The Moneychanger
Daily Commentary
Thursday, 15 September a.d. 2016 Browse the commentary archive

Buckle up your seatbelts, passengers! Rough air coming, with maybe a tornado.

Foget the stock market, that's already broken down, & look at the bond market, over $60 trillion world wide -- dwarfs stock markets. And central bank interest rate supppression has created History's Greatest Bubble in bonds. For the last 8 years investors have piled into bonds, espcially government bonds, after central banks announced they would buy gobs of them for Quantitative Easing. In the process central banks have bought so many long dated bonds that bond market liquidity has been starved. No liquidity means that when bonds becgin falling, they will fall faster because the market is too thin to absorb them and too many panicked folks are selling.

And it appears that central banks are losing control of interest rates. Here is the 30 Year US bond, http://schrts.co/IoR0Nw

Mark how it reached an all time high in July, traded sideways, then broke down throughh 170 support to close today at 165.81. Not far fom the 200 day moving average at 164.89, crossing which will add cast iron shoes to bonds' fall

Lo, the HYG junk bond ETF. http://schrts.co/pSvyKr

Notice the uptrend line from the February low (bond prices move opposite to interest rates, falling as rates rise.) Note, too, that HYG gapped down through the uptrend line 5 days ago. Beginning of a fall

Further downside is needed to prove these markets have broken down, but that US 30 year bond looks plumb whupped to me.

What to do? What investors hold government bonds? Many hold them directly, and most money market funds. Better figure out how much exposure you have and flee before the panic.

Federal Reserve looudmouths are killing the stock market. Rosengren from Boston said last Friday the Fed should raise rates & stocks plunged 394. Monday they sent out Lael Brainerd to say, No, we shouldn't raise 'em yet. Stocks rose 239, & Tuesday nosedived 258. Ain't that jawbonin' great? These folks aren't competent to clean the restrooms at a truck stop. They've left stocks looking like they've been wrestlin' with a bobcat without a face guard.

Dow today gained 177.71 (0,99) but remains below critical support at 18,300. S&P500 rose 21.49 (1.01) to 2147.26, way below critical 2,160 support. Stocks have broken down, no doubt.

US dollar continues to churn sideways with no gain. Lost 4 basis points today, too.

Now if stocks are plummeting, and bonds, where exactly can a soul run for safety? Right: silver & gold. Where do people run when they don't trust central banks or their currencies? Right: silver & gold.

What looked like a new rally in silve & gold was crushed on Friday last. Since then they have traded sideways. Gold today lost $8.00 to $1,313.50 on Comex & silver lost a token 2.3¢ to 1895.9¢. Here's the chart, http://schrts.co/26Dth9

I look for silver to stop somewhere around that red lower channel line, marked by a red arrow, and then to resume its upward flight.

Gold chart is here, http://schrts.co/XTQKhh

Gold is playing out the same pattern as silver, trading sideways in a descending channel. Bottom should come around that lower channel line (red arrow), then resume rallying.

Problem about timing here is that if bonds have indeed broken, as stocks appear to have done, silver and gold might experience panic buying. I have been there before, in 2008, when deliveries stretched out to 8 weeks and premiums soared.

As my old first sergeant used to say, "A word to the wise is suffice."

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
15-Sep-16 Price Change % Change
Gold, $/oz 1,313.50 8.00 0.61%
Silver, $/oz 18.96 -0.02 -0.12%
Gold/Silver Ratio 69.281 0.505 0.73%
Silver/Gold Ratio 0.0144 -0.0001 -0.73%
Platinum 1,032.20 -7.10 -0.68%
Palladium 656.60 0.10 0.02%
S&P 500 2,147.26 21.49 1.01%
Dow 18,212.48 177.75 0.99%
Dow in GOLD $s 286.63 1.06 0.37%
Dow in GOLD oz 13.87 0.05 0.37%
Dow in SILVER oz 960.62 10.53 1.11%
US Dollar Index 95.21 -0.04 -0.04%
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: 1,814.25      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,861.42 1,875.03 1,875.03
1/2 AE 0.50 924.76 957.02 1,914.03
1/4 AE 0.25 466.91 487.58 1,950.32
1/10 AE 0.10 190.39 198.66 1,986.60
Aust. 100 corona 0.98 1,762.32 1,771.32 1,807.10
British sovereign 0.24 430.28 443.28 1,883.08
French 20 franc 0.19 335.33 339.33 1,817.53
Krugerrand 1.00 1,825.14 1,835.14 1,835.14
Maple Leaf 1.00 1,824.25 1,838.25 1,838.25
1/2 Maple Leaf 0.50 1,043.19 952.48 1,904.96
1/4 Maple Leaf 0.25 462.63 485.31 1,941.25
1/10 Maple Leaf 0.10 192.31 197.75 1,977.53
Mexican 50 peso 1.21 2,174.14 2,185.14 1,812.34
.9999 bar 1.00 1,820.60 1,826.25 1,826.25
SPOT SILVER: 18.99      
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 13,542.10 13,828.10 19.34
US 40% silver 1/2s 0.30 5,410.30 5,560.30 18.85
100 oz .999 bar 100.00 1,879.00 1,914.00 19.14
10 oz .999 bar 10.00 191.40 196.40 19.64
1 oz .999 round 1.00 18.79 19.29 19.29
Am Eagle, 200 oz Min 1.00 20.49 21.99 21.99
SPOT PLATINUM: 1,032.20      
PLATINUM Fine Tr.Oz. BID ASK $/oz
Plat. Platypus 1.00 1,047.20 1,077.20 1,077.20
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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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