.2% to 16.47 oz while the DiS dropped 2.12% to 1,242.19 oz. Both indices got close enough to count the eyelashes on the 20 DMA, but didn't quite drop through. MACD & other indicators have positively turned down.

I reckon the dollar drop scared that charm queen, Janet Yellen, so bad she had to appear in public, limber up her nasal twang, & bleat about how great the economiy is doing & how ready the Fed is to raise interest rates. Maybe. Might do. Yeah, probably. Wink, wink.

Today Gold added 7.50 (0.7% to 1,061.70 at Comex close. Silver rose 7.4 cents to 1405.3c.

Given a 2.39% drop in the US dollar index, you'd expect more out of silver & gold, but the weak response probably represents that same lack of interest we've witnessed through most of November. But even that quibble fades when I look at the gold chart and see the first half of a key reversal, namely, a break to a new intraday (1,045.40) with a close higher than yesterday's. Tomorrow gold must paint the second half, a close higher than today's. Really, for better certainty we want to see that higher close for two days, not just one. Piling on top of that, the MACD has turned up, the RSI is climbing up out of "slap oversold," the rate of change is positive, & full stochastics are curving skyward. Volume jumped today, too, & don't forget Commitments of Traders at a 14 year bullish extreme.

What else do y'all want, a fairy godmother with a twinklin' wand?

Silver also posted a key reversal with a new intraday low at 1381c and a higher close. Or you might look at that as a double bottom with the 23 November low at 1385c. Either way, silver requires a higher close tomorrow. All indicators point up, up, up. Mark my words & hear me: higher.

All this implies but does not yet prove that we have seen AND PASSED the lows for the post-2011 bear phase in metals. Probably won't run away before year end, but next year promises to be golden with a silver lining.

But mercy, what do I know? I ain't been wearin' shoes but two years, and they's hand-me-downs. I ain't nothing but a nat'ral born durn fool from Tennessee, not even bright enough to pile into the same trade as everybody else. But then, I wadn't long dollars, either.

On 3 December 1854 Australian gold miners in Ballarat, Victoria (Australia) revolted against the English colonial authorities. The Battle of the Eureka Stockade was fought, lasted half an hour, and ended in the deaths of 27, most of them rebels. It was the culmination of a long time of civil disobedience against the government, police, & military. The event shortly resulted in greater powers of self-government for Australians, and is called by some the birth of Democracy in Australia.

Thomas Jefferson said, "The tree of liberty must be watered from time to time with the blood of patriots." Unhappily, tyrants understand nothing else.

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
3-Dec-15 Price Change % Change
Gold, $/oz 1,061.70 7.40 0.70%
Silver, $/oz 14.05 0.07 0.53%
Gold/Silver Ratio 75.550 0.129 0.17%
Silver/Gold Ratio 0.0132 -0.0000 -0.17%
Platinum 847.50 15.10 1.81%
Palladium 535.85 10.15 1.93%
S&P 500 1,049.62 -29.89 -2.77%
Dow 17,477.67 -252.01 -1.42%
Dow in GOLD $s 340.30 -7.33 -2.11%
Dow in GOLD oz 16.46 -0.35 -2.11%
Dow in SILVER oz 1,243.70 -24.61 -1.94%
US Dollar Index 97.63 -2.39 -2.39%
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: 1,061.60      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,091.32 1,098.76 1,098.76
1/2 AE 0.50 540.91 559.99 1,119.99
1/4 AE 0.25 273.10 285.31 1,141.22
1/10 AE 0.10 111.36 116.25 1,162.45
Aust. 100 corona 0.98 1,033.30 1,042.30 1,063.35
British sovereign 0.24 251.77 264.77 1,124.79
French 20 franc 0.19 199.69 203.69 1,090.99
Krugerrand 1.00 1,074.34 1,084.34 1,084.34
Maple Leaf 1.00 1,071.60 1,085.60 1,085.60
1/2 Maple Leaf 0.50 610.42 557.34 1,114.68
1/4 Maple Leaf 0.25 270.71 283.98 1,135.91
1/10 Maple Leaf 0.10 112.53 115.71 1,157.14
Mexican 50 peso 1.21 1,272.19 1,283.19 1,064.27
.9999 bar 1.00 1,065.32 1,073.60 1,073.60
SPOT SILVER: 14.05      
SILVER Fine Tr.Oz. BID ASK $/oz
VG+ Morgan $B4 1905 0.77 25.00 27.00 35.29
VG+ Peace dollar 0.77 20.00 22.00 28.76
90% silver coin bags 0.72 11,615.18 11,901.18 16.65
US 40% silver 1/2s 0.30 3,951.53 4,101.53 13.90
100 oz .999 bar 100.00 1,429.50 1,454.50 14.55
10 oz .999 bar 10.00 141.95 146.95 14.70
1 oz .999 round 1.00 14.15 14.61 14.61
Am Eagle, 200 oz Min 1.00 15.55 16.80 16.80
SPOT PLATINUM: 847.50      
Plat. Platypus 1.00 862.50 892.50 892.50
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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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