The Moneychanger
Daily Commentary
Thursday, 2 June a.d. 2016 Browse the commentary archive

Well, Mercy! I told y'all about Douglas Kaine McKelvey's "100-year Vision" article yesterday & urged y'all to read it, then neglected to give you a URL. Here it is, Delightful to read & ponder.

I've tortured & killed a lot of electrons writing and thinking about silver & gold, so it's time to throw it all up in the air & see if we can't find a new angle.

First, the closes. Metals refused to fall off a cliff today. Gold lost $2.10 (0.2%) to $1,209.80, but that was about the low. Silver gained 9.9¢ (0.6%) to 1600.5¢.

Here's a revised, stripped down gold chart,

WHAT IF gold is trading in a range, bounded by those pink lines? What if the bottom of that range is about $1,200? If gold really is strong, indeed, has entered a new bull phase, then it wouldn't weaken off to fall all the way to the 200 DMA (now $1,165).

And why is volume drying up as gold refuses to inch lower? Why is downward momentum slowing? Okay, maybe gold needs one good spike down still, but then again, maybe not. Maybe we've become so used to gold weakness since 2011 that we don't expect gold strength now -- and markets love to surprise.

Does silver agree? Chart's here,

WHAT IF the ruling pattern in silver is that rising range bounded by the green lines, defined by the uptrend from the January low? Silver today is only pennies off that line, which coincides with another support line from last year. Volume is drying up, not increasing. Momentum is slowing -- barely, but slowing. Rate of change is flattening.

This alternative interpretation is easily tested. If silver closes below 1590¢ or gold below $1,200, it's hogwash. On the other hand, if they bounce along this support & then begin rising, maybe 'tain't hogwash after all.

Consistent with a "metals won't drop much from here" outlook, the gold/silver ratio has stalled in a touchback to the lower boundary line it punched down through in April. That boundary line is also running roughly parallel to the 200 DMA. A rising ratio goes with metals falling, a falling ratio with metals rising.

US dollar index remains dazed, confused, & bumfuzzled. Rose 8 lousy basis points to 95.54. Is it rolling over earthward, or consolidating sideways? Pretty mealy-mouthed for a big, strong world class currency, I'd say.

On Wednesday Japan's PM Shinzo Abe announced he would delay imposing the sales tax. Some interpret that as a sign the central bank won't keep flooding the world with more yen. For whatever reason or none, the Yen rose today to 91.86 (0.61%). Euro lost 0.35$ to $1.1151.

Yea, & what of stocks? They rose modestly, in about as great a hurry as a Washington state driver in the left lane. Dow added 48.89 (0.27%) to 17,838.50. S&P500 edged up 5.93 to 2,105.26, up 0.28%.

How do you spell u-n-r-e-p-e-n-t-a-n-t? That is I, looking at stock chart indices. Still see a head and shoulders top appearing. Here's the Dow, and the S&P500,

On 2 June 1862 General Robert E. Lee, whom the newspapers had laughed at as "Granny Lee," took charge of the Confederate Army of Northern Virginia. Lee would get the last laugh.

On 2 June 1793 Maximilien Robespierre began the Reign of Terror that would take so many lives. The Revolution always eats her own children. After she had eaten many, she finished her blood-feast on Robespierre himself.

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
2-Jun-16 Price Change % Change
Gold, $/oz 1,209.80 -2.10 -0.17%
Silver, $/oz 16.01 0.10 0.62%
Gold/Silver Ratio 75.589 -0.602 -0.79%
Silver/Gold Ratio 0.0132 0.0001 0.80%
Platinum 958.40 -8.50 -0.88%
Palladium 535.60 -0.45 -0.08%
S&P 500 2,105.26 5.93 0.28%
Dow 17,838.56 48.89 0.27%
Dow in GOLD $s 304.81 1.36 0.45%
Dow in GOLD oz 14.75 0.07 0.45%
Dow in SILVER oz 1,114.56 -3.86 -0.35%
US Dollar Index 95.54 0.08 0.08%
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SPOT GOLD: 1,210.00      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,243.88 1,250.54 1,250.54
1/2 AE 0.50 616.59 638.28 1,276.55
1/4 AE 0.25 311.32 325.19 1,300.75
1/10 AE 0.10 126.95 132.50 1,324.95
Aust. 100 corona 0.98 1,180.11 1,189.11 1,213.13
British sovereign 0.24 286.97 299.97 1,274.30
French 20 franc 0.19 227.60 231.60 1,240.50
Krugerrand 1.00 1,220.89 1,230.89 1,230.89
Maple Leaf 1.00 1,220.00 1,234.00 1,234.00
1/2 Maple Leaf 0.50 695.75 635.25 1,270.50
1/4 Maple Leaf 0.25 308.55 323.68 1,294.70
1/10 Maple Leaf 0.10 128.26 131.89 1,318.90
Mexican 50 peso 1.21 1,450.02 1,461.02 1,211.76
.9999 bar 1.00 1,214.24 1,222.00 1,222.00
SPOT SILVER: 16.00      
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 12,008.43 12,293.43 17.19
US 40% silver 1/2s 0.30 4,600.53 4,762.53 16.14
100 oz .999 bar 100.00 1,624.50 1,649.50 16.50
10 oz .999 bar 10.00 161.45 166.45 16.65
1 oz .999 round 1.00 16.10 16.56 16.56
Am Eagle, 200 oz Min 1.00 17.50 18.75 18.75
SPOT PLATINUM: 958.40      
Plat. Platypus 1.00 973.40 1,003.40 1,003.40
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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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