The Moneychanger
Weekly Commentary
Friday, 7 October a.d. 2016 Browse the commentary archive
Here's the weekly scorecard:
  30-Sep-16 7-Oct-16 Change % Change
Silver, cents/oz. 1,913.90 1,732.40 -181.50 -9.5
Gold, dollars/oz. 1,313.30 1,248.90 -64.40 -4.9
Gold/silver ratio 68.619 72.091 3.472 5.1
Silver/gold ratio 0.0146 0.0139 -0.0007 -4.8
Dow in Gold Dollars (DIG$) 288.18 300.41 12.23 4.2
Dow in gold ounces 13.94 14.53 0.59 4.2
Dow in Silver ounces 956.59 1,047.64 91.05 9.5
Dow Industrials 18,308.15 18,149.35 -158.80 -0.9
S&P500 2,168.27 2,153.74 -14.53 -0.7
US dollar index 95.39 96.54 1.15 1.2
Platinum 1,028.60 958.80 -69.80 -6.8
Palladium 720.50 666.35 -54.15 -7.5

Before I talk about markets this week, let's ponder a moment the pound sterling's overnight flash crash. At 6 seconds after 1:00 Greenwich Mea Time, the pound was at $1.2609. Three seconds later, at 9 seconds after 1:00 GMT, the pound was at $1.1840, down 6.1% in three seconds. Now it later recovered to $1.24+, but that isn't the story. The forth most trade currency on planet earth dropped to a 31 year low, in 3 seconds. A similar flash crash hit the South African rand in January and the New Zealand dollar last year.

This goes far beyond puking in the waste basket, because computer trading happens faster than you can even reach your wastebasket and wipes you completely out. Globally currency markets trade over $5 trillion a day, but these sudden waves of computerized (if it is computerized trading & not some/thing/body else) selling render markets practically illiquid because they are so dangerous.

I have no inside knowledge, but anybody with two brain cells and minimal knowledge of how the world works can see this attack as a way to force the UK government out of its announced plans to rapidly & thoroughly pursue Brexit. Lots of suspects might oppose that: big banks, which are ALL now criminal organizations, EU government, US government, numerous central banks, or just rank speculators who have learned how to jimmy computers. Bottom line is, this trading has pushed the pound over the line of support and it could fall even as low as parity to the Euro (about $1.12).

Other bottom line is that markets have to be stable enough to trade like something other than hair trigger bear traps. Markets are going to have to rein in computerized trading, or risk destroying themselves. When markets are that volatile, market makers have only two options: withdraw from trading (further limiting market liquidity) or widen buy-sell spreads.


Silver & gold smashed support. Gold breaking $1,300 demoralized the whole market. The high levels of commercial shorts in the Commitments of Traders finally wreaked their vengeance. Stocks didn't do so hot, either, but didn't crash like metals (including platinum & palladium). US dollar index contributed a large share to silver & gold woes by breaking out upside.

Here's the dollar index chart,

Nice Government men must have called in all their off-duty manipulators & worked overtime to contain the flood of money trying to get out of pounds and yen and into dollars. Technically the dollar today posted a very ugly first-half-of-a-key-reversal with a jump into new high territory for the move followed by a close lower than the day before. Weak, but I still can't shake the conclusion that lots of confused, skairt money must be running into dollars.

Dollar index backed off 23 basis points (0.24%) to 96.54. Euro backed down 0.46% to $1.1199 but the yen gained 1.05% (NGM buying yen with dollars?) to 97.15. Today's rise is as meaningless as a teenager's protestations of eternal love. Yen broke this week, down from 98.68 to 96.01, down 2.67% at the low. Even with today's rise it's down 1.62% for the week, a and it has broken down out of its longstanding trading channel. Plumb tuckered out. Go look at the chart,

Stocks are locked in a downtrend & are filling an even-sided triangle, promising a break soon either up or down. Since they've been a downtrend for 2-1/2 months, odds strongly favor "down." Here's the Dow chart, and the S&P500,

Today the Dow dropped 28.01 (0.15%) to 18,149.35. S&P500 lost 7.03 (0.33%) to close at 2,153.74. For the past 2 months they have continued to erode, although interrupted for short spurts by short-lived rallies. Not the stuff higher markets are made of.

