The Moneychanger
Daily Commentary
Tuesday, 16 February a.d. 2016 Browse the commentary archive

Things are not always what they seem. More of that in a minute, but first I beg you to notice a Trial Balloon floated today. I don't think it was merely the wild saying of a rogue operator, because the speaker, Neel Kashkari, is president of the Minneapolis Fed, a former Goldman-Sachs-ite, and one of the main hatchetmen in the 2008 bank bailout. Given all that, why would he make a speech calling for breaking up the Too Big TO Fail banks, and even nationalizing them (by regulation) and taxing loans to reduce speculation? In other words, more government control and protection. Shucks, yeah! That's what got us here in the first place.

Not his idea, I'm guessing. He's carrying water for somebody else, way higher up. Clearly, there is no rest in Establishment-land as they watch central banking & the economy unravel faster than a polyester Walmart sweater.

Things are not what they seem. Y'all might think that because gold fell 2.5% today and silver 2.8% that the enormous breakout last week was a fluke. Y'all would be wrong, too. What you saw was usual market behavior.

On Monday the Chinese government came back after the holidays and raised the yuan's peg to the US dollar. All the stock cheerleaders around the world and on Wall Street jubilated, taking this as a sign the central banks would bail them out again by printing more money. Ran up US stocks and the US dollar today, too.

Pause to reflect I mentioned to y'all earlier there was most likely a C-wave up in stocks, and a correction in gold and silver, coming this week. I ain't no clairvoyant, & crystal balls ain't necessary to know that a long, hard, parabolic rise or fall is followed by a reaction, often sharp. Si monumentum quaeris, circumspice -- If you're looking for a monument, look around you. That's what's happening, not the end of a gold and silver rally that's just begun (and will last years) or the end of a stock decline that's just started (and will last years.) Up and down, back and forth -- that's what markets do.

Dow today rose 1.39% or 222.57 points to close at 16,196.41 while the S&P500 climbed 1.65% (30.8) to 1,895.58. Most likely target is 16,600 (1,950) or if really garlicky 17,100 (2,000). Y'all should seize this countertrend rally to dump any remaining stocks you own or to buy index put options or bear ETFs. Put the proceeds into gold & silver.

Dow in Gold rallied toward that uptrend line from the 2011 low, and before this episode ends with wailing and gnashing of stock investors' teeth, should reach up to 14.00 oz, or even 14.75 oz. I would be surprised if it reached the 200 dma at 15.28 oz, but I reckon that's possible.

Hot ziggety! US dollar index gapped up a little and closed at 96.88, just on its 200 dma at 96.89. Rose 89 basis points or 0.98%. Hot dog, don't mean a thing. Could climb to the last high at 97.50, even to the 50 DMA at 98.25, but to turn its trend upward, oh, my! Would need to close above 99.95. Meanwhile the past 11 months argues that the dollar has topped. Could always turn around, but that's the weight of the evidence right now.

The Chinese central bank's move on Monday also sent oil higher, up to cut its 20 DMA, but this means nothing yet. Closed $29.12. Treasury yields also rose (bond prices fell) as hot money flipped out of bonds and back into stocks. Alas for the refugees, no safety lies in either!

Gold closed off 2.5% (-$31.20) at $1,207.90 on Comex. Silver tripped 45.6¢ (2.8%) to end at 1532.9¢.

Should you have a straightedge and a pencil, you could draw a line from gold's $1,205.70 June high across the October high at $1,191.70 & keep on drawing it eastward until you run out of paper. Where that line crosses current trading, you will see that it just caught & supported the jiggle before gold broke through $1,200. Jes' look:

And today's low came at $1,191.50, right at gold's October (last) high. Lo, twas a parabolic move gold made, and a correction is in order and typical. Will probably last the rest of this week and maybe longer. Offers y'all a perfect opportunity to load up.

Silver's chart looks a little different. Silver has retreated from 1600¢ nearly to the 200 DMA (1510¢), a likely target for this correction.

Things are not what they seem. Don't let today's action fool you into discounting the proof of a trend change by last week's silver & gold breakout. Just relax and ride the pendulum.

I'm driving up to Harriman for a grazing conference tomorrow, so I won't be sending another commentary until Friday. Yes, our family farm raises grass-fed South Poll cattle & we are trying every way in the world to work with nature instead of against. Takes about three years to see the change, but suddenly the pastures explode with grass.

Thanks again to all y'all praying for my wife Susan's eye. It is slowly improving, but is still so bad she is making me drive, and she hates my driving. When she takes the wheel again, I'll know she's mended.

On 16 February 1923 English archaeologist Howard Carter entered the sealed burial chamber of Egyptian King Tutankhamen. Carter had spent six years searching for the tomb.

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
16-Feb-16 Price Change % Change
Gold, $/oz 1,207.90 -31.20 -2.52%
Silver, $/oz 15.33 -0.46 -2.89%
Gold/Silver Ratio 78.798 0.300 0.38%
Silver/Gold Ratio 0.0127 -0.0000 -0.38%
Platinum 936.70 -20.60 -2.15%
Palladium 509.80 -17.45 -3.31%
S&P 500 1,895.58 30.80 1.65%
Dow 16,196.41 222.51 1.39%
Dow in GOLD $s 277.18 10.69 4.01%
Dow in GOLD oz 13.41 0.52 4.01%
Dow in SILVER oz 1,056.59 44.62 4.41%
US Dollar Index 96.88 0.89 0.93%
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SPOT GOLD: 1,203.10      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,233.18 1,252.43 1,252.43
1/2 AE 0.50 613.07 634.64 1,269.27
1/4 AE 0.25 309.54 323.33 1,293.33
1/10 AE 0.10 126.22 131.74 1,317.39
Aust. 100 corona 0.98 1,173.38 1,182.38 1,206.27
British sovereign 0.24 285.33 298.33 1,267.35
French 20 franc 0.19 226.30 230.30 1,233.55
Krugerrand 1.00 1,217.54 1,227.54 1,227.54
Maple Leaf 1.00 1,213.10 1,227.10 1,227.10
1/2 Maple Leaf 0.50 691.78 631.63 1,263.26
1/4 Maple Leaf 0.25 306.79 321.83 1,287.32
1/10 Maple Leaf 0.10 127.53 131.14 1,311.38
Mexican 50 peso 1.21 1,443.21 1,454.21 1,206.11
.9999 bar 1.00 1,207.31 1,215.10 1,215.10
SPOT SILVER: 15.28      
SILVER Fine Tr.Oz. BID ASK $/oz
VG+ Morgan $B4 1905 0.77 22.50 26.00 33.99
VG+ Peace dollar 0.77 17.50 20.00 26.14
90% silver coin bags 0.72 12,601.88 12,959.38 18.13
US 40% silver 1/2s 0.30 4,388.13 4,550.13 15.42
100 oz .999 bar 100.00 1,552.50 1,577.50 15.78
10 oz .999 bar 10.00 154.25 159.25 15.93
1 oz .999 round 1.00 15.38 15.84 15.84
Am Eagle, 200 oz Min 1.00 16.78 18.03 18.03
SPOT PLATINUM: 936.70      
Plat. Platypus 1.00 951.70 981.70 981.70
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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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