The Moneychanger
Weekly Commentary
Friday, 21 October a.d. 2016 Browse the commentary archive
Here's the weekly scorecard:
  14-Oct-16 21-Oct-16 Change % Change
Silver, cents/oz. 1,739.30 1,744.80 5.50 0.3
Gold, dollars/oz. 1,253.10 1,265.90 12.80 1.0
Gold/silver ratio 72.046 72.553 0.507 0.7
Silver/gold ratio 0.0139 0.0138 -0.0001 -0.7
Dow in Gold Dollars (DIG$) 299.22 296.31 -2.91 -1.0
Dow in gold ounces 14.47 14.33 -0.14 -1.0
Dow in Silver ounces 1,042.86 1,039.99 -2.87 -0.3
Dow Industrials 18,138.38 18,145.71 7.33 0.0
S&P500 2,132.98 2,141.16 8.18 0.4
US dollar index 98.00 98.60 0.60 0.6
Platinum 935.90 928.60 -7.30 -0.8
Palladium 647.25 619.70 -27.55 -4.3

This feels like Sitzkrieg, that first 8 months in World War II when war had been declared, but nobody moved. There's an eerie silence, a degenerating calm, the shells have not yet started falling. Yesterday Fred Reed said the choice between Hillary and Trump was the choice between a bad acid trip and death by sinus drainage. The world and markets aren't facing nice choices. They're holding their breath. At some point, hammers will fall.

This weeks stocks finished slightly better than unchanged, but still lost ground. Dollar index finally launched an (almost) believable rally. In spite of dollar strength silver & gold are trying to rally.

First, the scrofulous, scabrous US dollar index, loathsome bloodsucker on the necks of nations. 23 month chart lies here,

Chart's ambiguous, because it is a trading range occurring after a long rise (from Summer 2014). This trading range may signify a consolidation, an area where a market catches breath before continuing, or a reversal. Dollar index has two strikes against it, those double tops in March 2015 and December 2015. I pass over with a nod and jut of chin that lower top in February 2016, which begs to be called a failed attempt at a third top. Leave that alone for now.

The trading range has been roughly halved by resistance around 98. Observe how many failures have occurred there. Aha -- this time the dollar index has broken through 98. Today it gained 37 basis points to close at 98.60. Wow. Does that mean it will crash through resistance at 100, where the 2015 double tops stopped?

Can't tell you, but the general rule is there ain't no such thing as triple tops or triple bottoms. Third time a market hits, it breaks through. Hence if the dollar intends to rally, it will shoot through 100 and head for 120 (sounds crazy, but the 2014 rally began about 80. 120 would be symmetrical.)

That's not a prediction, it's a possibility. On the other hand, if the dollar index fails above 98 yet again, then we can probably reckon with a fall through the range's bottom.

I don't believe the Fed can afford to let the dollar run to 120 while it chokes on a tsunami of money flooding into the dollar. US exports die and all sorts of other problems pop up.

But what do I know, a nat'ral born durned fool from Tennessee? What kind of central banker would I make, in overalls and shoeless at them fancy IMF parties with all them furriners? Shoot, they eat fish eggs at them shindigs. And they ain't even devilled. What kind of fool am I, critizizing my central bank betters! Why, some of them have stolen more money in a day than I'll make in a lifetime!

Here's the short and sweet on stocks: if you ain't moving forward, you're sliding backward. Look at the Dow chart,

Looks like icicles meltin' off a steep roof, don't it? Been meltin' since that August high. Volume rises on the falls. Downtrend established. To expect higher prices out of this chart is the triumph of self-delusion over realism.

Dow today dropped 16.64 (0.09% to 18,145.71. S&P lost a tee-tiny 0.18 to 2,141.16.

Gold today rose 30 cents (get out your jeweler's loupe) to $1,265.90. Silver backed off 5.4¢ to 1744.8¢.

Gold chart lies here,

The infant rally has touched back to the 200 day moving average, and today was knocked through it but recovered to close above. All indicators point up. We might get another scare around election time, confusion no matter which teenager is "elected," but that will be the last of any weakness we'll see the rest of this year. Fed will raise interest rates in December if and when frogs grow wings so they don't bump their little bottoms when they jump. Central banking is on the run, and gold will benefit.

