The Moneychanger
Weekly Commentary
Friday, 10 June a.d. 2016 Browse the commentary archive
Here's the weekly scorecard:
  3-Jun-16 10-Jun-16 Change % Change
Silver, cents/oz. 1,634.60 1,731.50 96.90 5.9
Gold, dollars/oz. 1,240.10 1,273.40 33.30 2.7
Gold/silver ratio 75.866 73.543 -2.322 -3.1
Silver/gold ratio 0.0132 0.0136 0.0004 3.2
Dow in Gold Dollars (DIG$) 296.83 290.02 -6.82 -2.3
Dow in gold ounces 14.36 14.03 -0.33 -2.3
Dow in Silver ounces 1,089.38 1,031.78 -57.60 -5.3
Dow Industrials 17,807.06 17,865.34 58.28 0.3
S&P500 2,099.13 2,096.07 -3.06 -0.1
US dollar index 94.03 94.64 0.61 0.6
Platinum 980.90 993.80 12.90 1.3
Palladium 549.25 547.15 -2.10 -0.4

Forgive any blank emails you might have gotten yesterday, please. Our server was sick & stopping & starting emailing program. Problem now fixed.

Sorry, this has to be fast because I've been driving all day to Chattanooga & back to get that wire out of my toe - thank heaven! Now I have to learn how to bend my foot again, but I am grateful.

'Twas a crazy week. Silver shot up -- look at that! -- 5.9% and gold rose 2.7%. Gold/silver ratio dropped 3.1% (perfect! Direction we want it to move). Stocks were mixed, as they say, or better yet, mixed up. They hit new highs this week, but puked back all the gains. Dow ended the week up by a splinter and S&P500 down a sliver. Yet slivers can be portentous, & this one threatens to mark completion of a head and shoulders top in stocks. US dollar index wobbled and tumbled and tried to stand up this week, but only found feet today. Of that 61 basis point gain for the week, 65 came today. Gold/Bank Stock Index spread shot up this week, a sign confidence is draining out of financial markets (stocks) & into gold.

My arcane comments yesterday about George Soros touting a coming stock market crash & buying gold is simply this: I don't trust anything he says. Maybe he's truthing, maybe he's just Trojan-horsing around. Either way, I don't want to make any decisions based on assumptions about what Soros is doing.

Let's beat this dead horse plumb to a pulp: Dow Jones Industrial Average & the S&P500 are forming head and shoulders topping patterns. This week the new highs only marked the top of the right shoulder. Today the fell like bricks out a second story window. Without closes above May 2015's highs, both will keep edging off for a couple of more weeks, maybe three, then they will tank. When they cut through that neckline, rate-of-fall will accelerate.

Dow chart is here, and the S&P500 is here

Today both indices fell off a cliff. Dow sank 119.85 (0.67%) to 17,865.34. S&P500 fell more yet, down 19.41 (0.92%) to 2,096.07. If y'all will look at the charts, you'll understand what I mean. No, the slightly higher high on the right shoulder of the S&P500 doesn't make any difference.

Stocks faint today took the Dow in Gold down even more, finishing the week at 14.00 oz. Chart is here, completing a megaphone reversal.

Dow in silver is here,

Once the Dow in silver drops through 995 oz (it closed at 1,030.89 oz today), it will hit the gas pedal in its flight earthward.

Time to sell stocks and put the proceeds into silver & gold.

US dollar index had a better day after fumbling all week. It rose 65 basis points (0.69%. Here's a chart,

It surprises me a bit that the dollar punched through its 50 dma and the top boundary of the downtrending channel. However, I don't set no store by that till it shows it can keep doing it.

Euro has no strength of its own and is probably coming under pressure from the possibility the UK on June 23 will vote to leave the European Union. It lost 0.52% to $1.1258. Yen gained 0.1% to 93.52. Makes no sense from an economic or currency management standpoint, but the yen is the strongest of the three big currencies in the market. Forget reality.

Silver added another 6.2¢ (0.4%) for a 1731.5¢ Comex close. Gold raked in $3.20 (0.25%) to $1,273.40.

I wish y'all would look at gold's weekly chart since 2011: Notice that it climbed above that green downtrend form the October 2012 high, AND through the blue line marking the top border of the post 2013 trading channel. Don't miss this: Gold traded nearly to its 200 week moving average (now $1,315.45), backed off to $1,201.50, which just happened to be the top boundary of that post 2013 trading channel. Whoa! I know what that is -- a final kiss good-bye before shooting the moon.

Here's gold's monthly since 2010, On this chart it has broken out upward through the upper boundary of a falling wedge, and through its 20 month moving average. All indicators point up.

Don't miss the Daily Chart,

Gold bounced off the lower range boundary at 2015, shot through its clustered 20 & 50 DMAs, then shot through the downtrend line from the 1 May high at $1306. Now it has reached territory ($1,272 - $1,287) where resistance will be stiffer, since it was stopped there earlier in the year. So far it's stronger than a garlic milkshake, but it must keep proving itself, next by piercing this resistance.

