The Moneychanger
Weekly Commentary
Friday, 4 December a.d. 2015 Browse the commentary archive
Here's the weekly scorecard:
  27-Nov-15 4-Dec-15 Change % Change
Silver, cents/oz. 1,400.80 1,450.50 49.70 3.5
Gold, dollars/oz. 1,056.20 1,084.50 28.30 2.7
Gold/silver ratio 75.400 74.767 -0.632 -0.8
Silver/gold ratio 0.0133 0.0134 0.0001 0.8
Dow in Gold Dollars (DIG$) 348.35 340.20 -8.15 -2.3
Dow in gold ounces 16.85 16.46 -0.39 -2.3
Dow in Silver ounces 1,270.59 1,230.45 -40.15 -3.2
Dow Industrials 17,798.49 17,847.63 49.14 0.3
S&P500 2,090.11 2,091.69 1.58 0.1
US dollar index 100.07 98.35 -1.72 -1.7
Platinum 833.00 880.50 47.50 5.7
Palladium 549.60 566.20 16.60 3.0

Wow, it was a wild week. ECB head criminal Mario Draghi threw markets into consternation when he announced the ECB would not be disemboweling the euro as quickly as they expected. Since every trader in the world was short euros & long dollars, they panicked, sending the euro soaring & the dollar tanking, down a massive 2.4%. Stocks plummeted but silver & gold moved little. Today markets remembered that gold & silver existed, & they jumped. Platinum & Palladium confirmed.

First, a footnote. I apologize, my explanation yesterday of why higher interest rates mean lower stock prices was neither clear nor exact. Let me explain it this way.

Suppose a bond pays $110 in one year. Never mind what the original buyer pays for it, the secondary market where you go to sell the bond will value the bond not by the rate it pays on its face, but by the future amount it will pay DISCOUNTED by the CURRENT interest rate.

So if you buy a bond in the secondary market when the prevailing interest rate is 10%, and the next day the interest rate rises to 12%, your bond is worth less.

For instance, a bond that pays $110 in one year, discounted at 10%, is worth $100.00 today in the secondary market. That same bond discounted at 20% is worth $91.67 today.

Stocks are simply securities like a bond, and in the secondary market their value is discounted by the prevailing interest rate. Like a bond's value, a stock's value, other things being equal, will drop when interest rates rise.

Or, in the shortest form, "Interest rate goes up, bond price goes down; bond price goes up, interest rate goes down. Stocks, too."

Never mind all that, no logic lives in stock market heads today. They've lived so long under the threat of the Fed raising rates they can't think of ought else. The LGER (Lying Government Employment Report) came out with more jobs created than expected (they're hiring at McDonald's & Walmart) & that sent stock buyers into a buying frenzy. Dow rose 369.96 (2.12%) to 17,847.63 -- not quite as high as its 4 December close. S&P500 leapt 42.07 (2.05%) to 2,091.69.

Don't miss this: despite stocks' garlicky move today, the Dow in Gold and Dow in Silver continued falling. That spotlights the last highs as the ultimate highs, provided we see further moves downward to confirm. Charts are at and Both closed beneath 20 DMAs.

Now y'all ponder a moment: when everybody was on the same side of the short euros/long dollars trade & the ECB disappointed them, chaos erupted. Now markets show an 80% expectation that the Fed will raise rates on 16 December, so they're all long stocks.

But so what? What can a 1/4 of 1% rise mean? Nothing good, so why should anyone expect stocks to rise from a raise? Rather, this will be a classic instance of "buy the rumor, sell the news," even IF the Fed doesn't disappoint. What would happen if the Fed flinches? I leave that to y'all's imagination.

Whether the 2.4% fall yesterday broke the dollar rally's back or not remains to be seen, but the suspicion of that diagnosis will linger until the dollar climbs over 100.70. Interesting will be what it does when it reaches the 200 day moving average at 96.72, and whether holds or falls through.

Today the dollar recaptured some of yesterday's 239 basis point loss by rising 71 bps (0.73%) to 98.35. This says nothing, nor shows e'er a sign of recovery. Dollar would have to exceed its 20 DMA, now at 99.39, to show any optimism.