Silver's chart is right here,

Same process is taking place that you see on gold's chart, all indicators pointing up. Higher prices coming.

With the exception of that threat of instability around election day, silver & gold are firmly pointed skyward. I didn't give you charts for it today, but interest rates are rising, and, listen to my words, they will unravel the whole world's sweater.

I opened this commentary to see that on Friday, 7 October I had dashed out of here to help Susan with a punctured tire. She made it home, but in the morning nothing I & my grandson could do would move the lug nuts. We tried to plug it, but the cut was so wide it still leaked. We had to attend a picnic an hour away, so left the car and asked my son, Zachariah the Mechanic, to change it and put on the donut spare. Went to the picnic, came back & picked up Susan's pickup at Zach's. As we headed home in separate cars, she waved me on & told me she was going by the farm to pick up ground beef for supper. We were having overnight guests we had never met, with four young children.

Not ten minutes after I arrived at our house (The Shoe) and was talking to our guests, here comes a text from Susan: "Have punctured another tire!" She had to trudge up the hill to get a signal out of that dark holler.

When I arrived here donut spare was worthless. I told her to just back the car up, lock it, & leave it. She did, but when she stepped out of the car in the boots she had lovingly polished that morning, she stepped ankle deep into a cowpie. Had it been me, I'd have laid down on the side of the road and given up. Two punctures and a cowpie is my limit. Instead, she tried to clean off her boot on the grass -- "Get in the car, Hon, I've got rubber mats, it's okay." At home she speedily washed off the offending boot, then went inside, made folks she had never before laid eye on feel welcome as Queen Elizabeth at Windsor Castle, fixed supper for everyone, and smiled.

That's what the love of God overflowing from your heart can do.

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
21-Oct-16 Price Change % Change
Gold, $/oz 1,265.90 0.30 0.0
Silver, $/oz 17.45 -0.05 -0.3
Gold/Silver Ratio 72.553 0.019 0.0
Silver/Gold Ratio 0.0138 -0.0000 -0.3
Platinum 928.60 -2.60 -0.3
Palladium 619.70 -12.10 -1.9
S&P 500 2,141.16 -0.18 -0.0
Dow 18,145.71 -16.64 -0.1
Dow in GOLD $s 296.31 -0.31 -0.1
Dow in GOLD oz 14.33 -0.02 -0.1
Dow in SILVER oz 1,039.99 2.26 0.2
US Dollar Index 98.60 0.37 0.4
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: 1,265.00      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,299.16 1,307.38 1,307.38
1/2 AE 0.50 644.64 667.29 1,334.58
1/4 AE 0.25 325.48 339.97 1,359.88
1/10 AE 0.10 132.72 138.52 1,385.18
Aust. 100 corona 0.98 1,232.51 1,241.51 1,266.59
British sovereign 0.24 300.01 313.01 1,329.71
French 20 franc 0.19 233.81 237.81 1,273.77
Krugerrand 1.00 1,278.92 1,288.92 1,288.92
Maple Leaf 1.00 1,275.00 1,289.00 1,289.00
1/2 Maple Leaf 0.50 727.38 664.13 1,328.25
1/4 Maple Leaf 0.25 322.58 338.39 1,353.55
1/10 Maple Leaf 0.10 134.09 137.89 1,378.85
Mexican 50 peso 1.21 1,515.93 1,526.93 1,266.43
.9999 bar 1.00 1,269.43 1,277.00 1,277.00
SPOT SILVER: 17.49      
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 13,181.03 13,467.03 18.84
US 40% silver 1/2s 0.30 4,966.33 5,116.33 17.34
100 oz .999 bar 100.00 1,728.50 1,763.50 17.64
10 oz .999 bar 10.00 176.35 181.35 18.14
1 oz .999 round 1.00 17.29 17.79 17.79
Am Eagle, 200 oz Min 1.00 18.99 20.49 20.49
SPOT PLATINUM: 928.60      
Platinum Platypus 1.00 943.60 973.60 973.60
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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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