The Moneychanger
Daily Commentary
Wednesday, 5 October a.d. 2016 Browse the commentary archive

Back about 1900 in England people were actually writing fixed rate property leases for 100 year terms. To us raised under inflation and the constant expectation that dollars tomorrow will be worth less than dollars today, this sounds lunatic, but in that time it wasn't. Governments worldwide, especially that of Great Britain, were committed to a gold standard, and the effect of that and the Industrial Revolution had been to drive prices down for several decades. [I won't comment in detail, but will only mention in passing that the so called "gold standard" was really a gold-plated bank credit standard.] So it was rational for property owners in 1900 to write 100 year leases. It was irrational to expect World War I and the global repudiation of the gold standard.

Today Italy issued its first ever 50 year bond. The issue will be4 bn euros, and there are already orders oversubscribing the issue 4 times. It is expected to yield about 2.85%. This is sheer lunacy, begging for a white coat that buckles in back. Investors are projecting the present low interest rates into the future forever, well, for 50 years at least. And not the least shred of evidence gives hope that the euro will not be depreciated year by year, and certainly in 50 years to a quarter of its present value at best. Rising interest rates will GUT the price of these bonds.

Even without whatever unforeseen events may strike soon, like a global jubilee and the end of central banking, buying 50 year sovereign bonds has to signal the entire world has lost its mind.

Nor is Italy alone. This year Belgium, Spain, & France issued 50 year debt, and Belgium and Ireland have sold 100 year bonds.

Imagine a led ball dropped from a 2 story building. It falls a long way, but bounces very shallowly. So does any market that experiences a sharp drop, as silver & gold did yesterday.

Today gold closed at $12,65.20 on Comex, down $1.10 or 0.08%. Silver lost 7.9¢ (0.4%) to 1763.4¢. Shallow bounces, probably end of move. Watch what happens tomorrow.

Ned Schmidt speculated, probably accurately, that yesterday's fall in the British pound and rise in the dollar came largely from disgruntled UK banks who don't want an abrupt Brexit. Selling pounds sent the dollar up and gold down. Plausible

Big mistake I want y'all to avoid is thinking that the gold & silver reversal of a 5 year downward correction has been invalidated. NOT BY ANY MEANS. Silver & gold are offering a chance to load up with a low risk buy.

Showing its accustomed spunk, US dollar index lost 1 basis point to 96.11. Yen lost another 0.65% to 96.58, its uptrend truly broken.

Dow gained 112.58 to 18,281.03 and the S&P500 added 9.24 to 2,159.73. Trouble coming soon. In a downtrend.

My son Justin operates our family Top of the World Farm here in southern middle Tennessee. We raise grass fed South Poll beef, pastured chickens (Including this year the French Bresse), grass fed lamb, and pastured pork. If (and only if) you live in middle Tennessee and are interested to receive our emails with sale notifications, send me an email with "FARM" in the subject line. Oh, also please include your name & physical address.

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
5-Oct-16 Price Change % Change
Gold, $/oz 1,265.20 1.10 0.09%
Silver, $/oz 17.63 0.08 0.45%
Gold/Silver Ratio 71.748 -0.260 -0.36%
Silver/Gold Ratio 0.0139 0.0001 0.36%
Platinum 972.30 -12.40 -1.26%
Palladium 674.55 -23.95 -3.43%
S&P 500 2,159.73 9.24 0.43%
Dow 18,281.03 112.58 0.62%
Dow in GOLD $s 298.69 1.58 0.53%
Dow in GOLD oz 14.45 0.08 0.53%
Dow in SILVER oz 1,036.69 1.75 0.17%
US Dollar Index 96.11 -0.01 -0.01%
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: 1,268.75      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,303.01 1,311.25 1,311.25
1/2 AE 0.50 646.55 669.27 1,338.53
1/4 AE 0.25 326.45 340.98 1,363.91
1/10 AE 0.10 133.11 138.93 1,389.28
Aust. 100 corona 0.98 1,232.44 1,241.44 1,266.51
British sovereign 0.24 300.90 313.90 1,333.49
French 20 franc 0.19 234.51 238.51 1,277.49
Krugerrand 1.00 1,277.63 1,287.63 1,287.63
Maple Leaf 1.00 1,278.75 1,292.75 1,292.75
1/2 Maple Leaf 0.50 729.53 666.09 1,332.19
1/4 Maple Leaf 0.25 323.53 339.39 1,357.56
1/10 Maple Leaf 0.10 134.49 138.29 1,382.94
Mexican 50 peso 1.21 1,520.43 1,531.43 1,270.16
.9999 bar 1.00 1,273.19 1,280.75 1,280.75
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: 972.30      
Plat. Platypus 1.00 987.30 1,017.30 1,017.30
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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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