The Moneychanger
Daily Commentary
Thursday, 11 August a.d. 2016 Browse the commentary archive

Clearly I am not the only one confused by the utter contradictions in markets. Here today's column from Larry Levin, quoting David Rosenberg. "This reality is one weird market." Short read, but thorough. http://bit.ly/2aOSYJZ

Did y'all hear what happened to Hillary yesterday? She was visiting an old folks home, and leaned over to a little blue haired lady in a wheel chair, stuck out her hand, & said, "Do you know who I am?"

The woman thought a minute, then said, "No, but if you'll go up to the front desk, they can tell you."

In this best of all possible [central bank] worlds, it just got better! Dow, S&P500, & Nasdaq Composite all hit new all-time highs today, first time since 31 December 1999, right before they spent the next two-and-a-half years deep sea diving (Dow topped in January 2000, Nasdaq & S&P500 in March 2000). Actually, the Dow only exceeded its January 2000 peak in 2006, and I'm too lazy to look up the others. Suffice it to say investors spent long enough under water to wrinkle and peel their skin.

Dow rose 117.86 (0.64%) to 18,613.52. S&P500 powered up 10.3 (0.47%) to 2,185.79. Truth be told, I don't really care whether they're making new highs in dollar terms, considering how much stocks have fallen this year in silver & gold terms. But then, I am a constitutional sourpuss & wetblanket.

US dollar index had a Goldilocks day, not too hot, not too cold, but jes' right. Added 23 basis points (0.24%) to 95.84, maintaining its firm hold on a downtrend but remaining above critical 95.50 support and the 50 DMA. Great work, Nice Government Men! Jes' right.

Skittery Yen dropped 0.8% to 98.10, painting out a double top. Sorry euro, leper even among fiat currencies, fell back again today 0.39% to $1.1135.

I see headlines connecting today's stock rally causally to oil's rising price. I scratch my nat'ral born durn Tennessee noggin trying to parse that. Lessee, oil becoming more expensive is going to help businesses who all count oil among their COSTS? Naw, that don't work. Maybe it's this: oil rising is a secret sign that world demand for oil is rising, a secret sign business will improve & so stocks will become more valuable? Or maybe it's this: the rising price of oil has attracted the attention of Aliens from outer space, and when they land they will start buying stocks with all eight tentacles.

We need some grown up people to replace all these mental teenagers writing about the economy.

Law, it was a TOUGH day on metals! Platinum lost every cent of the $24.40 it gained yesterday and two dollars to boot for a close at $1,154.20. Palladium lost $34.60 (after gaining $32.05 yesterday) to close at $690.55. Makes yesterday's action look like a final move blow-off, especially since it happened at a 5 year downtrend line. Their failure will weigh on silver & gold.

Comex gold lost $1.80 (0.13%) to $1,342.50; silver dropped 15¢ (0.7%) to 1998.4¢. Close below 2000¢ is a morale-buster.

Gold did not puncture its rising uptrend line, but it punched into it & closed right on it. Remains above its 20 DMA, so has not yet officially signaled a downtrend. Lo, the chart, http://schrts.co/Yv2po1

Chart shows support areas -- remember they are areas, not points -- around $1,310 - $1,300, then around $1,250, and even as low as $1,201.50. All that's possible, but it might surprise everybody (including me) if silver did most of the correcting and gold never broke that uptrend line. My, that feels like drawing to an inside straight when I think about those horribly bearish Commitments of Traders. But then I have to ask myself, what if gold is discounting something else it sees ahead? What if that European bank crises the ECB & politicians are so vigorously trying to smother roars up off the bed?

This silver chart's a mess, but there 'tis: http://schrts.co/Yv2po1

Let me see if I can 'splain this. The heavy green lines are silver's established trading channel, & so should furnish support at the bottom, and resistance at the top, as they already have.

