The Moneychanger
Daily Commentary
Thursday, 28 April a.d. 2016 Browse the commentary archive

I sat staring at the silver chart yesterday, wondering why it was saying it wanted to go higher. Today I found out: samurai central banker!

It seems the market expected Bank of Japan head criminal Kuroda to take interest rates further into negative-land. Instead, Kuroda left them unchanged. In the market's mind, this equaled an interest rate rise, meant the yen was not going to depreciate to toilet paper, and the dollar was not going to shoot the moon. Here's what it looked like:

Samurai central banking caught everyone by surprise. The Yen, which had fallen down out of a rising wedge and was playing footsie with its 50 day moving average, promising to fall mightily, shot back up inside the wedge, rising 3.03% in a market where daily moves are normally measured by nano-percentages.

The Euro didn't move much, up 03% to $1.1358, but the US dollar took it personally. Very personally. Look:

US dollar fell 69 basis points (0.73%) to lodge at 93.68. That took it below the bottom border of the month long trading range and pretty well wrecked beyond repair the earlier break out from that (green) falling wedge. Last low was 93.62. Any close below that is liable to precipitate a free fall. Below 92.50 there is only -- AIR. Clouds. Not enough support for a hummingbird to perch on.

Let me be clear, speaking without forked tongue: US dollar is teetering on the lip of an escarpment whose bottom is a massive 13 points lower. Should the dollar fall off that lip, it will send silver, gold, & commodities soaring.

Stocks didn't like anything about today. In Japan, where the Nipponese version of Quantitative Easing has left the BoJ owning almost all Japanese government bonds, 40% of all stock ETFs, and untold other stocks, Kuroda's announcement that the BoJ would stop buying all that sent the Nikkei 225 down 3.61%.

In the US, Apple has fallen from 104.35 two days ago -- Mercy, 112.10 on 14 April! -- to 94.83 today, a modest 9.1% loss in two days. Carl Icahn fired tear gas into the panicked crowds when he disclosed he'd sold his Apple shares. That, combined with the rubber bullets out of Japan implying an end to free central bank money for speculation, spooked the mob into stampeding. Dow fell 210.79 (1.17%) to 17830.76. S&P500 plunged 19.34 (0.92%) to 2,075.81.

I can't remember where I heard it, but somebody said yesterday stocks were floating on borrowed time. Today their creditor came calling.

Oh, and just LOOK at that Dow in Silver!

'Tain't going any direction but down, and this leg now started will be a BIG one. DiS ended at 1,013.11 oz. Below all the moving averages, below the uptrend line from the 2011 low, below, below, below. When it breaks 991.46 (last low), why, a waterfall will become the Gulf Stream.

Dow in Gold is no slouch, either.

Gold's lethargy compared to silver has slowed the DiG, but today its downward flight bumped into the uptrend from the 2011 low and the 50 DMA. Closed at 14.06 oz, down 2.79%, and will be cheaper tomorrow.

Silver leapt 26.7¢ (1.54%) to 1755.3¢ on Comex. Gold vaulted $16.3 (1.3%) to $1,265.5 Gold/Silver ratio fell today from grossly oversold to even-more-grossly-oversold, & stopped at 72.096.

I'll be switched. Much as indicators and time scream they ought to correct, silver & gold act like markets beginning to break out skyward. Of course, both have been tanked up with central bank rocket fuel, so that casts doubt.

Here's a gold chart,

Gold's MACD turned up today, as did the rate of change. It pulled away upwards from its intertwined 20 & 50 DMAs, and jumped BACK over the uptrend line from the January low. It did everything, in fact, except close above the last high ($1,272.40), & didn't miss that by much. If gold gets above $1,287.80, the March high, it'll be gone like a lean hog in a ripe cornfield, and you'll never get it back.

At its 1769¢ high, silver was exactly three cents off its last high at 1772¢. It is straining at the leash, ready to run.

It's also as overbought as antimacassars at an old ladies' convention. Can it go higher? Yes, but it is surely bucking expectation.

Bottom line: Today is either one monstrous trap for gold and silver bulls and both markets are going to turn and burn tomorrow, OR both are fixing to break out to new rallies that will see 1850 and $1,350 before June closes her pretty doors.

But whether that rally comes tomorrow or next week, 'tis coming SOON.

MISTAKE: Yesterday's commentary contained -- I know this'll astonish y'all's dentures right out of your mouths -- a mistake. Dennis Hastert was not sentenced to 15 years in prison but 15 months. Y'all are so picky. I was only off by a factor of twelve.

Y'ALL ARE GOING TO LOVE THIS! Here's how the Italians solved their banking crisis, and thumbed their nose at Mario Draghi & the ECB. Italian banks have 360 billion euros in bad loans, most in Europe, but here's the solution. All the banks contribute 5 billion euros to a bailout fund called "Atlas" (get it? Bears the weight of the banks on his shoulders.) The bailout fund will buy new stock issued by the troubled banks, AND will buy loans from troubled banks.

Now this is exceptionally bad math, even for bankers. The bailout fund is exactly 1/72 of the bad loans. This ain't even smoke and mirrors, its just smoke, from a little bitty match. POOF!

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
28-Apr-16 Price Change % Change
Gold, $/oz 1,265.50 16.30 1.30%
Silver, $/oz 17.55 0.27 1.54%
Gold/Silver Ratio 72.096 -0.171 -0.24%
Silver/Gold Ratio 0.0139 0.0000 0.24%
Platinum 1,048.90 24.80 2.42%
Palladium 624.60 14.20 2.33%
S&P 500 2,075.81 -19.34 -0.92%
Dow 17,830.76 -210.79 -1.17%
Dow in GOLD $s 291.26 -7.29 -2.44%
Dow in GOLD oz 14.09 -0.35 -2.44%
Dow in SILVER oz 1,015.82 -27.88 -2.67%
US Dollar Index 93.68 -0.69 -0.73%
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SPOT GOLD: 1,267.80      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,304.57 1,310.27 1,310.27
1/2 AE 0.50 646.07 668.76 1,337.53
1/4 AE 0.25 326.20 340.72 1,362.89
1/10 AE 0.10 133.01 138.82 1,388.24
Aust. 100 corona 0.98 1,236.48 1,245.48 1,270.64
British sovereign 0.24 300.68 313.68 1,332.53
French 20 franc 0.19 238.47 242.47 1,298.73
Krugerrand 1.00 1,279.21 1,289.21 1,289.21
Maple Leaf 1.00 1,277.80 1,291.80 1,291.80
1/2 Maple Leaf 0.50 728.99 665.60 1,331.19
1/4 Maple Leaf 0.25 323.29 339.14 1,356.55
1/10 Maple Leaf 0.10 134.39 138.19 1,381.90
Mexican 50 peso 1.21 1,517.76 1,528.76 1,267.94
.9999 bar 1.00 1,272.24 1,279.80 1,279.80
SPOT SILVER: 17.61      
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 13,195.33 13,480.33 18.85
US 40% silver 1/2s 0.30 5,075.48 5,237.48 17.75
100 oz .999 bar 100.00 1,785.50 1,810.50 18.11
10 oz .999 bar 10.00 177.55 182.55 18.26
1 oz .999 round 1.00 17.71 18.17 18.17
Am Eagle, 200 oz Min 1.00 19.11 20.36 20.36
SPOT PLATINUM: 1,048.90      
Plat. Platypus 1.00 1,063.90 1,093.90 1,093.90
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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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