The Moneychanger
Daily Commentary
Tuesday, 4 October a.d. 2016 Browse the commentary archive

What a mess! Gold broke longstanding support at $1,300 & the bottom fell out. Silver suffered the same fate from about 1880¢. On Comex gold lost $42.70 (3.2%) to $1,266.30 while silver lost 108.2¢ (5.8%) to 1771.3¢.

Whenever a market shows support in the same area, traders cluster their Stop Loss orders just under that number. When the number is broken, it triggers all those stop losses at one time. Adding to gold's technical woe was the US Dollar Index's strength. It gained 54 basis points (0.56%) to end at 96.12. I keep reading reports that the dollar rose on "improved economic data," but got tired of chasing my tail looking for what that data might be. We are left with the same old tired story, "Improved US data makes investors believe the Fed will raise interest rates, yakka, yakka, yakka."

Anyway, you need not postulate Nice Government Men lurking behind the curtains pushing silver & gold over cliff (you are welcome to if you so desire), but the technical developments, breaking important support in the teeth of a rising dollar, pretty well explain events.

Now if I WERE going to speculate about Nice Government Men walloping gold, I would look for a motive in pre-emptory defensive moves against an unrolling European bank crisis, leading to the Nice Government Men (bless their tiny hearts!) whalloping gold in advance to prevent timid money fleeing from the crisis into gold. But then, I am not speculating, only spinning out suspicious ideas. Intellectually and logically it's safer just to stick with technical factors, the most obvious & readiest explanation.

Whatever is happening behind the curtains in the Emerald City of Oz, stocks didn't benefit from it, either. Down nearly 140 at the low, the Dow ended losing only 85.4 (0.47%). S&P500 lost 10.71 (0.5%) to 2,150.49.

Just a little food for thought here: the 2008 financial crisis sent money fleeing stocks & gold & silver & running into US dollars and US government securities. A panic or financial crisis is always a LIQUIDITY crisis. That is, the demand for money suddenly goes sky high, & to raise money people sell everything. However, after 8 years of feckless, indeed, destructive central bank policies that have brought central banks themselves into disrepute and distrust, a panic today will likely send more money fleeing into gold than in 2008. Maybe more people trust gold more than dollars. That's only my idle musing.

Gold and silver were under attack from sellers from 9:00 onward -- relentlessly. Let's think about where today left them, as I suspect today pretty much wore out downside momentum. We'll want to wait a day or two to see.

Gold chart is here,

Today's stumble sliced clean through that bottom channel line and its support. That leaves gold looking at next support, $1,25500 (last June low), where the 200 DMA also runs at $1,254.32. You may want to shoot me, but this drop offers us a chance to load up. Correcting the rise from the $1,050 December low, gold is offering us a chance to buy a classic opportunity, a bull market touching back to a 200 day moving average.

Here's silver's chart,

Silver's fall today was greater, but did less technical damage than gold's. It only pushed silver to the bottom channel line. Didn't break through. Yet silver remains likely to touch its 200 DMA (now 1705¢) unless we see evidence to the contrary.

Gold/silver ratio chart is here,

The ratio's chart shows a gap & leap today up to the 200 DMA (7413¢), but ot a close up there. Comex closing ratio was 71.490 oz of silver to one oz of gold. Frankly, that looks great to me because it argues that the move down for silver & gold is very near exhausting itself. Sure, we have to watch but that's the first suggestion.

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
4-Oct-16 Price Change % Change
Gold, $/oz 1,266.30 -42.70 -3.26%
Silver, $/oz 17.71 -1.08 -5.76%
Gold/Silver Ratio 71.490 1.844 2.65%
Silver/Gold Ratio 0.0140 -0.0004 -2.58%
Platinum 984.70 -24.90 -2.47%
Palladium 698.50 -9.75 -1.38%
S&P 500 2,150.49 -10.77 -0.50%
Dow 18,168.45 -85.40 -0.47%
Dow in GOLD $s 296.59 8.33 2.89%
Dow in GOLD oz 14.35 0.40 2.89%
Dow in SILVER oz 1,025.71 54.50 5.61%
US Dollar Index 96.12 0.54 0.56%
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SPOT GOLD: 1,269.20      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,303.47 1,311.72 1,311.72
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Aust. 100 corona 0.98 1,232.87 1,241.87 1,266.96
British sovereign 0.24 301.01 314.01 1,333.94
French 20 franc 0.19 234.59 238.59 1,277.93
Krugerrand 1.00 1,278.08 1,288.08 1,288.08
Maple Leaf 1.00 1,279.20 1,293.20 1,293.20
1/2 Maple Leaf 0.50 729.79 666.33 1,332.66
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Mexican 50 peso 1.21 1,520.97 1,531.97 1,270.60
.9999 bar 1.00 1,273.64 1,281.20 1,281.20
SPOT SILVER: 17.80      
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 12,798.50 13,084.50 18.30
US 40% silver 1/2s 0.30 5,059.25 5,209.25 17.66
100 oz .999 bar 100.00 1,760.00 1,795.00 17.95
10 oz .999 bar 10.00 179.50 184.50 18.45
1 oz .999 round 1.00 17.60 18.10 18.10
Am Eagle, 200 oz Min 1.00 19.30 20.80 20.80
SPOT PLATINUM: 984.70      
Plat. Platypus 1.00 999.70 1,029.70 1,029.70
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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.
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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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