Y'all please look at the Gold/Bank Stock Index,

Look here: it's been dropping since 2011, and from late 2013 through January of this year, it traded in a slightly downtrending range. In January it broke up out of that range, topped in February, then entered a correction until about 1 June. It formed a new trading channel & touched the bottom, and the 200 DMA, end-May/beginning of June. It has gapped up THREE times, and now is challenging the top of that trading channel. The Gold/BKX is fixin' to blow out the top.

Remember, the spread is a fraction with Gold as the numerator and BKX as the denominator. More gold rises against the bank stock index, the larger the fraction becomes and the more the spread rises.

Silver's weekly chart looks far better than gold's. Here it is,

WHY do I make so bold? Look, silver has conquered the downtrend line from the 2011 high and broken out to the upside, all the way to 1806¢. Then it went back to the line for a kiss good-bye, and now it has taken off again. On the monthly chart it has done the same. What more confirmation do y'all want?

On the daily silver chart, y'all can trace silver's astonishing climb this week. It cleared the 20 & 50 DMA's then poked through that downtrend line like it was wet cardboard. But now silver approacheth more resistance from 1762 - 1772¢.

Next week silver & gold may lollygag, digesting its gains like a big old black snake eats a hen egg and basks in the sun to digest it. However, watch $1,308 and 1806¢. If gold & silver climb above those last highs, BACK UP THE TRUCK and buy. Meantime any backsliding must not violate the 50 day moving average.

What (at this point) seems to be the successful test of silver & gold's gains from the first of the year clinches in spades the conclusion that silver & gold bottomed in December 2015.

On 10 June 1864 at the Battle of Brice's Crossroads in northern Mississippi, Confederate General Nathan Bedford Forrest with only 3,500 cavalry SMASHED Union General Samuel Sturgis' army of 4,800 infantry and 3,300 cavalry. Forrest captured 1,600 prisoners, 18 artillery pieces, and wagons loaded with supplies. Forrest cleverly sized up the land and the Union army's state after marching for hours on a hot June day. When they arrived exhausted, he bluffed them by sending men with trumpets to one flan. After fighting an uphill battle, Union troops broke and started running for Memphis. Forrest's foxy cleverness is hilarious, and you can read about it in THAT DEVIL FORREST by John Allen Wyeth.

Y'all enjoy your weekend.

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
10-Jun-16 Price Change % Change
Gold, $/oz 1,273.40 3.20 0.3
Silver, $/oz 17.32 0.06 0.4
Gold/Silver Ratio 73.543 0.182 0.2
Silver/Gold Ratio 0.0136 0.0000 0.4
Platinum 993.80 -9.60 -1.0
Palladium 547.15 -14.30 -2.5
S&P 500 2,096.07 -19.41 -0.9
Dow 17,865.34 -119.85 -0.7
Dow in GOLD $s 290.02 -2.65 -0.9
Dow in GOLD oz 14.03 -0.13 -0.9
Dow in SILVER oz 1,031.78 -10.65 -1.0
US Dollar Index 94.64 0.65 0.7
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: 1,274.90      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,308.05 1,317.61 1,317.61
1/2 AE 0.50 649.69 672.51 1,345.02
1/4 AE 0.25 328.03 342.63 1,370.52
1/10 AE 0.10 133.76 139.60 1,396.02
Aust. 100 corona 0.98 1,243.41 1,252.41 1,277.71
British sovereign 0.24 302.36 315.36 1,339.69
French 20 franc 0.19 239.81 243.81 1,305.89
Krugerrand 1.00 1,285.10 1,295.10 1,295.10
Maple Leaf 1.00 1,284.90 1,298.90 1,298.90
1/2 Maple Leaf 0.50 733.07 669.32 1,338.65
1/4 Maple Leaf 0.25 325.10 341.04 1,364.14
1/10 Maple Leaf 0.10 135.14 138.96 1,389.64
Mexican 50 peso 1.21 1,527.80 1,538.80 1,276.27
.9999 bar 1.00 1,279.36 1,286.90 1,286.90
SPOT SILVER: 17.33      
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 12,673.38 12,958.38 18.12
US 40% silver 1/2s 0.30 4,992.88 5,154.88 17.47
100 oz .999 bar 100.00 1,757.50 1,782.50 17.83
10 oz .999 bar 10.00 174.75 179.75 17.98
1 oz .999 round 1.00 17.43 17.89 17.89
Am Eagle, 200 oz Min 1.00 18.83 20.08 20.08
SPOT PLATINUM: 993.80      
Platinum Platypus 1.00 1,008.80 1,038.80 1,038.80
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© 2015 Little Mountain Corporation, d.b.a. The Moneychanger. All rights reserved. May not be republished in any form, including electronically, without our express permission.

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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