The Moneychanger
Daily Commentary
Monday, 14 November a.d. 2016 Browse the commentary archive

On 8 November 2016 the Indian government demonetized the Rs500 rupees (about US$7.50) and RS1,000 (US$15) banknotes. Since these make up about 80% of the currency, the government in effect made most currency use illegal. Excuse used was to eradicate corruption and push counterfeit money out of circulation.

This punishes savers, period. They rushed to get any value they could out of the banned bank notes, driving gold up to $2,294 per ounce -- if you could find it, as gold inventories shrank rapidly.

Holders of the old bank notes must exchange them by 30 December, and the customer must present identification, & obviously will be investigated by tax authorities if they trade in large amounts.

The ban has created a bonanza of confusion and black market profits. People are rushing to use the bills where they are not yet banned, at hospitals, gas stations, pharmacies, & train stations (buy the ticket, cash it in later).

Only in India, you say? It appears that savers ought to be saving in a money not subject to government welching, repudiation, or bank reneging: gold and silver.

The one-sided stock rally continued to be confined to the Dow Industrials. DJIA made a another new high today, third in three days, at 18,868.69, up 21.03 or 0.11%. Nasdaq fell 18.71 and the S&P500 fell 0.25 to 2,164.20. This can easily keep up another two weeks, setting the stage for a really spectacular cascade.

Dow Industrials today hit the top jaw of a Jaws of Death formation. S&P500 is no where near that. Be patient, don't get sucked in.

US dollar index today closed up a massive 107 basis points (1.08%) to 100.12. Chart:

Look at that chart: the Dollar index has pierced the top channel line and is pointing for that resistance from the two highs at roughly 100.50. Pass not by what this signifyeth: should the dollar index pierce that resistance, 'twill jump MUCH higher. Much.

Dollar's jump has creamed the Yen & euro. Yen today lost 1.59% to close at 92.25, gapping down through its 200 DMA. Well and truly broken down. Chart's here,

Euro looks sick as a 10 year old boy smoking his first ceegar. Gapped down today and lost 1.08% to close at l$1.0739. Like to see the chart?

Y'all need to look at a 14 month gold chart to get the picture:

Comex gold lost another $2.30 (0.2%) today to end at $1,221.20. On the chart you will mark that gold sliced through its 200 day moving average on the ninth & has sunk since like your American Express card fluttering out the window of a Piper Cub. Notice that previous declines in this rally stopped at or above $1,200. That's support. Just to terrorize all the bears & shake off all the bull riders, it might terrorize us with a one day spike to $1,190, but the worst of the drop is past. Should remain puny the rest of the week, offering you a monumental buying opportunity.

Silver lost 48.7¢ (2.8%) today to close Comex at 1687.7¢. Behold the chart,

Today silver broke the ice of its 200 DMA AND the bottom channel line. See that pink horizontal line at 1600¢? That's the next support, and it could stretch all the way down to 1583¢. The fall has not yet exhausted its momentum, so expect weakness to persist the rest of the week.

Y'all keep your powder dry. Big buying opportunity coming.

The ONE thing y'all must keep in mind is that the 2011- December 2015 gold & silver correction is FINISHED. OVER. Done done. Presently y'all are witnessing a mere correction of the massive rally off last December's lows to July, and it will soon end. Think, O Ladies & Gentlemen! If markets outperform in the bull market upleg after the "Mid-Life Crisis" (seen in metals 2011-Dec 2015), and if gold rose 7.5 times and silver 12.5 times in that first upleg (1999-2011), and if the lows in December 2015 were $1,050 and $13.50, what target is gold shooting for? Why, 7.5 times that December 2015 low. Y'all multiply that out, I haven't got that many fingers & toes. Makes the difference between $1,220 & $1,190 look pretty measly if that's the upside target.

I am developing a much deeper appreciation for all the shopping & supply work my wife Susan was constantly performing so efficiently & frugally. I had to drive to Florence, Alabama early this morning, and thought I'd stop by Sam's, pick up some of the stuff Susan always brought back. Naturally I headed straight for the Manfood Section where I retrieved large blocks of my natural prey: Asiago, Parmesan, & Irish cheddar cheese and Italian salami. I also picked up 8 lb. of vitamin B (bacon). Satisfied with life's necessities, I sailed to the dog food & learned that Susan loved those dogs a LOT more than I thought. How so? Miss Frugal, who could make a nickel howl, was walking past the $25 - 55 lb. bag of dog food and buying the $35 - 45 lb. bag. She some-kinda loved those dogs.

I received more lessons. Somehow my pitiful pile of stuff racked up a $160 bill! I took my licks and rolled my cart out the door, stopping to let the checker at the door look over my basket and my receipt to make sure I was not smuggling out tires or nuclear warheads without paying for them. I reached Susan's Honda Ridgeline pickup, parked the buggy at its side, and commenced carefully loading my purchases into the back seat . I intended to put the dog food into the truck's bed, but when I turned around, buggy and dogwood were racing down the hill toward the side of a very expensive looking Hummer. Happily the buggy only bumped the bumper & did no damage, & an old man can still run nearly as fast as a runaway buggy.

I tell y'all, I don't know how Susan got it all done.

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
14-Nov-16 Price Change % Change
Gold, $/oz 1,221.20 -2.30 -0.19%
Silver, $/oz 16.88 -0.49 -2.80%
Gold/Silver Ratio 72.359 1.897 2.69%
Silver/Gold Ratio 0.0138 -0.0004 -2.62%
Platinum 931.70 -9.90 -1.05%
Palladium 697.15 13.00 1.90%
S&P 500 2,174.20 -0.25 -0.01%
Dow 18,868.69 21.03 0.11%
Dow in GOLD $s 319.40 0.96 0.30%
Dow in GOLD oz 15.45 0.05 0.30%
Dow in SILVER oz 1,118.01 32.57 3.00%
US Dollar Index 100.12 1.07 1.08%
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: 1,219.60      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,257.41 1,260.46 1,260.46
1/2 AE 0.50 621.49 643.34 1,286.68
1/4 AE 0.25 313.79 327.77 1,311.07
1/10 AE 0.10 127.95 133.55 1,335.46
Aust. 100 corona 0.98 1,189.47 1,198.47 1,222.68
British sovereign 0.24 289.25 302.25 1,283.97
French 20 franc 0.19 225.42 229.42 1,228.83
Krugerrand 1.00 1,236.67 1,246.67 1,246.67
Maple Leaf 1.00 1,229.60 1,243.60 1,243.60
1/2 Maple Leaf 0.50 701.27 640.29 1,280.58
1/4 Maple Leaf 0.25 311.00 326.24 1,304.97
1/10 Maple Leaf 0.10 129.28 132.94 1,329.36
Mexican 50 peso 1.21 1,463.00 1,474.00 1,222.52
.9999 bar 1.00 1,223.87 1,231.60 1,231.60
SPOT SILVER: 16.82      
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 12,487.48 12,773.48 17.87
US 40% silver 1/2s 0.30 4,768.68 4,918.68 16.67
100 oz .999 bar 100.00 1,661.50 1,696.50 16.97
10 oz .999 bar 10.00 169.65 174.65 17.47
1 oz .999 round 1.00 16.62 17.12 17.12
Am Eagle, 200 oz Min 1.00 18.32 19.82 19.82
SPOT PLATINUM: 931.70      
Plat. Platypus 1.00 946.70 976.70 976.70
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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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