Look, please, at the US 30 year treasury bond chart,

That activity you see since January has been a "throwover of the VERY long term (36 year) trend. Interest rates have been relentlessly if not spectacularly rising. The USB broke through the upper support of that deadly rising wedge (green lines) early in September, then this week fell through the 200 DMA and the lower wedge boundary. Listen to me, hear my words: this is a financial tornado brewing. When the bond market breaks & snatches control of interest rates out of the Feds pale, flabby, uncalloused hands, the storm will level tall skyscrapers.

Gold was flaccid today on Comex, closing down $0.90 atl$1,248.90 Aftermarket shot up $10. Silver, too, was limp, rising only 3.6¢ to 1732.4¢, but trading at 1757¢ in the aftermarket.

Why am I talking so ugly about silver & gold? Just mean, I reckon. Actually, gold's daily chart (you can see it at, using symbol "xauusdo") today actually looked fairly good. A spike to $1,265 about 10:00 a.m. collapsed to the day's low at $1,243.20, but by 2:00 p.m.. recovered to $1,255. Potentially that's a V-bottom -- potentially. To prove that gold must trade ABOVE $1,255 all day Monday, and step out smartly higher.

Here's gold's chart, so y'all can see how it has punched into the 200 DMA & lateral support at $1,250. Notice, too, how oversold it is on the RSI & MACD.

Silver's three day chart is very instructive. (Try using "xagusdo"). Around noon yesterday silver made a low about 1710¢. Today about the same time it repeated that act: double bottom. How can silver validate that potential double bottom: Stay above today's highs on Monday, i.e., 1765¢, and no lollygagging after it reaches that.

Don't overlook this: premium on US90% silver coin jumped up 40¢ an ounce this week. That's a sign silver has fallen far enough.

Silver has reached its 200 DMA, fit target for end of a correction, and is overbought, according to the witness of the RSI & MACD. Chart's here,

Got to run. Susan just called and something punched a hole in her tire crossing Robinson Branch. Have to run help her.

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
7-Oct-16 Price Change % Change
Gold, $/oz 1,248.90 -0.90 -0.1
Silver, $/oz 17.32 0.04 0.2
Gold/Silver Ratio 72.091 -0.053 -0.1
Silver/Gold Ratio 0.0139 0.0000 0.2
Platinum 958.80 -3.50 -0.4
Palladium 666.35 1.25 0.2
S&P 500 2,160.77 1.04 0.0
Dow 18,149.35 -28.01 -0.2
Dow in GOLD $s 300.41 -0.22 -0.1
Dow in GOLD oz 14.53 -0.01 -0.1
Dow in SILVER oz 1,047.64 -3.80 -0.4
US Dollar Index 96.54 -0.23 -0.2
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SPOT GOLD: 1,258.10      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,292.07 1,300.25 1,300.25
1/2 AE 0.50 641.12 663.65 1,327.30
1/4 AE 0.25 323.70 338.11 1,352.46
1/10 AE 0.10 132.00 137.76 1,377.62
Aust. 100 corona 0.98 1,222.09 1,231.09 1,255.96
British sovereign 0.24 298.38 311.38 1,322.76
French 20 franc 0.19 232.54 236.54 1,266.94
Krugerrand 1.00 1,266.91 1,276.91 1,276.91
Maple Leaf 1.00 1,268.10 1,282.10 1,282.10
1/2 Maple Leaf 0.50 723.41 660.50 1,321.01
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SILVER Fine Tr.Oz. BID ASK $/oz
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VG+ Peace dollar 0.77 20.00 22.00 28.76
90% silver coin bags 0.72 12,630.48 13,202.48 18.47
US 40% silver 1/2s 0.30 4,989.93 5,139.93 17.42
100 oz .999 bar 100.00 1,736.50 1,771.50 17.72
10 oz .999 bar 10.00 177.15 182.15 18.22
1 oz .999 round 1.00 17.37 17.87 17.87
Am Eagle, 200 oz Min 1.00 19.07 20.57 20.57
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Platinum Platypus 1.00 973.80 1,003.80 1,003.80
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© 2015 Little Mountain Corporation, d.b.a. The Moneychanger. All rights reserved. May not be republished in any form, including electronically, without our express permission.

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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