The Moneychanger
Daily Commentary
Wednesday, 20 July a.d. 2016 Browse the commentary archive

Before I forget for the third day running, falling premiums need mentioning. Premium on US 90% silver coin, at $5 an ounce over spot at wholesale last August, has fallen to 20¢ over spot. That makes 90%, my favorite form of holding silver, the cheapest way to buy silver.

In gold coins, the Austrian 100 corona (0.9802 oz) yesterday was about $2 UNDER spot at wholesale. The US $5 commemoratives (0.241875 troy ounce) costs only $2 over spot at wholesale, ridiculously cheap for a fractional US coin.

Why does it make a difference? OVER TIME, PREMIUM ALWAYS DISAPPEARS. Gold is gold. Therefore, we always want to buy the lowest cost per ounce coin. Buy gold, not premium, and, yes, I mean to prefer these low premium coins over the gold American Eagles, and 90% coin over silver American Eagles.

Back in August 2015 we advised our customers to SWAP US 90% coin for silver bullion because they could realize a roughly 20% gain in ounces. Now that the premium has vanished on 90% coin, it wouldn't be a bad idea to swap bullion back into 90%. Why? One day that premium will return, and besides, US 90% coin has potentially the greatest utility of any physical silver.

TODAY silver broke out of that pennant, proving it was an even-sided triangle instead of a pennant. Or did it?

Silver dropped 39.3¢ (2%) to 1958.2¢. Gold tumbled $12.70 (1%) to $1,318.80 on Comex. I repeat: silver is more volatile than gold, upside and downside.

Here's the Silver chart,

Silver punched through the lower boundary of that pattern, but didn't quite reach its 20 day moving average below at 1934¢. Low came at 1944¢.

That heavy blue line holding everything up is the current uptrend line. If this is simply a shallow correction, silver will touch that 20 DMA & reverse. It might be a deeper correction, in which case it must not breach that heavy blue uptrend line, tomorrow about 1860¢.

Yes, redrawing that pennant into a flat bottomed falling triangle does make me nervous. Those patterns have a habit of breaking down.

None of this terrorizes me because (1) gold & silver needed some correction to shake out the optimists, and (2) the gold chart is just fine. Take a look,

Gold could have dropped as low as $1,350 today & remained within that bullish flag. Actual low came at $1,313.30. Maximum possible low tomorrow to stay within the flag is $1,309. Gold adds this complication, that it is smack on the uptrend line, so the bottom boundary of that flag becomes that uptrend line.

Gold pierced its 20 DMA ($1,331.09) today. Good. Volume rose some, but not markedly, nor did silver's.

On the upside watch $1,340 and 2025¢. Closes above that signal an upside breakout.

No, I don't know how many days this correction might continue, but gold's chart says not more than three or four.

I should have heeded the gold/silver ratio's warning yesterday. It gapped up & ended the day up 1%. Surely headed for the 20 DMA overhead (68.99). View the chart here,

US dollar index today built on yesterday's gains by adding 15 basis points (0.15%) to 97.26. Clearly intends to move higher.

Euro followed through on yesterday's downside break out, but ended at $1.1009, only 0.9% lower. Yen, however, busted its 50 DMA (94.18) today & lost a huge 1%.

Stocks rose again. Dow added 36.02 (0.19%) to 18,595.03. S&P500 grabbed 9.24 (0.43%) to end at 2,173.02. The power of central banking lies.

I am beat. Pulled grass out of flowerbeds on Saturday, & Monday the chiggers started showing up. Now my chiggerbites have chiggerbites. Scratching like I've got fleas. Thank God for lavender oil!

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
20-Jul-16 Price Change % Change
Gold, $/oz 1,318.80 -12.70 -0.95%
Silver, $/oz 19.58 -0.39 -1.97%
Gold/Silver Ratio 67.348 0.689 1.03%
Silver/Gold Ratio 0.0148 -0.0002 -1.02%
Platinum 1,087.60 -7.10 -0.65%
Palladium 674.40 17.50 2.66%
S&P 500 2,173.02 9.24 0.43%
Dow 18,595.03 36.02 0.19%
Dow in GOLD $s 291.47 3.34 1.16%
Dow in GOLD oz 14.10 0.16 1.16%
Dow in SILVER oz 949.60 20.49 2.20%
US Dollar Index 97.26 0.15 0.15%
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: 1,314.10      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,343.01 1,358.12 1,358.12
1/2 AE 0.50 669.68 693.19 1,386.38
1/4 AE 0.25 338.12 353.16 1,412.66
1/10 AE 0.10 136.56 143.89 1,438.94
Aust. 100 corona 0.98 1,279.06 1,288.06 1,314.08
British sovereign 0.24 311.66 324.66 1,379.18
French 20 franc 0.19 247.18 251.18 1,345.38
Krugerrand 1.00 1,320.67 1,330.67 1,330.67
Maple Leaf 1.00 1,324.10 1,338.10 1,338.10
1/2 Maple Leaf 0.50 755.61 689.90 1,379.81
1/4 Maple Leaf 0.25 335.10 351.52 1,406.09
1/10 Maple Leaf 0.10 139.29 143.24 1,432.37
Mexican 50 peso 1.21 1,574.77 1,585.77 1,315.23
.9999 bar 1.00 1,318.70 1,326.10 1,326.10
SPOT SILVER: 19.42      
SILVER Fine Tr.Oz. BID ASK $/oz
VG+ Morgan $B4 1905 0.77 23.00 27.00 35.29
VG+ Peace dollar 0.77 18.00 20.00 26.14
90% silver coin bags 0.72 13,706.55 13,991.55 19.57
US 40% silver 1/2s 0.30 5,610.90 5,772.90 19.57
100 oz .999 bar 100.00 1,967.00 1,992.00 19.92
10 oz .999 bar 10.00 195.70 200.70 20.07
1 oz .999 round 1.00 19.52 19.98 19.98
Am Eagle, 200 oz Min 1.00 21.17 22.17 22.17
SPOT PLATINUM: 1,087.60      
Plat. Platypus 1.00 1,102.60 1,132.60 1,132.60
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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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