The Moneychanger
Weekly Commentary
Friday, 12 August a.d. 2016 Browse the commentary archive
Here's the weekly scorecard:
  5-Aug-16 12-Aug-16 Change % Change
Silver, cents/oz. 1,978.00 1,967.20 -10.80 -0.5
Gold, dollars/oz. 1,336.40 1,335.80 -0.60 -0.0
Gold/silver ratio 67.563 67.904 0.340 0.5
Silver/gold ratio 0.0148 0.0147 -0.0001 -0.5
Dow in Gold Dollars (DIG$) 286.84 287.48 0.64 0.2
Dow in gold ounces 13.88 13.91 0.03 0.2
Dow in Silver ounces 937.49 944.31 6.82 0.7
Dow Industrials 18,543.53 18,576.47 32.94 0.2
S&P500 2,182.87 2,184.05 1.18 0.1
US dollar index 96.17 95.67 -0.50 -0.5
Platinum 1,148.00 1,126.80 -21.20 -1.8
Palladium 695.05 689.55 -5.50 -0.8

For stocks, the best just got better this week, squeaking out new highs. Dollar index continues in its inexplicable weakness, weaker still this week. Silver & gold closed only a little lower on the week, but actually had been much higher during the week. Platinum & Palladium exploded into new highs, then fainted.

US dollar index fell sharply, as low as 95.19, on surprise lows in Advance Retail Sales & the producer price index. Low inflation, no rate hike, no reason to hold dollars. Eventually it recovered to close at 95.67, down only 17 basis points (0.18%).

Now, granted that interest rate differentials are the primary drivers of currency exchange rates (I speak as fool who knoweth not that central banks manipulate their exchange rates), still the expected inflation rate also figures in. Since January 2015, the ECB and BoJ balance sheets are 50% larger, the Fed's 1% smaller. The inflation (increase in money supply) has already happened, period. Hence, sorry as the US dollar is, it can't hold e'er a candle, nor a match, nor a spark to the sorriness of the Yen & euro. Add to that the European banks teetering on the brink of implosion, and centrifugal political pressures blowing the EU apart, and it's just hard for somebody as durned stupid as I am to parse why the buck is falling while those other rat-skin currencies are rising.

So the dollar fell today, and the euro rose 0.27% to $1.1165. Yen rose 0.66% to 98.75.

By the way, the dollar spent time today BELOW that important 95.50 support, which hints it may diver further below it.

After new all-time highs yesterday, stocks lost today. Winners sell their positions at the week's end, lay 'em back on Monday. Dow backed up 37.05 (.2%) to 18,576.47. S&P500 fell 1.75 (0.08%) to 2,184.05. Is that a double top on those charts?

Here are the 9 month charts for the Dow in metals. Start with Dow in Gold, http://schrts.co/C2BFBn

After the furious fall from the December high to the February low, the Dow in Gold recovered from 12.56 to 14.57, but then traded into a megaphone pattern that tried to break out earthward in June. Then traded back up into the megaphone on post-Brexit stock strength. Rallied has carried no further than the green internal downtrend line, roughly coinciding with the 50 & 20 day moving averages right now. The suspicion that the Dow in Gold will not move higher leads me to expect stocks to turn down. With gold weak, stocks must weaken, or the ratio will rise through that downtrend line.

Dow in silver can be see here, http://schrts.co/ZiOEWK

Dow in silver's fall from December has been more spectacular and more consistent than the Dow in Gold's. It broke through the twin lows of February and April, broke down, mind you, to new lows. The green downtrend line, along with the 200 DMA, are so far overhead as to require balloon transport to reach 'em. However, the DiS has made what could be a double bottom which might indicate higher highs for the move. Indicators are all pointing up.

So if silver & gold fell off here, and stocks only kept moving sideways, the Dow in Gold & Dow in Silver would rise. Seasonality argues against that, since August's latter half usually sees precious metals' uptrends a-spawning.

West Texas Intermediate crude appears to have bottomed as August opened. Chart's here, http://schrts.co/MxgwhV After hitting the 200 DMA and the uptrend line, it has climbed back into the trading channel it fell out of, and above its 20 DMA. Indicators foretell further upside.

