The Moneychanger
Daily Commentary
Thursday, 10 March a.d. 2016 Browse the commentary archive

Though we needed it not, once again we were treated to the turmoil caused by the very central banks who exist supposedly to "stabilize" economies. Right, like putting a heroin addict in charge of the drug room to "stabilize" the narcotics supply.

The turmoil began even as Head European Central Bank Criminal Mario Draghi was speaking -- or so I am told. I was not there. I was out in our barn helping build a new chicken brooder. Anyhow, while the words were still drooling off his lips, the euro tanked, the dollar shot up, and stocks rallied -- for a minute. Then they all reversed, and the dollar suffered its worst one day fall this year.

What did he say? That the ECB would

1. CUT INTEREST RATES. ECB cut it benchmark lending rate to zero from 0.05%, and lower the rate it pays on bank reserves deposits with it from negative 0.3% to negative 0.4%. He also said that would be the last rate cut for a long time.

2. INCREASED QUANTITATIVE EASING. ECB had been buying bonds at rate of €60 billion a month & will ramp that up to €80 bn. And will now include corporate bonds.

3. WILL PAY BANKS TO LEND. Through 4 year Targeted Longer-Term Refinancing Operations or TLTROS the ECB will loan banks money a 0% and pay them up to 0.4% -- yes, yes, I said ECB will PAY the banks to borrow -- if their loan book gets big enough. So on one hand they are charging banks interest to hold their reserves, but paying them interest to loan.

Today's turmoil clearly shows that central bank credibility has evaporated. Logicking that if the ECB lowers rates the Fed can be the only central bank on the planet to raise rates, traders dumped dollars as if they showed active symptoms of Black death AND cholera. On a colossal range of 251 basis points, the dollar first slammed itself unconscious against 98.50, then fell down the stairs to 95.99. Limp & barely awake, it closed at 96.12, down 104 bps or 1.07%.

On the other side of that trade the euro ranged from $1.0822 to $1.1217, and rose 1.63% to $1.1179, and broke into a rally. The Yen added 0.18% to 88.37. Euro chart's here,

Thrice now since December we have watched the US dollar skinned in a single day by its fellow central banks. On 3 December 2015 it was the ECB, then on 3 February the Japanese with negative rates, & now today the ECB again. Here's a 4 month chart to show what I mean. Does this look to y'all like a market advancing, or that wants to advance? If it closed below 95.28, it will sink all the way to the critical 92.50. We keep getting these very loud messages -- look like Exclamation Points on a chart -- screaming that all those analysts who expect a higher dollar and the Fed to raise rates are wrong.

Colossal slides are not usual in markets, & show massive fear and indecision sending money shooting from one direction to another.

I repeat: central bank credibility is evaporating. The ECB has tried everything, & availed nothing. The Fed has tried everything, & accomplished nothing. Statistical tricks aside, the central bank's nakedness is showing. The king is buck naked -- no clothes. If you can't trust central banks, who can you trust? Only silver & gold. Well, in this world, I mean.

Stocks spent 2/3 of the day falling, then rallied back enough to end the day down only pennies. S&P500 actually rose 0.31 point to 1,989.57. Dow industrials lost 5.23 to 16,995.13.

Charts I am inclined to be led by the most, the Dow in Gold & Dow in Silver, both point to lower stocks and higher metals. Even the Dow in Silver, which in the upward correction that began 11 February rose almost to its 200 day moving average (1,136 oz against about 1,149 oz), has dropped. Chart looks as if the correction might have ended,

In its correction the Dow in Gold barely stuck a toe over its 20 DMA. Today it fell again, to 13.35 oz. Longing to fall down,

Well, I ain't fool enough to insist I'm right when the rain is pouring down my face & I've got two flats and an empty gas tank. I'm a pretty big durn nat'ral born fool from Tennessee, but not fool enough for that. Maybe.

Gold refused to accommodate my expectations and fall. Instead, after a two day drop, it cam back to chalk down its highest closed since this year's rally began, $1,272, up $15.40. That flirt silver rose 19.1¢ to 1554.6¢, not near its 1599¢ highest close.

