The Moneychanger
Weekly Commentary
Friday, 11 November a.d. 2016 Browse the commentary archive
Here's the weekly scorecard:
  4-Nov-16 11-Nov-16 Change % Change
Silver, cents/oz. 1,834.20 1,736.40 -97.80 -5.3
Gold, dollars/oz. 1,303.30 1,223.50 -79.80 -6.1
Gold/silver ratio 71.056 70.462 -0.594 -0.8
Silver/gold ratio 0.0141 0.0142 0.0001 0.8
Dow in Gold Dollars (DIG$) 283.73 318.44 34.71 12.2
Dow in gold ounces 13.73 15.40 1.68 12.2
Dow in Silver ounces 975.26 1,085.44 110.18 11.3
Dow Industrials 17,888.28 18,847.66 959.38 5.4
S&P500 2,085.18 2,164.45 79.27 3.8
US dollar index 96.97 99.06 2.09 2.2
Platinum 1,001.70 941.00 -60.70 -6.1
Palladium 624.25 684.15 59.90 9.6

Contrary to some of the email I am getting, Donald Trump is not Jesus, not even remotely close. I really don't understand what folks are thinking. Trump announces a plan to spend $500 billion and boost the national debt by $5.3 trillion, a plan worthy of Franklin Roosevelt's New Deal, & people think the millennium has arrived? That's progress? Pardon my suspicions, but although Trump ran as an "outsider," nobody has explained to me how a man who made a billion dollars in New York real estate classifies as an "outsider." He had no bank financing? Worst blow to Trump's credibility came today, with the rumor -- only a rumor as yet -- that he would name JP Morgan CEO Jamie Dimon Treasury Secretary. Let's see, the POSTER BOY for crony capitalism, big bank contempt for the law, and the head of the largest criminal organization in the US, JP Morgan. If Trump does that, y'all will know the fix is in.

But lay all that aside a moment, & recall what I told y'all on election day: you are dealing with a SYSTEM. You can't change anything by changing one element in the system, you must change the system. Let's see if Trump makes any systemic changes.

Floating on Trump's announcement he would spend gobs of government money to spark the economy, financial stocks & stocks related to building have soared while medical stocks & gun manufacturers have tanked. US dollar index rose again today & is threatening the 2015 high at 100. Silver & gold were smashed today but palladium is rising.

Stock indices are gainsaying each other. Dow rose 218 yesterday, Nasdaq sank 50, & S&P500 rose only 4.22. Today the Dow rose 39.78 to 18,847.66 but the S&P500 lost 3.03 to $2,164.45. Likewise yesterday the Dow made a new all-time high close at 18,807.88 and today again at 18,847.66, both well above the 15 August 2015 18,636.05. But the S&P500 even at yesterday's 2,167.48 close stood well below its 15 August 2016 all-time high at 2,190.15. Loads of folks smarter than me and richer than me, rich enough to afford them shiny sharkskin Armani suits, think stocks are set for another bull market. Maybe, but look at this Dow chart, The Dow has only rallied to -- the upper jaw of a broadening top/Jaws of Death.

I don't buy the government-spending-helps-the-economy argument. If government spending on "infrastructure" helps the economy (other than the folks directly building the infrastructure) why not spend on video games? Wouldn't that help the economy, too? Or why not send every Tom, Dick, & Harriet in America a check for a million bucks and make us ALL rich?

I am not so much interested in stocks as I am in stocks measured by gold & silver. Here's the Dow in gold chart,

Clearly the DiG has broken through the downtrend line from the December 2015 high, and not by a little. Logical place for it to stop -- assuming it will stop -- is about 16 ounces of gold to buy the Dow. Or maybe, along with the Dow, it will put in a big double top.

Whether government spending raises economic activity in fact or not, if all the Wall Streeters believe it does they will run up the already-overvalued stock market even further in a self-fulfilling prophecy. Don't miss this: however much the Dow rises, gold will outperform it. Trump's government spending route to the millennium guarantees that.

Here's the Dow in silver chart,

'Tain't nearly as dramatic as the Dow in Gold, but still represents a breakout. I'm interested to see if it can get past 1,115oz, the June high. Anyway, my long term view for the next five years remains this: however much the Dow rises, silver will outperform it.

