The Moneychanger
Daily Commentary
Wednesday, 2 March a.d. 2016 Browse the commentary archive

On Monday I explained to y'all that my Southern Astrological Sign is the Possum. Across the circle of the heavens from the slow, timid possum lies The Armadillo. Those born under the Armadillo tend to run here and there in a frenzy, poking their nose into everything and digging holes with great cloud of dust but not much effect. Like their namesake, whose sole defense mechanism beside his impenetrable armor is to jump straight up in the air 24 inches, so Armadillos jump skyward when frightened. Unfortunately straight up 24 inches is right where the speeding car bumper meets you. Armadillos can be friendly but their hard hide makes it nearly impossible to get through to them.

On to today's markets:

Friends, it just don't work like this for long. EVERYBODY cannot win, and last few days gold & silver have been flexing their muscles, stocks a-rising, & the pestiferous US dollar levitating. 'Sgonna change.

Yesterday, smoking what dope I don't know, Dow rize 348.58 (2.11%) higher. Today it was underwater most of the day, until 3:30, then closed up 34.24 (0.2%). Mmmm. S&P 500 added 46.12 (2.4%) yesterday and another 8.10 (0.4%) today to 1,986.45. Stocks have entered that territory where the going becomes miry and swampy, the resistance more determined. Bottom could fall out tomorrow or two weeks from now, but fall out it will.

Background for all this is a correction of stocks' brutal fall from 2016's opening & silver & gold's rally from same. Be patient, let it unroll. 'Twill soon resume major trend.

US dollar index waxes awfully wilty & melty when it nears its 50 DMA. Been over it for three days, but today backed plumb back, 17 basis points or 0.18%, to end at 98.19, almost dead on the 50 DMA. If it intends to rally further, through the May 2015 high at 100.04, it's sure keeping its cards close to its breast. No insistent strength as you'd expect from a bull, just fits & starts & faintin' spells.

Gold today rose $10.80 (0.88%) to $1,241.10. Silver flew up 1.83% or 27¢ to 1500.3¢.

Y'all don't shoot the messenger, but the charts aren't optimistic. Gold has formed a bear flag, & thereateneth still to tumble to $1,180. Silver moved bravely but only touched its 200 day moving average (1503¢). Can still slide to 1440s.

What turns them decisively heavenward? A gold close above $1,264 & silver over 1600¢. That would send gold MUCH higher & it would drag silver along with it.

Bear in mind I am only looking for a small correction. I still maintain that silver & gold both bottomed & completed the post-2011 correction in December.

Gold/Silver ratio remains at the very top of the 20 year range, closing today at 82.723. Y'all still have time to swap gold for silver, but you'd better jump.

Here's a 30-year chart of the gold/silver ratio, so y'all can get a good idea of what I mean by the range.

This is an End of Day chart so it exaggerates my numbers, which are Comex closes, but the picture is similar. Note the top of the range is about 84.5, the lower end about 43. Shows a 2011 spike down to 29.08, but actually that was 32. Also shows target for next silver to gold swap about 32. Mark also how overbought the ratio is, as measured by the RSI indicator.

Our gold/silver swapping strategy swaps OUT of gold and into silver near the range's top, and back OUT of silver & into gold at the range's bottom.

On 2 March 1877 Rutherford B. Hayes was declared winner of the 1876 presidential election by congress, although Samuel J. Tilden had won the popular vote. Hayes was elected by a deal with Southern states, namely, that if elected he would end Reconstructions and withdraw occupying troops from the South, still there 12 years after the War had ended.

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
2-Mar-16 Price Change % Change
Gold, $/oz 1,241.10 10.80 0.88%
Silver, $/oz 15.00 0.27 1.83%
Gold/Silver Ratio 82.723 -0.783 -0.94%
Silver/Gold Ratio 0.0121 0.0001 0.95%
Platinum 935.70 -0.40 -0.04%
Palladium 515.50 -2.10 -0.41%
S&P 500 1,986.45 8.10 0.41%
Dow 16,899.32 34.24 0.20%
Dow in GOLD $s 281.48 -1.90 -0.67%
Dow in GOLD oz 13.62 -0.09 -0.67%
Dow in SILVER oz 1,126.40 -18.32 -1.60%
US Dollar Index 98.19 -0.17 -0.17%
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: 1,239.80      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,269.56 1,290.63 1,290.63
1/2 AE 0.50 631.79 653.99 1,307.99
1/4 AE 0.25 318.99 333.20 1,332.79
1/10 AE 0.10 130.07 135.76 1,357.58
Aust. 100 corona 0.98 1,207.96 1,216.96 1,241.54
British sovereign 0.24 294.04 307.04 1,304.32
French 20 franc 0.19 233.21 237.21 1,270.52
Krugerrand 1.00 1,253.44 1,263.44 1,263.44
Maple Leaf 1.00 1,249.80 1,263.80 1,263.80
1/2 Maple Leaf 0.50 712.89 650.90 1,301.79
1/4 Maple Leaf 0.25 316.15 331.65 1,326.59
1/10 Maple Leaf 0.10 131.42 135.14 1,351.38
Mexican 50 peso 1.21 1,485.73 1,496.73 1,241.38
.9999 bar 1.00 1,244.14 1,251.80 1,251.80
SPOT SILVER: 14.95      
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 12,401.68 12,580.68 17.60
US 40% silver 1/2s 0.30 4,290.78 4,452.78 15.09
100 oz .999 bar 100.00 1,519.50 1,544.50 15.45
10 oz .999 bar 10.00 150.95 155.95 15.60
1 oz .999 round 1.00 15.05 15.51 15.51
Am Eagle, 200 oz Min 1.00 16.45 17.70 17.70
SPOT PLATINUM: 935.70      
Plat. Platypus 1.00 950.70 980.70 980.70
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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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