The Moneychanger
Daily Commentary
Tuesday, 5 April a.d. 2016 Browse the commentary archive

Sorry I missed y'all yesterday evening. It was my wife's fault. (There. No subtlety here, just rank finger pointing and self-justification.)

Stocks began dropping yesterday & speeded up today. Dow Industrial Average has lost 189.43 or 1.06% since Friday, not bad for two days' work. Closed today at 17,603.32. So far it appears to have bumped up near those December highs until it successfully found the rat poison. S&P500 has lost 27.61 (1.33%) and ended the day at 2,045.17. Dow chart's right here,

Both have walked through the lower boundary of a very sharp rising wedge to hover in midair, much like Wile E. Coyote in the great 1960s cartoons used to run off the edge of a mesa, legs whirring against nothing, & hold up a sign saying, "Not again!" before he dropped out of sight.

Dow in Gold & Dow in silver are agreeing with lower stocks. Dow in Gold dropped 2.03% today to 14.28, down from a 14.63 high for the move yesterday. Yes, yes, it needs to confirm by falling lower. DiS has also turned down from 1,190 oz to 1,162.7 oz today. Upmove completed?

Meanwhile the US dollar index has slipped and slid down the (blue) downtrend line from the March 2015 high. Behold! In its decline the dollar index formed a falling right triangle (hypotenuse in blue). Look at it here,

In October 2016 it broke out upward from that triangle, which generally portends the opposite, namely, a fall. It climbed to the March high about 100, then fainted, again and again. But it hath not yet suffered the crowning shame of plunging back into that falling triangle. And that line also caught & held the Dollar index in February and March.

Today the dollar index added 11 basis points (0.12%) for a 94.64 close.

The larger picture -- lean back from the screen, y'all -- shows a trading range between 92.50 and 100. This can be a distribution zone, leading to a top and a fall, or a consolidation zone, leading to another rally. As yet, we know not. One would assume, were one rational as central bankers are not, that the Fed ought to let the dollar fall to meet the competition from other central banks devaluing their currencies. However, we don't know, can't know, what sort of goals the Fed has, although we can never doubt that they don't care any more for the American public than a Dominecker chicken cares for a fire ant, and they adore & serve the banks like a geeky teenage boy hopelessly adores the cheerleader captain. Bottom line is, we don't know yet what the longer term dollar outlook will be. Waiting for breakdown or breakout.

Among the other scrofulous major currencies, the Euro fell 0.05% today to $1,1385. Nobody home there. Yen, however, gapped up and landed 0.91% higher at 90.65, a new high for the move climbing since last November. Maybe the Nipponese central bank criminals have a deal with the US Federal Reserve Criminals to let the yen appreciate a while.

Yield on the 10 year US Treasury note fell today 2.92%, gapped down in fact, to 1.727%. Investors loading into bonds (bond prices rise as yields fall) signals they are loading out of stocks. More bad juju for stocks.

Speaking of interest rates, the HYG junk bond fund has since mid-February recovered from a four-month crash up to the major downtrend line & 200 DMA. Dancing on that line like a tomcat straddling hot asphalt, faltering, uncertain. Ready to cascade again. Risk off, fortissimo.

Gold lost 4.30 yesterday, but gained $10.40 today to shutter Comex at $1,228.40. Silver lost 10¢ Monday & closed below 1500¢ @ 1494.2¢, but today regained 17.2¢ for a 1511.4¢ close.

The quandary remains, gold still speaking with forked tongue. Gold reached up and nearly touched its 20 DMA ($1,241) with a $1,238.80 high. Plus it has refused to fall through that uptrend line from the January low (green) which the 50 DMA is now tracking. Look here,

Gold's stubborn refusal to break down, and its snappy recoveries from spikes down, keep it looking strong. But. But, merely "not breaking down" doesn't get you anywhere. Gold could still break to $1,170, but keep watching the clock because time is running out for this correction. It ought to be a memory by 15 April.

Behold, silver,

It formed that bowl in November - January, slung up out of the bowl, reached 1599, then fell back to the bowl lip (1461¢) for a final kiss good-bye. Ran for 1600¢ again, but fell to defeat in March. Yet in the ensuing retreat, silver has refused to fall through its 200 DMA (now 1490¢).

None of this lately inspires cheering, but silver is showing strength at 1500¢, & we may well have seen the low at 1478¢. But that is all pie in the sky speculation until silver begins climbing and shows some spunk by closing higher than 1560¢. Till then, we are just like men in prison, working off time until 15 April.

On 5 April 1614 Pamunkey Indian chief's daughter Pocahontas married English tobacco planter John Rolfe. She was 18. In 1607 when she saved the life of Englishman John Smith about to be executed by her father, she was probably 11. She had a son in 1615, and in 1616 travelled with her family to London. In 1617 the Rolfes took ship for Virginia but she died at Gravesend before they got to sea. She was 21.

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
5-Apr-16 Price Change % Change
Gold, $/oz 1,228.40 10.40 0.85%
Silver, $/oz 15.11 0.17 1.15%
Gold/Silver Ratio 81.276 -0.240 -0.29%
Silver/Gold Ratio 0.0123 0.0000 0.29%
Platinum 950.00 7.50 0.80%
Palladium 546.35 -8.75 -1.58%
S&P 500 2,045.17 -20.96 -1.01%
Dow 17,603.32 -133.68 -0.75%
Dow in GOLD $s 296.23 -4.80 -1.59%
Dow in GOLD oz 14.33 -0.23 -1.59%
Dow in SILVER oz 1,164.70 -22.35 -1.88%
US Dollar Index 94.64 0.11 0.12%
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SPOT GOLD: 1,231.70      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,266.19 1,272.96 1,272.96
1/2 AE 0.50 627.66 649.72 1,299.44
1/4 AE 0.25 316.91 331.02 1,324.08
1/10 AE 0.10 129.22 134.87 1,348.71
Aust. 100 corona 0.98 1,201.28 1,210.28 1,234.72
British sovereign 0.24 292.12 305.12 1,296.16
French 20 franc 0.19 231.68 235.68 1,262.36
Krugerrand 1.00 1,241.55 1,251.55 1,251.55
Maple Leaf 1.00 1,241.70 1,255.70 1,255.70
1/2 Maple Leaf 0.50 708.23 646.64 1,293.29
1/4 Maple Leaf 0.25 314.08 329.48 1,317.92
1/10 Maple Leaf 0.10 130.56 134.26 1,342.55
Mexican 50 peso 1.21 1,474.54 1,485.54 1,232.10
.9999 bar 1.00 1,236.01 1,243.70 1,243.70
SPOT SILVER: 15.15      
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 11,726.00 12,051.00 16.85
US 40% silver 1/2s 0.30 4,351.25 4,513.25 15.30
100 oz .999 bar 100.00 1,540.00 1,565.00 15.65
10 oz .999 bar 10.00 153.00 158.00 15.80
1 oz .999 round 1.00 15.25 15.71 15.71
Am Eagle, 200 oz Min 1.00 16.65 17.90 17.90
SPOT PLATINUM: 950.00      
Plat. Platypus 1.00 965.00 995.00 995.00
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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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