The Moneychanger
Daily Commentary
Thursday, 9 June a.d. 2016 Browse the commentary archive

When you hear that a pension fund explosion is coming thanks to Quantitative Easing & Zero Interest rates, you can hardly imagine how catastrophic it is. Reader JF forwarded me a letter to the Financial Times from Sir William Lithgow, a former director of the Bank of Scotland. Try to digest this: "Remarkably, liabilities increase by 20% for every one percentage point reduction in the discount rate employed. . . Central bankers deny QE's toxic effects."

The QE/ZIRP induced pension fund collapse will make the real estate bubble look like a Sunday School picnic. During the roaring 90s corporations, states, & municipalities made pension promises that would have been hard enough to keep when they were earning 6%. Earning one-half of one percent, the liabilities metastasize & the pensions can never be paid.

The Trojan priest Laocoon saw the Trojan horse, which unbeknownst to the Trojana was filled with Greek warriors, & said, "Equo ne credite, Teucri! Quidquid id est, timeo Danaos et dona ferentes!" Loosely translated: "Don't trust the horse, Trojans! Whatever it is, I fear the Greeks even when they come bearing gifts."

I read where George Soros is touting gold. Mmmm. "Asino ne credite, Teucri! Quidquid it est, timeo Soros et dona ferentes!"

Y'all wouldn't believe it, but the Magic Force appeared again today in the stock market, almost 2:00 on the dot to buy, buy, buy. Alas, even the Nice Government Men have not all power, and today the market wrestled their strong arm right down to the table top. After a low at 17,915, the Magic Force did manage to boost the Dow 70 points to 17,985.19, down only 19.86 (0.11%). Also fell the S&P500, down 1.98 (0.17%) to 2,115.48.

This won't come as any surprise to y'all, but I am STILL watching that head & shoulders top completing in stocks. Look here, http://schrts.co/Q6KUW0 or here, http://schrts.co/vtdPMb Why AM I so stubbornly small-minded & ungenerous?

Oh! Owch! Yikes! Look at that Dow in Gold, http://schrts.co/0IyQsH Hit the upper border of that megaphone on 2 June (right beneath the 200DMA) & ricocheted -- ZING! It has tumbled ever since, again through the uptrend from the 2011 low (yes, ma'am, that DOES signify something big) & today plunging through the 20 & 50 DMAs.

Whoo! Dow in silver looks weaker than jail house soup, http://schrts.co/ohwLZP

Upward correction of the April-May fall couldn't even reach the 200 DMA, but stopped at 1,114.21 oz. Last few days it has avalanched down to 1,040.81 oz. Momentum has turned down, and it has, well, nothing going for it.

Why am I telling y'all this? Because the post 2011 upward correction in of the Dow in silver, which lost 85% from 2001 to 2011, has ended. From here stocks will lose another 85% against silver & gold. Swap stocks for silver & gold.

I can't really say the US dollar index "played the man" today, but it did rise 39 basis points (0.42%). After rolling downhill head over heels for four days. I reckon that something. Still, it remains below any trigger of an upward move, and is safely confined again by the upper boundary of the channel downtrending since May.

Now quick! Which is the most schizophrenic major currency? Give yourself a pat on the back if you said "euro." It gapped down today and fell 0.7% to $1.1318. This thing will blow up like a giant Lego man one day. Yen dropped 0.03% to 93.43.

Yield on the US 10 year treasury fell 1.52% today to 1.680%, gapping down through support that has "mostly) held since last February. http://schrts.co/vUJO4G That strikes me as a panicky chart, reflecting the building terror of stock investors trying to unload and run to a safe cave.

Today silver & gold continued their steady advance. Comex gold rose $10.40 (0.8%) to $1,270.20. Silver jumped 28.5¢ to 1725.3¢.

Both silver & gold have broken through their downtrends and made good that breakthrough two days. Their test will come as they approach March's $1,287.80 high. Can they keep driving through that?

Only one thing bothers me, & that is a fairly active level of retail selling. That's not fatal, but makes me check my enthusiasm.

On the other hand, look at the Gold/BKX bank stock index. http://schrts.co/SOxWwD

Remember this spread shows confidence flowing from gold to financial markets & back. Clearly, the public's confidence is draining away from banks. In the last five days the spread has twice gapped up. Sentiment is flowing toward gold.

On 9 June 1869 Charles Elmer Hires sold his first root beer in Philadelphia, bless him.

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
9-Jun-16 Price Change % Change
Gold, $/oz 1,270.20 10.40 0.83%
Silver, $/oz 17.25 0.29 1.68%
Gold/Silver Ratio 73.622 -0.624 -0.84%
Silver/Gold Ratio 0.0136 0.0001 0.85%
Platinum 1,003.40 -7.50 -0.74%
Palladium 561.45 -0.55 -0.10%
S&P 500 2,115.48 -1.98 -0.09%
Dow 17,985.19 -19.86 -0.11%
Dow in GOLD $s 292.70 -2.74 -0.93%
Dow in GOLD oz 14.16 -0.13 -0.93%
Dow in SILVER oz 1,042.44 -18.68 -1.76%
US Dollar Index 96.99 0.39 0.40%
IMPORTANT NOTE: The following are wholesale, not retail, prices. To figure our retail selling price, multiply the "ask" price by 1.035. To figure our retail buying price, multiple the "bid" price by 0.97. Lower commissions apply to larger orders, higher commissions to very small orders.
SPOT GOLD: 1,270.00      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,304.29 1,312.55 1,312.55
1/2 AE 0.50 647.19 669.93 1,339.85
1/4 AE 0.25 326.77 341.31 1,365.25
1/10 AE 0.10 133.25 139.07 1,390.65
Aust. 100 corona 0.98 1,238.63 1,247.63 1,272.83
British sovereign 0.24 301.20 314.20 1,334.75
French 20 franc 0.19 238.89 242.89 1,300.95
Krugerrand 1.00 1,280.16 1,290.16 1,290.16
Maple Leaf 1.00 1,280.00 1,294.00 1,294.00
1/2 Maple Leaf 0.50 730.25 666.75 1,333.50
1/4 Maple Leaf 0.25 323.85 339.73 1,358.90
1/10 Maple Leaf 0.10 134.62 138.43 1,384.30
Mexican 50 peso 1.21 1,521.93 1,532.93 1,271.40
.9999 bar 1.00 1,274.45 1,282.00 1,282.00
SPOT SILVER: 17.27      
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 12,737.73 13,022.73 18.21
US 40% silver 1/2s 0.30 4,975.18 5,137.18 17.41
100 oz .999 bar 100.00 1,751.50 1,776.50 17.77
10 oz .999 bar 10.00 174.15 179.15 17.92
1 oz .999 round 1.00 17.37 17.83 17.83
Am Eagle, 200 oz Min 1.00 18.77 20.02 20.02
SPOT PLATINUM: 1,003.40      
PLATINUM Fine Tr.Oz. BID ASK $/oz
Plat. Platypus 1.00 1,018.40 1,048.40 1,048.40
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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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