US dollar index rose again today to 99.06, up 28 basis points (0.28%). Here is the 6 month dollar index chart,

On election day the dollar index fell to its 200 Day Moving Average, which roughly ran together with the rising trend line off the June low. Today it nearly reached the top of its trading channel, and lies only about 154 basis points from the March 2015 high at 100.70, noted by the heavy red line on this chart.

When interest rates change, everything is re-priced -- everything, including stocks, eventually. Dollar is attracting money right now (in spite of the implications of Trump's spending), thanks in part to rising dollar interest rates and in part to economies & markets around the globe terrorized by the uncertainty Trump's election rains on them. Can that carry the US dollar index through 100.7? Might, and if it does the dollar index might run to 120. But first, let's see what it does at 100.

Rising dollar has trashed the yen & euro. Yen now stands at 93.66 from 97.22 six days ago. Euro ended the day at $108.47, down from $1.1150 five days ago.

The collapse of bond prices and rising interest rates ought to be grabbing headlines, but they're not. Since the July all-time high at 176.06, the US 30 year treasury bond has lost 12.6%. Here's the chart, (Remember that as interest rates rise, bond prices fall.)

Behold the 10 year Treasury note, down 4.8% since the July high at 133.21 to 126.76 today.

Remember, rising interest rates re-price EVERYthing, including obviously junk bonds as well. Look at this "better" junk bond ETF called JNK, Or how about this junk-junk bond ETF called HYG, Ain't no picture of health here. And the 10 year treasury yield is gunning straight for the downtrend line from 2007,

I say it again, not to gloat but, well, to GLOAT: the Federal Reserve does NOT control interest rates, the market does. Market is taking back the steering wheel.

Merciful heavens, about 10 a.m. sellers started hitting gold with sledgehammers and broke it. Gold lost $42.00 (3.2%) to end at $1,223.50. Silver lost 135.2¢ (7.2%) to 1736.4¢.

I have been hinting to y'all that we should expect a second low in silver & gold, but thought we saw it on election night. Was I wrong. It appears the lows will be lower than any lows we've seen since the July peak. The cycles fellow I read looks for a bottom by 18 November. (I read an expert on cycles because they remain wholly opaque to me. This fellow, however, is fairly accurate, if opaque.)

What price does that translate to? For Gold, strong support stands at $1,200. Here, look at the chart,

What about silver? Today it hit the bottom boundary of its trading channel, but it's possible it might fall to lateral support at 1600¢. Please go look at the chart for yourself,

These are not predictions, just a steely eyed look at the charts. Best stand aside a few days to let this settle. Please get this clear and don't misunderstand: silver & gold bottomed in December 2015 and have renewed their bull market. Don't let this pothole send you into a tailspin. Be calm. Be patient.

Another little Susan story.

We were married seven years before Susan ever got pregnant, but when she got pregnant -- this was in 1974 -- she hopped into it will all the energy & love she brought to everything. Back then the standard medical practice was knock the mother out with drugs, deliver the (also drugged) baby, and make the husband wait in the waiting room.

Somehow Susan got hold of a copy of "Husband Coached Childbirth" about Lamaze childbearing. She suggested to me that we do that & I replied that was for people who ate nuts and berries, not me. She didn't argue, just handed me a copy of "Husband Coached Childbirth" and asked me to read it.

Grudgingly, I picked it up. It was hilarious, and 100% persuasive. I was all in.

For Lamaze, the mother must train like an Olympic athlete. We went to classes where other women who had swallowed basketballs sat on the floor with their bumfuzzled husbands learning to "coach" their wives. Coach's main job was to keep talking to calm his wife, plus make sure she was absolutely, utterly relaxed. No muscle tensed. And then there was the breathing, everything from panting (for transition) to shallow slow breathing. After the classes were over Susan, who had bought a stopwatch, would pull out that stopwatch and we would practice coaching, panting, & relaxing -- every night.