Euro gave back 0.58$% today to close at $1.0874. Needs to close above that 200 DMA ($1.1043) to confirm reversal. Yen closed down 0.45% at 81.21. No trend reversal upward yet.

Investors who had forgotten gold and silver yesterday suddenly discovered it today. Shorts got creamed & gold gave positive witness of a rally.

Gold jumped $22.80 or 2.1% to $1,084.50 on Comex. Silver soared 3.2% or 45.2 cents to 1450.5c. My tripwires for a metals' rally were 1440c silver and $1080 gold. Both tripped those wires and then some. Gold's close at $1,084.50 took it comfortably above its 20 DMA at 1,075. Silver's 20 DMA stands at 1423c, so a 1450.5c close effortlessly left that behind. Gold/silver ratio fell today to 74.767, positive for a rally. Sliced through its 50 DMA (74.59) and 200 DMA (74.05), but didn't close down there. That's okay, it will come back down. Loaf has been sliced already.

Any gold strength elsewhere? Gold stock indices jumped like they hit a 440 volt line: HUI up 6.23%, GDX up 5.3%, & XAU up 5.9%. Gold/Bank Stock index spread (confidence in gold vs confidence in the financial system) appears to have double bottomed, July & end-November, and turned up.

On 4 December 1619 thirty-eight English colonists disembarked in Virginia & gave thanks to God. It was America's second Thanksgiving, the first having taken place in Fort Augustine, Florida in 1518. The one the Pilgrims celebrated up north in 1621 came YEARS later than the first Thanksgiving celebrations in the South. As usual, the South does the heavy lifting, somebody else gets the credit.

Y'all enjoy your weekend.

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
4-Dec-15 Price Change % Change
Gold, $/oz 1,084.50 22.80 2.1
Silver, $/oz 14.51 0.45 3.2
Gold/Silver Ratio 74.767 1.549 2.1
Silver/Gold Ratio 0.0134 0.0004 3.2
Platinum 880.50 33.00 3.9
Palladium 566.20 30.35 5.7
S&P 500 2,091.69 42.07 2.1
Dow 17,847.63 369.96 2.1
Dow in GOLD $s 340.20 -0.07 -0.0
Dow in GOLD oz 16.46 -0.00 -0.0
Dow in SILVER oz 1,230.45 -13.25 -1.1
US Dollar Index 98.35 0.71 0.7
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: 1,086.60      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,117.02 1,124.63 1,124.63
1/2 AE 0.50 553.66 573.18 1,146.36
1/4 AE 0.25 279.54 292.02 1,168.10
1/10 AE 0.10 113.99 118.98 1,189.83
Aust. 100 corona 0.98 1,057.63 1,066.63 1,088.18
British sovereign 0.24 257.70 270.70 1,149.97
French 20 franc 0.19 204.39 208.39 1,116.17
Krugerrand 1.00 1,100.73 1,110.73 1,110.73
Maple Leaf 1.00 1,096.60 1,110.60 1,110.60
1/2 Maple Leaf 0.50 624.80 570.47 1,140.93
1/4 Maple Leaf 0.25 277.08 290.67 1,162.66
1/10 Maple Leaf 0.10 115.18 118.44 1,184.39
Mexican 50 peso 1.21 1,302.14 1,313.14 1,089.11
.9999 bar 1.00 1,090.40 1,098.60 1,098.60
SPOT SILVER: 14.52      
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 11,951.23 12,237.23 17.12
US 40% silver 1/2s 0.30 4,090.18 4,240.18 14.37
100 oz .999 bar 100.00 1,476.50 1,501.50 15.02
10 oz .999 bar 10.00 146.65 151.65 15.17
1 oz .999 round 1.00 14.62 15.08 15.08
Am Eagle, 200 oz Min 1.00 16.02 17.27 17.27
SPOT PLATINUM: 880.50      
Platinum Platypus 1.00 895.50 925.50 925.50
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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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