The Moneychanger
Daily Commentary
Thursday, 21 July a.d. 2016 Browse the commentary archive

A brief explanation of yesterday's remarks on 90% coin premium:

Since 1998 I've watched the premium on US 90% silver coin run from zero to 40% four times, I think. Back last September when the premium at wholesale buy was $3 to $4 over spot/oz, I recommended you swap 90% for bullion bars or rounds and pick up an 18% - 22% increase. Why? Because experience hath shewed that the premium would vanish, & if you don't use it, you lose it.

So why in the world would I GIVE UP ounces now to swap bullion back into 90%? Because 90% will most likely again gain a big premium affording us another opportunity to increase ounces at no risk & no cost. To set us up for that opportunity, we swap bullion now for 90%, but we have to give up about 3% in ounces.

Okay, now follow me: gain 20%, lose 3%, so net gain 17% AND we are set up to make the swap again. That's why I recommend it.

But the numbers just aren't quite right yet. With silver correcting wholesalers aren't paying more than spot for bars & rounds, and we have to pay 20¢ to 25¢ an ounce over spot for 90%. You also have to pay me a commission because I stopped working for free after I got out of the army. I'm watching it. I'll let y'all know when it works.

By the way, hardly any gold & silver dealers trade swapping strategies like we do, and I don't believe ANY of them will charge you a commission on one side only, as we do.

Am I crazy? Nope. I figure if I make money for you & give you a square deal, you'll remember and come back.

Pay 'tention, now, 'cause I have a supper guest and my wife will wear me out if I'm late. Gotta work fast. Susan with a switch in her hand scares me.

Stocks wilted today, maybe just the first Japanese beetle of summer, but wilted still. Dow backed off 77.8 (0.42%) to 18517.23 while the S&P500 sagged 7.85 (0.36%) to 2,165.17. Both indices have walked sideways out of spindly rising wedges. Spindly rising wedges are to stock market rallies what mixing Boiler Makers, wine, and Tom Collins are to drinking parties -- and hangovers..

US dollar index tucked tail & ran like a scalded dog. Fell 22 basis points to 97.05, but didn't close back within that flat-topped triangle. I'm too much a nat'ral born durn Tennessee fool to parse the Dollar index today. Around 9:00, I reckon about when the European Central Bank Headcriminal Draghi was announcing the ECB would leave interest rates unchanged at 0.0%, the dollar index tanked from 97.1 to 96.7 then sharply turned around & climbed to 97.2, and faded the rest of the day. Euro rose 0.18% to $1.1029 while the Yen rose a mighty 1.9% to 94.52. I wouldn't trade them nasty fiat currencies with yore money.

Gold jumped $11.7 (0.9%) to $1,330.50 and silver leapt 20.2¢ (1%) to 1978.4¢.

Let me make this clear: both silver & gold had turned in the wee hours of Wednesday. They did not rise merely on news from the World-Felon Draghi. They had already turned.

For the moment, then, we assume that the firm bottom for gold is $1,310, Wednesday's low, and 1927¢ for silver. Virtually the selfsame turnaround pattern appears on both charts, an upside down head & shoulders.

But this is not enough. Gold was stopped today by $1,335 (or $1,332.30, depending on whom you listen to), silver at 1990¢. To confirm today's turnaround as more than a one day bounce, gold must conquer $1,335, better $1,340, and silver 2020¢. Here's the gold chart,

Gold remained within the bullish flag after a low at $1,310.70, then turned & sprinted for the 20 DMA ($1,334.20). Closed barely above the flag's upper boundary, but not enough to convince me. That flag has run out of time and is squeezing gold out, one way or the other. I feel like a certified, wearing a jacket with sleeves that buckle in the back, lunatic saying it, but I believe silver & gold are set to rise. Yes, volume rose sharply for both today, confirming the rise.

Here be the silver chart,

Huge volume rise in silver today, and a punch through the 20 DMA (1946¢) with a recovery back up to the pennant's apex, BUT not above. Here again, that triangle is squeezing silver out, one way or the other. I'm betting up.

First major battle of the War for Southern Independence began when a yankee army invaded Virginia, near the city of Manassas. Although the Battle of First Manassas began badly for the raw Confederate Army, the raw Union Army didn't perform much better. Worse, in fact.

Confederate Gen'l. Joe Johnston arrived with reinforcements from the Shenandoah Valley by railroad and the tide turned South. The Virginia First Brigade under an obscure brigadier from Virginia Military Institute, stood their ground at the critical moment, earning Thomas Jonathan Jackson the immortal nickname, "Stonewall," although he always insisted it belonged to the Brigade, and not to him. Under the Confederate counterattack the Union army panicked, turning a retreat into a rout. Unhappily, the nemesis of the Confederacy, commanding Gen'l. P.G.T. Beauregard, managed to squander his advantage by not advancing. He squandered another, greater advantage the next year in Tennessee at Shiloh.

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
21-Jul-16 Price Change % Change
Gold, $/oz 1,330.50 11.70 0.89%
Silver, $/oz 19.78 0.20 1.03%
Gold/Silver Ratio 67.251 -0.096 -0.14%
Silver/Gold Ratio 0.0149 0.0000 0.14%
Platinum 1,105.20 17.60 1.62%
Palladium 683.85 9.45 1.40%
S&P 500 2,165.17 7.85 0.36%
Dow 18,517.23 -77.80 -0.42%
Dow in GOLD $s 287.70 -3.77 -1.29%
Dow in GOLD oz 13.92 -0.18 -1.29%
Dow in SILVER oz 935.97 -13.63 -1.44%
US Dollar Index 97.05 -0.22 -0.23%
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: 1,330.70      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,362.64 1,375.28 1,375.28
1/2 AE 0.50 678.15 701.94 1,403.89
1/4 AE 0.25 342.40 357.63 1,430.50
1/10 AE 0.10 138.29 145.71 1,457.12
Aust. 100 corona 0.98 1,295.22 1,304.22 1,330.57
British sovereign 0.24 315.60 328.60 1,395.91
French 20 franc 0.19 250.31 254.31 1,362.10
Krugerrand 1.00 1,338.68 1,348.68 1,348.68
Maple Leaf 1.00 1,340.70 1,354.70 1,354.70
1/2 Maple Leaf 0.50 765.15 698.62 1,397.24
1/4 Maple Leaf 0.25 339.33 355.96 1,423.85
1/10 Maple Leaf 0.10 141.05 145.05 1,450.46
Mexican 50 peso 1.21 1,594.67 1,605.67 1,331.73
.9999 bar 1.00 1,335.36 1,342.70 1,342.70
SPOT SILVER: 19.80      
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 14,049.75 14,334.75 20.05
US 40% silver 1/2s 0.30 5,723.00 5,885.00 19.95
100 oz .999 bar 100.00 2,005.00 2,030.00 20.30
10 oz .999 bar 10.00 199.50 204.50 20.45
1 oz .999 round 1.00 19.90 20.36 20.36
Am Eagle, 200 oz Min 1.00 21.55 22.55 22.55
SPOT PLATINUM: 1,105.20      
Plat. Platypus 1.00 1,120.20 1,150.20 1,150.20
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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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