Well, maybe I am that big a fool after all. I just hate to make a decision on a day central bank lunacy has been distorting markets. Still, if gold closes up here for the week, what can I do but throw in the durned towel? Or drown in my own cold sweat.

Silver's trading today agrees with a cup-and-handle formation on its chart. By that I mean it broke out of the handle, then touched back to the handle boundary, and shot up. Handle boundary happens to coincide almost with the 20 dma. Look at it here,

I've been whomped by silver & gold so many times in the last 4-1/2 years that I'm a little whomp-shy now. I'd like silver to close above 1600¢, and not a little, before I say say, yes, both metals are moving higher. I jes' wanna see what they'll do tomorrow. Ain't no doubt today they were stronger than a garlic milkshake.

Lawsy Mercy, If I could take my shirt off and show y'all my back you'd think I'd been wrestlin' with a weedeater. Nope, it's the stripes from those tongue lashings I got for doubting Mr. Trump's genuineness. I got lashed, but my doubts remain. Don't I wish they'd fly away1

As Patrick Buchanan observes, the Insiders are foaming at the mouth because Trump has dared to name the garbage can stinking in the middle of the room, namely, all their policies that have been destroying the US since WWII ended. Immigration is denaturing and displacing the American population & culture, crony capitalism has shipped the US economy overseas through all those wonderful trade pacts, and young US lives have been squandered all over the world in pointless wars like Iraq & Afghanistan. Not a single politician will meaningfully deal with these hot potatoes, because they all belong to the Insiders & want to hold on to their jobs. Along comes Trump and voices what every middle class American knows, the country is falling apart at seams and beams. The smell of death hangs over us all.

I wish Mr. Trump well, but if y'all think electing one fellow with an excruciatingly bad haircut is going to change anything, you're in for a nasty surprise. Regeneration don't work that way. EVERYbody has to work on it.

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
10-Mar-16 Price Change % Change
Gold, $/oz 1,272.00 15.40 1.23%
Silver, $/oz 15.55 0.19 1.24%
Gold/Silver Ratio 81.822 -0.015 -0.02%
Silver/Gold Ratio 0.0122 0.0000 0.02%
Platinum 977.20 -5.10 -0.52%
Palladium 574.35 7.85 1.39%
S&P 500 1,989.57 0.31 0.02%
Dow 16,996.13 -5.23 -0.03%
Dow in GOLD $s 276.21 -3.47 -1.24%
Dow in GOLD oz 13.36 -0.17 -1.24%
Dow in SILVER oz 1,093.28 -13.94 -1.26%
US Dollar Index 96.12 -1.04 -1.07%
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SPOT GOLD: 1,272.30      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,304.11 1,324.46 1,324.46
1/2 AE 0.50 648.36 671.14 1,342.28
1/4 AE 0.25 327.36 341.93 1,367.72
1/10 AE 0.10 133.49 139.32 1,393.17
Aust. 100 corona 0.98 1,239.63 1,248.63 1,273.85
British sovereign 0.24 301.75 314.75 1,337.07
French 20 franc 0.19 239.32 243.32 1,303.27
Krugerrand 1.00 1,285.02 1,295.02 1,295.02
Maple Leaf 1.00 1,282.30 1,296.30 1,296.30
1/2 Maple Leaf 0.50 731.57 667.96 1,335.92
1/4 Maple Leaf 0.25 324.44 340.34 1,361.36
1/10 Maple Leaf 0.10 134.86 138.68 1,386.81
Mexican 50 peso 1.21 1,524.68 1,535.68 1,273.68
.9999 bar 1.00 1,276.75 1,284.30 1,284.30
SPOT SILVER: 15.62      
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 12,705.55 12,955.55 18.12
US 40% silver 1/2s 0.30 4,489.90 4,651.90 15.77
100 oz .999 bar 100.00 1,587.00 1,612.00 16.12
10 oz .999 bar 10.00 157.70 162.70 16.27
1 oz .999 round 1.00 15.72 16.18 16.18
Am Eagle, 200 oz Min 1.00 17.12 18.37 18.37
SPOT PLATINUM: 977.20      
Plat. Platypus 1.00 992.20 1,022.20 1,022.20
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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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