We lived in Little Rock at the time, and although the hospital was new and fully designed with capacious laboring rooms where wives could labor with their husbands, not many doctors were on board with having a husband around. Susan's doctor was English. He had fled socialized medicine to Canada; then when they socialized medicine in Canada, he fled to Arkansas. He was all in favor of Lamaze, but unhappily he wasn't on duty the night Liberty was born.

Instead, there was this little doctor we had never seen. Susan labored like a trooper for hours then got into transition and time for the delivery room. Nurses came in & wheeled her bed down the hall but the little doctor tried to slam the door in my face & tell me to wait there.

I do not consider myself a violent person, but right then I formed a plan that at the time seemed perfectly reasonable I was going to ask him once, nice, to let me go into the delivery room. After that, I was going to dismember him and go to the delivery room anyway. Happily, I never had to put the second plan into effect, as he relented. I got to be in the room, coaching & encouraging Susan, when Liberty was born, right with her every minute. No matter what kind of experience a husband & wife share, nothing in the world could create a stronger bond than working together to brng a baby into the world. And I was present and coaching at the birth of every other one of our seven children.

When it was time to leave the delivery room, one of the nurses said, "It's time to go," and I swear to you, Susan sat up on the edge of the table & got ready to walk out of the room. THAT made 'em jump: "No! No! Not you!"

Now the rest of the story, about the bill. At least part of Susan's motivation for Lamaze had to do with our lack of insurance. She figured Lamaze would get her out of the hospital faster, and it did. She left the hospital in 24 hours (no exaggeration) and did just fine. When the bill came, she found that because bookkeeping was not accustomed to billing a Lamaze birth, they had billed her standard charges for all sorts of drugs & anesthesia she hadn't had. Poor bookkeeping! Susan tore into that bill and went into full Money Saving Mode. By the time she finished getting all the false charges taken off, her entire hospital bill was about three hundred dollars ($300).

If I'm lying, I'm dying.

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
11-Nov-16 Price Change % Change
Gold, $/oz 1,223.50 -42.00 -3.3
Silver, $/oz 17.36 -1.35 -7.2
Gold/Silver Ratio 70.462 -2.362 -3.2
Silver/Gold Ratio 0.0142 -0.0011 -7.2
Platinum 941.00 -38.50 -3.9
Palladium 684.15 -11.80 -1.7
S&P 500 2,164.45 -3.03 -0.1
Dow 18,847.66 39.78 0.2
Dow in GOLD $s 318.44 11.25 3.7
Dow in GOLD oz 15.40 0.54 3.7
Dow in SILVER oz 1,085.44 80.54 8.0
US Dollar Index 98.77 0.24 0.2
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: 1,224.20      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,260.93 1,265.21 1,265.21
1/2 AE 0.50 623.83 645.77 1,291.53
1/4 AE 0.25 314.97 329.00 1,316.02
1/10 AE 0.10 128.44 134.05 1,340.50
Aust. 100 corona 0.98 1,193.96 1,202.96 1,227.26
British sovereign 0.24 290.34 303.34 1,288.61
French 20 franc 0.19 226.27 230.27 1,233.38
Krugerrand 1.00 1,240.11 1,250.11 1,250.11
Maple Leaf 1.00 1,234.20 1,248.20 1,248.20
1/2 Maple Leaf 0.50 703.92 642.71 1,285.41
1/4 Maple Leaf 0.25 312.17 327.47 1,309.89
1/10 Maple Leaf 0.10 129.77 133.44 1,334.38
Mexican 50 peso 1.21 1,468.52 1,479.52 1,227.10
.9999 bar 1.00 1,228.48 1,236.20 1,236.20
SPOT SILVER: 17.27      
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 12,844.98 13,130.98 18.37
US 40% silver 1/2s 0.30 4,901.43 5,051.43 17.12
100 oz .999 bar 100.00 1,706.50 1,741.50 17.42
10 oz .999 bar 10.00 174.15 179.15 17.92
1 oz .999 round 1.00 17.07 17.57 17.57
Am Eagle, 200 oz Min 1.00 18.77 20.27 20.27
SPOT PLATINUM: 941.00      
Platinum Platypus 1.00 956.00 986.00 986.00
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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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