The Moneychanger
Daily Commentary
Monday, 22 August a.d. 2016 Browse the commentary archive

Well, sometimes you're right, sometimes not. I thought silver & gold would hold on tighter, but they Broke. Still, they haven't crumbled.

What ticks me off is that much most of this is caused by the next & upcoming siege of Fed Flatulence, the Jackson Hole conference. What a fitting venue for the Fed, whom we would all like to stuff down a hole somewhere, then kick the hole in after them!

Of all the utterly meaningless events in the wide world, that has to rank near the top. Those who have ridden up the waves of new money the Fed has pumped into stocks the last eight years hope to hear the party will continue. Realistically, the Fed has been riding a tiger, and can't climb off now. They are the prisoner of their own interest rate suppression. Y'all shed a tear. Let it crawl slowly down your cheek, in sympathy for all the poor central bankers.

Whatever gas Yellen emits, it will change nothing economically. Whatever measures the Fed takes, it will only wound the economy. Raise rates? When pigs fly.

Do I have a right to be ticked off?

Let's catalog the damage.

US dollar index gained 31 basis points on Friday, which helped deflate silver's balloon. Today it opened at 94.92, but ended the day only 2 basis points higher at 94.50. Not great action, since it couldn't hold on to that higher ground. Chart's here,

Observe, dear readers, that after last weeks collapse out of its trading channel, the dollar index sank like your Rolex dropped off the side of a bass boat. Never stopped till it hit 94.05 Thursday, then Friday gained the aforesaid 31 bps and 2 today. ALL OF WHICH did no more than bring it within sight of the green downtrend line. Maybe the Nice Government Men are merely manipulating it upward for a few days to keep it from tanking too fast. Technically it is headed for 92.50, but what is technical analysis in currency exchange rates?

Euro fell 0.04% today to $1.1330 and the yen to 99.67 (-0.14%). Speculators are lying low until they see how the pallid, uncalloused, and clammy Fed hands will move.

Stocks are hardly moving in all this. Dow sank Friday and today, down today 23.15 (0.12%) to 18,466.86. S&P500 lost 1.23 (0.6%) to close at 2,182.64. Do y'all remember those classic Warner Brothers cartoons in the late 1960s and early 1970s, Bugs Bunny, Elmer Fudd, Daffy Duck, Wile E. Coyote and the Road Runner? In the roadrunner cartoons the poor coyote hotly pursuing the roadrunner often ran off a cliff. Viewed from the side you could see what had happened. He hung there just a moment, looked down, realized what had happened, and popped out a sign that read, "Uh-oh!"

That's what the stock market looks like to me, a market that has run over the cliff edge but is hovering while it realizes what has happened.

Silver has broken down dramatically, but gold hath not.

Today Comex gold lost $2.70 (0.2%) to close at 41,337.70. On Friday it lost $10.80. Silver today lost another 45.8¢ (2.4%) to close at 1884.3c, after losing 41.4¢ (2.1%) on Friday.

Look at gold's chart first,

Gold had traced out an even sided triangle, but today's break fractured that bottom boundary. Gold is shooting for its 50 day moving average, now $1,332, a likely target for the fall. Yes, it might fall more, all the way to $1,310. But some resolution will come out of Yellen's speech from the Hole. Either it will take the pressure off gold, or make it worse. 'Twon't be neutral. That comes Wednesday.

Ever more volatile silver's chart is here,

Silver broke down from its triangle on Friday, and today fell way below the 50 DMA (1934¢). Remember, it always outruns gold, both upside & downside. Obvious target is 1800¢, give or take 25¢. Lowest target would be 1750¢ where the rising uptrend line from the December low now resides.

Silver has been under pressure since early July, hanging on against all odds. A correction will help the market same way pruning helps an apple or pear tree (Mercy! I sound like Chance the gardener in the movie Being There.) Never mind. The excessive expectation & optimism have to be wrung out of the market before it can punch through that July high, & that's what's now taking place.

For buyers of physical metal, this correction merely offers an opportunity to buy more at lower prices. I notice the premium on US 90% silver coin is rising, arguing softly that this decline won't reach far. Watch the gold/silver ratio, Notice on the chart that it gapped up today and closed at 70.992 (Comex). That blew through the upper channel boundary & the 50 DMA. Will it stop at 72? Whatever it does will offer us more information about how far this correction might reach. That RSI indicator makes the Ratio look overbought to me, and so nearing a reversal downward.

But what does a nat'ral born durn fool from Tennessee know?

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
22-Aug-16 Price Change % Change
Gold, $/oz 1,337.70 -2.70 -0.20%
Silver, $/oz 18.84 -0.46 -2.37%
Gold/Silver Ratio 70.992 1.545 2.22%
Silver/Gold Ratio 0.0141 -0.0003 -2.18%
Platinum 1,106.50 -9.70 -0.87%
Palladium 691.25 -17.20 -2.43%
S&P 500 2,182.64 -1.23 -0.06%
Dow 18,466.86 -23.15 -0.13%
Dow in GOLD $s 285.37 0.22 0.08%
Dow in GOLD oz 13.80 0.01 0.08%
Dow in SILVER oz 980.04 22.06 2.30%
US Dollar Index 94.50 0.02 0.02%
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: 1,337.40      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,369.50 1,382.20 1,382.20
1/2 AE 0.50 681.56 705.48 1,410.96
1/4 AE 0.25 344.12 359.43 1,437.71
1/10 AE 0.10 140.32 146.45 1,464.45
Aust. 100 corona 0.98 1,301.74 1,310.74 1,337.22
British sovereign 0.24 317.19 330.19 1,402.66
French 20 franc 0.19 247.20 251.20 1,345.45
Krugerrand 1.00 1,345.42 1,355.42 1,355.42
Maple Leaf 1.00 1,347.40 1,361.40 1,361.40
1/2 Maple Leaf 0.50 769.01 702.14 1,404.27
1/4 Maple Leaf 0.25 341.04 357.75 1,431.02
1/10 Maple Leaf 0.10 141.76 145.78 1,457.77
Mexican 50 peso 1.21 1,597.86 1,608.86 1,334.38
.9999 bar 1.00 1,342.08 1,349.40 1,349.40
SPOT SILVER: 18.86      
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 13,445.58 13,767.58 19.26
US 40% silver 1/2s 0.30 5,370.48 5,520.48 18.71
100 oz .999 bar 100.00 1,865.50 1,900.50 19.01
10 oz .999 bar 10.00 190.05 195.05 19.51
1 oz .999 round 1.00 18.66 19.16 19.16
Am Eagle, 200 oz Min 1.00 20.36 21.86 21.86
SPOT PLATINUM: 1,106.50      
Plat. Platypus 1.00 1,121.50 1,151.50 1,151.50
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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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