Silver stands on the wrong side, the down side, of that rising trend (blue line). Some little support exists at that red dotted line connecting the July & August lows, about 1960¢. More enthusiastic support come in at the 50 DMA (1894¢)

Stepping back further, those pale pink lines come from the 1800¢ May high, and the June 1585¢ low. That latter is also the neckline of a big head and shoulders. Both the bearish Commitments of Traders & the downturned momentum indicators argue that silver will break here.

Y'all know that George Washington was a sorry general, right? He seldom won a battle. So how did he become the Father of his Country? He refused to give up. No matter how many battles he lost, how congress cheated & shorted him, how much Tories undercut him, how many trusted underlings betrayed him, he kept on fighting. He had to fight nearly 5 years, but he never lost hope. He saw the future, & pursued it.

In a manner much less morally important, markets require the similar courage out of us. You try to identify what the future holds, and then through all the swings and ups and downs and reaching for the wastebasket to puke, you hold on to what you know is true. And pray you're right.

What is correct now? Silver & gold bottomed out of a four year correction last December. The pendulum has swung our way. Be patient, wait for it to come back.

I will make bold here to ask y'all to pray for me. Susan & I face a momentous decision, and we need guidance. Frankly, my foot's not too hot, either, after that surgery. I thank y'all in advance for your kind and generous help.

On 11 August 1909 the American ship Arapahoe became first ever to use the new SOS distress signal off Cape Hatteras. I don't know as I would aspire to that distinction myself.

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
11-Aug-16 Price Change % Change
Gold, $/oz 1,342.50 -1.80 -0.13%
Silver, $/oz 19.98 -0.15 -0.75%
Gold/Silver Ratio 67.179 0.411 0.62%
Silver/Gold Ratio 0.0149 -0.0001 -0.61%
Platinum 1,154.20 -26.40 -2.24%
Palladium 690.55 -34.60 -4.77%
S&P 500 2,185.79 10.30 0.47%
Dow 18,613.52 117.86 0.64%
Dow in GOLD $s 286.61 2.20 0.77%
Dow in GOLD oz 13.86 0.11 0.77%
Dow in SILVER oz 931.42 12.79 1.39%
US Dollar Index 95.84 0.23 0.24%
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: 1,336.80      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,367.55 1,381.58 1,381.58
1/2 AE 0.50 681.26 705.16 1,410.32
1/4 AE 0.25 343.97 359.27 1,437.06
1/10 AE 0.10 140.26 146.38 1,463.80
Aust. 100 corona 0.98 1,301.16 1,310.16 1,336.62
British sovereign 0.24 317.04 330.04 1,402.05
French 20 franc 0.19 247.08 251.08 1,344.86
Krugerrand 1.00 1,344.82 1,354.82 1,354.82
Maple Leaf 1.00 1,346.80 1,360.80 1,360.80
1/2 Maple Leaf 0.50 768.66 701.82 1,403.64
1/4 Maple Leaf 0.25 340.88 357.59 1,430.38
1/10 Maple Leaf 0.10 141.70 145.71 1,457.11
Mexican 50 peso 1.21 1,598.75 1,609.75 1,335.12
.9999 bar 1.00 1,341.48 1,348.80 1,348.80
SPOT SILVER: 19.94      
SILVER Fine Tr.Oz. BID ASK $/oz
VG+ Morgan $B4 1905 0.77 25.00 27.00 35.29
VG+ Peace dollar 0.77 20.00 22.00 28.76
90% silver coin bags 0.72 14,114.10 14,472.10 20.24
US 40% silver 1/2s 0.30 5,690.55 5,840.55 19.80
100 oz .999 bar 100.00 1,974.00 2,039.00 20.39
10 oz .999 bar 10.00 200.90 205.90 20.59
1 oz .999 round 1.00 19.74 20.49 20.49
Am Eagle, 200 oz Min 1.00 21.44 22.94 22.94
SPOT PLATINUM: 1,154.20      
PLATINUM Fine Tr.Oz. BID ASK $/oz
Plat. Platypus 1.00 1,169.20 1,199.20 1,199.20
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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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