The Moneychanger
Daily Commentary
Monday, 23 May a.d. 2016 Browse the commentary archive

I reckon I couldn't have picked a better day to play hooky than last Friday, as very little transpired.

As usual, that scurvy tapeworm, the US dollar index, lies at the knot of the riddle (to mix a couple of disgusting metaphors). Chart's here,

Last Wednesday the Dollar index traded up through its 50 DMA, then Thursday penetrated the downtrend line from February -- and stopped. Jes' balked like a flop eared mule. And has been stuck there ever since, too lily-livered to bust through 95.50 resistance.

What's the big deal? Just this, markets that break through resistance & downtrend lines tend to show at least some life & enthusiasm, reaching into the new territory. Even with the Fed sending out OLs (Official Liars) to jawbone up the dollar with more empty threats of raising their discount rate in June, dollar index can't advance. Now this may not be permanent, it may be passing, but it sure ain't no way to start a rally. Looks weak & sickly as a runt pig.

Japanese yen benefited from trade balance news today and rose 0.78% to 91.53. This leaves the yen broken down from a bearish rising wedge, but bouncing off its 50 DMA. Euro lost 0.04% to $1.1218.

Lift up your eyes to the horizon! Y'all realize that we are watching a currency centrifuge in slow motion, right? The huge overindebtedness is whirling currencies & economies around faster and faster until they are shaken to pieces. Mercy, don't be one of those who can't believe an inevitable outcome because it's not yet before your eyes. The default will come, & with it transglobal agony. Facebook won't save you, nor Amazon. Not even Netflicks.

Stocks are breaking down through the neckline of a head & shoulders top.

Like busy fire ants beneath the surface, I suspect the Nice Government Men of the Plunge Protection team and sweating themselves to dehydration trying to keep stocks up. Dow gained -- get out your magnifying glass -- 2.09 (0.01%) to 17,503.03, but other indices lost millimeters. S&P500 shaved off 2.79 (0.14%) to 2,049.53.

Dow in Gold & Dow in silver are correcting the first little leg down of their unfolding plunge. DiS is here, Dow in Gold here,

Gold lost $1.30 today to settle on Comex at $1,251.10. Silver subtracted 10.9¢ to 1641¢. Both have skidded to a halt after last week's break, at least temporarily.

Gold chart can be found here,

My suspected targets are the bottom of the present uptrending range, which would be a very shallow correction indeed, and the $1,208 - $1,190 area. Below that a Freddie Kruger correction would cut to the 200 DMA ($1,161). The height of that triangle gold formed in May (blue dashed line) projects a decline to $1,200 or $1,190. Volume is rising slightly as it falls.

Silver's chart is here,

Most likely targets are 1600¢ and the 200 day moving average, now at 1618¢. As for gold, indicators point down for silver but it's taking its time to work lower. I am anxious to see how Commitments of Traders reports have changed when they come out this week. I keep thinking this will be a shallow correction, but the market may slap my jaws.

Don't mess with Czechs. On 23 May 1618 in Prague began the 30 Years War when Czech protestants tossed three Habsburg governors out a window -- the Defenestration of Prague. It was NOT a first story window, and this was not the first time the Czechs had removed offensive officials by defenestration. They killed seven city council members that way in 1419.

Now all you squeamish modern folks will wince at the thought of pitching offending officials out the window. However, think about it. Think how it would improve the manners of those defenestrated, and how respectful it would render the rest, the not-yet-defenestrated. Might work better than a recall election, and certainly more permanently.

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
23-May-16 Price Change % Change
Gold, $/oz 1,252.90 -1.80 -0.14%
Silver, $/oz 16.52 0.04 0.24%
Gold/Silver Ratio 75.846 -0.293 -0.39%
Silver/Gold Ratio 0.0132 0.0001 0.39%
Platinum 1,012.30 -10.20 -1.00%
Palladium 550.05 -8.65 -1.55%
S&P 500 2,052.32 12.28 0.60%
Dow 17,500.94 65.54 0.38%
Dow in GOLD $s 288.75 1.49 0.52%
Dow in GOLD oz 13.97 0.07 0.52%
Dow in SILVER oz 1,059.44 1.41 0.13%
US Dollar Index 95.24 -0.05 -0.05%
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SPOT GOLD: 1,250.50      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,284.26 1,292.39 1,292.39
1/2 AE 0.50 637.25 659.64 1,319.28
1/4 AE 0.25 321.75 336.07 1,344.29
1/10 AE 0.10 131.20 136.93 1,369.30
Aust. 100 corona 0.98 1,219.61 1,228.61 1,253.43
British sovereign 0.24 296.58 309.58 1,315.10
French 20 franc 0.19 235.22 239.22 1,281.30
Krugerrand 1.00 1,260.50 1,270.50 1,270.50
Maple Leaf 1.00 1,260.50 1,274.50 1,274.50
1/2 Maple Leaf 0.50 719.04 656.51 1,313.03
1/4 Maple Leaf 0.25 318.88 334.51 1,338.04
1/10 Maple Leaf 0.10 132.55 136.30 1,363.05
Mexican 50 peso 1.21 1,497.05 1,508.05 1,250.77
.9999 bar 1.00 1,254.88 1,262.50 1,262.50
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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 12,280.84 12,640.84 17.68
US 40% silver 1/2s 0.30 4,727.67 4,889.67 16.58
100 oz .999 bar 100.00 1,667.60 1,692.60 16.93
10 oz .999 bar 10.00 165.76 170.76 17.08
1 oz .999 round 1.00 16.53 16.99 16.99
Am Eagle, 200 oz Min 1.00 17.93 19.18 19.18
SPOT PLATINUM: 1,012.30      
Plat. Platypus 1.00 1,027.30 1,057.30 1,057.30
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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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