On Comex silver peeled off 31.2¢ (1.6%) to close at 1967.2¢. Gold shaved off $6.70 (0.5%) to $1,335.80. In the aftermarket gold was trading at $1,333.10, where it opened the week. Whole week has been spinning wheels. Aftermarket silver was 1965.5¢.

Gold chart lurks here, http://schrts.co/Yv2po1 and silver here, http://schrts.co/c3rLVP

Dollar index fell about 8:30 on that news. Took about an hour for gold & silver to respond, then they shot straight up, traded sideways three hours, then, set your clock by it, collapsed to below where they started. Silver & gold have challenged overhead resistance three times now, and fallen back to lower lows. What keeps on surprising me is their sudden strength on dollar weakness. But falling back suggests that's all the strength they've got, simply reacting to the dollar's moves.

Line in the sand is now 1960¢ for silver and $1,330 for gold. Trading below those, even intraday, will likely pull the plug on them. Overhead they need to pierce 2045¢ & $1,355 to escape the sellers.

I don't want to leave y'all with a misapprehension. My expecting lower silver & gold in the near future doesn't extend any further than the next two or three weeks at most. I still am persuaded that both bottomed in December, and that both are in a rally that will carry MORE THAN 7.5 times the gold low at $1,050 and 12.5 times the silver low at $13.50. Those gains would only equal gains from 1999- 2011, so 'tain't as crazy as it looks.

On 12 August 1981 IBM introduced its first Personal Computer (PC) with PC-DOS version 1.0. Unfortunately for IBM, management failed to tae the personal computer revolution seriously, and so squandered their lead. I bought my first computer about that year or the next. It came with a glorious 32 kilobytes of memory, which I upgraded to 64K. I didn't care. I was happy as a boy with a new puppy. That first PC cost $1,565, equal to $4,150 today. and weighed 50 lb. with a big old cathode ray tube monitor -- orange screen. The printer printed in both directions.

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
12-Aug-16 Price Change % Change
Gold, $/oz 1,335.80 -6.70 -0.5
Silver, $/oz 19.67 -0.31 -1.6
Gold/Silver Ratio 67.904 -0.330 -0.5
Silver/Gold Ratio 0.0147 -0.0002 -1.6
Platinum 1,126.80 -27.40 -2.4
Palladium 689.55 -1.00 -0.1
S&P 500 2,184.05 -1.74 -0.1
Dow 18,576.47 -37.05 -0.2
Dow in GOLD $s 287.47 0.89 0.3
Dow in GOLD oz 13.91 0.04 0.3
Dow in SILVER oz 944.31 12.89 1.4
US Dollar Index 95.67 -0.17 -0.2
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: 1,333.10      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,363.76 1,377.76 1,377.76
1/2 AE 0.50 679.37 703.21 1,406.42
1/4 AE 0.25 343.02 358.27 1,433.08
1/10 AE 0.10 139.87 145.97 1,459.74
Aust. 100 corona 0.98 1,297.56 1,306.56 1,332.95
British sovereign 0.24 316.17 329.17 1,398.32
French 20 franc 0.19 246.40 250.40 1,341.19
Krugerrand 1.00 1,342.43 1,352.43 1,352.43
Maple Leaf 1.00 1,343.10 1,357.10 1,357.10
1/2 Maple Leaf 0.50 766.53 699.88 1,399.76
1/4 Maple Leaf 0.25 339.94 356.60 1,426.42
1/10 Maple Leaf 0.10 141.31 145.31 1,453.08
Mexican 50 peso 1.21 1,592.72 1,603.72 1,330.12
.9999 bar 1.00 1,337.77 1,345.10 1,345.10
SPOT SILVER: 19.66      
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 13,874.58 14,196.58 19.86
US 40% silver 1/2s 0.30 5,606.48 5,756.48 19.51
100 oz .999 bar 100.00 1,945.50 2,010.50 20.11
10 oz .999 bar 10.00 198.05 203.05 20.31
1 oz .999 round 1.00 19.46 20.21 20.21
Am Eagle, 200 oz Min 1.00 21.16 22.66 22.66
SPOT PLATINUM: 1,126.80      
PLATINUM Fine Tr.Oz. BID ASK $/oz
Platinum Platypus 1.00 1,141.80 1,171.80 1,171.80
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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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