The Moneychanger
Daily Commentary
Monday, 7 March a.d. 2016 Browse the commentary archive

Y'all think it did, but it didn't. Gold, I mean. Break out. Hang with me, I'll explain.

But first the scrofulous, scurvy, slimy, US dollar index. Last Wednesday it topped & closed down. Next three days it has cascaded through the 50 day moving average, & 97.50 support. Today, losing another 23 basis points and closing at 97.08, it has thumped through the 20 & 200 day MAs. Chart,

Okay, let's roll back over it. Dollar topped at 100.04 in March 2015, then hit 100.02 on 2 December for a double top. Sluiced down out of that top, bottomed 12 February, tried to climb again but only reached its 50 DMA, and waterfalled yet again.

The dollar has problems, whether we can see them or not. What are the stakes? If the dollar closed below 92.52, it will have turned its upward trend that began in July 2014 DOWN. If it closes above 100.04, it will rally further.

On the dollar's course hangs much of gold & silver's course. Dollar is signaling something unpleasant for itself and financial markets.

I am unrepentant. Stocks have reached the upper range of where I imagined they might rally, but nothing has changed my outlook. I wouldn't buy stocks with your money if you gave it to me AND a copy of tomorrow's newspaper. Break already occurred in August.

Dow rose 67.18 (0.4%) to 17,073.95 while the S&P500 eased up 1.77 (0.09%) to 2,001.76. Chart is dwindling into a terminal rising wedge. May hit the 200 DMAs (17,175.98 & 2,022.44) & I will lift my eyebrows in mild surprise but think nothing else of it.

Dow in gold has not managed even to penetrate that uptrend line from the 2011 low, although today at 13.47 oz it closed barely above the 13.41 20 DMA. Rate of Change has peaked, MACD is rolling over. Not much of a correction yet. Behold the chart,

Dow in Silver reflects the high gold/silver ratio. It has rallied nearly to its entertwined 50 & 200 DMAs (1,132.97 oz & 1,148.22 oz). Today it fell barely to 1,092.66 oz. Lo, the chart,

Oil, as West Texas Intermediate Crude, has been rising since 11 February. Last week it cleared $34.50 resistance and has even poked its head through the downtrend line from last June with today's $37.98 close. It has made some kind of bottom, but let's see how well it can improve it. Shooting for the 200 DMA at 43.78.

Friday Gold shot up $12.50 (1%) to $1,269.90 while silver exploded 55¢ (3.6%) to 1568.1¢. Today gold backed up $6.70 (0.5%) to $1,263.20. Silver gave back 5.8¢ (0.4%) to 1562.3¢.

Let me pretend for a moment I was born under the Sign of the Crawdad (instead of the Possum). I know I said that if gold could close above $1,264 it would head toward $1,400. Yes, I did, I said that on Thursday, but the fact is gold close above that on Friday, and made nothing out of it.

What do you do with that?

Here's a chart,

On the End of Day chart but not the Comex chart gold made a very bad move: it rose into new high territory but closed lower. That's not necessarily fatal, but does hint that gold hath not the horsepower to keep moving up. Poked its head up and turned timid. Add to that the Commitments of Traders numbers that just get worse and worse, hollering for a correction.

Today gold had another chance to build on Friday's strength, but passed. All this looks more like a correction brewing than a rally, I've got to confess.

Ahh, silver. Right here,

MACD indicator is trying to turn up, as is the Rate of Change. Friday it broke out of the downtrend ruling since the 11 February high at 1599¢. Hit 1579¢ -- twice, because it did so again today without success. Remember that this 1560¢ level offered silver support from December 2014 through July 2015. Now it's transmogrified into resistance and silver must pierce it.

What's needed now? Both silver & gold must better their previous performance. Hand in hand gold must break away through $1,270 and silver must BETTER 1599¢, the last high. Otherwise both will correct, and all the odds favour that correction soon.

At Comex spot closes today the gold/silver ratio stood at 80.855:1. Yes, at that ratio I would still swap gold for silver, targeting a swap back into gold at 32:1 or lower.

Well known is the market proverb, and justly so: "Bull markets always climb a wall of worry." Also, in a bull market surprises always come to the Upside. I may be surprised here, but a metals' correction seems unavoidable.

I got everything bumfuzzled Thursday. The storytellers' convention was at LaGrange College in LaGrange, Georgia, near Callaway Gardens. It was very interesting. There were two superb storytellers, one very professional, & one I won't talk about. Yes, Susan was right, it was worth the trip. We drove down to Callaway Gardens Saturday but nothing had started blooming. Going to Callaway Gardens when nothing's blooming is like going to a pro football game where somebody's stolen all the footballs.

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
7-Mar-16 Price Change % Change
Gold, $/oz 1,263.20 -6.70 -0.53%
Silver, $/oz 15.62 -0.06 -0.37%
Gold/Silver Ratio 80.855 -0.128 -0.16%
Silver/Gold Ratio 0.0124 0.0000 0.16%
Platinum 1,001.50 16.00 1.62%
Palladium 577.90 14.80 2.63%
S&P 500 2,001.76 1.77 0.09%
Dow 17,073.95 67.18 0.40%
Dow in GOLD $s 279.41 2.57 0.93%
Dow in GOLD oz 13.52 0.12 0.93%
Dow in SILVER oz 1,092.87 8.33 0.77%
US Dollar Index 97.08 -0.26 -0.27%
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SPOT GOLD: 1,267.20      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,296.35 1,319.16 1,319.16
1/2 AE 0.50 645.76 668.45 1,336.90
1/4 AE 0.25 326.05 340.56 1,362.24
1/10 AE 0.10 132.95 138.76 1,387.58
Aust. 100 corona 0.98 1,234.66 1,243.66 1,268.78
British sovereign 0.24 300.54 313.54 1,331.93
French 20 franc 0.19 238.36 242.36 1,298.13
Krugerrand 1.00 1,281.14 1,291.14 1,291.14
Maple Leaf 1.00 1,277.20 1,291.20 1,291.20
1/2 Maple Leaf 0.50 728.64 665.28 1,330.56
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1/10 Maple Leaf 0.10 134.32 138.12 1,381.25
Mexican 50 peso 1.21 1,518.57 1,529.57 1,268.62
.9999 bar 1.00 1,271.64 1,279.20 1,279.20
SPOT SILVER: 15.66      
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 12,766.33 13,016.33 18.20
US 40% silver 1/2s 0.30 4,500.23 4,662.23 15.80
100 oz .999 bar 100.00 1,590.50 1,615.50 16.16
10 oz .999 bar 10.00 158.05 163.05 16.31
1 oz .999 round 1.00 15.76 16.22 16.22
Am Eagle, 200 oz Min 1.00 17.16 18.41 18.41
SPOT PLATINUM: 1,001.50      
Plat. Platypus 1.00 1,016.50 1,046.50 1,046.50
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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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