The Moneychanger
Daily Commentary
Thursday, 17 November a.d. 2016 Browse the commentary archive

A reader wrote today asking, "What impact would higher interest rates have on silver?"

Theoretically higher rates should put downward pressure on gold & silver prices. And theoretically, a more expensive dollar should press down gold & silver.

This ignores, however, the effect of MONETARY DEMAND on gold & silver. When the public begins to lose confidence in a currency or in the financial system, their monetary demand for a safer money drives them into silver or gold.

So which will prevail: higher rates, higher dollar, or monetary demand? Monetary demand. I say that not only because the financial system is coming unraveled and I believe the end of the central banking era is nigh, but also because technically silver & gold both bottomed in December 2015. From here the next big move is UP, and let interest rates and a higher dollar take the hindmost.

Janet The Terrible Yellen entered the lists today to do battle with the Evil Donald, black knight of anti-bureaucracy. Frankly, Janet made no one tremble with fear. Imagine being savaged by a dead sheep.

US dollar index rose to a new high since 2003 at 100.99, up 55 basis points or 0.55%. Look at the picture here,

Y'all will immediately mark that the dollar index has hit the Big Red Resistance. Note above that the extremely overbought RSI (green blob). At the very least dollar ought to correct to catch breath. Dollar is gutting the yen and euro. Euro fell 0.61% today to $1.0625 and the yen fell 0.97% to 90.84.

Dow made another new high today at 18,903.82, 35.68 (0.19%) higher than yesterday. S&P 500 still has not reached its all time high (2,190.15), but today rose 10.18 (0.77%) to 2,187.12. Y'all just be patient: judge no market before its time.

Owch! Gold tumbled $6.90 (0.6%) to $1,216.50 on Comex. Silver slid 15.3¢ (0.9%) to 1676.1¢.

Look at the gold/silver ratio chart here,

It has formed a rising wedge as it touches its 200 DMA. This says (1) upward correction is nearly finished, and (2) next move is the downward collapse out of the rising wedge.

Both silver & gold are bumping along lows made Monday. That points either to a double bottom at $1,211 and 1650¢, or another plunge to $1,200 & 1600¢. Either way both ought to stop sliding by Friday.

On 17 November 1734 the colonial governor of New York, William Cosby, had printer & newspaper publisher John Peter Zenger arrested for criticizing him. After a grand jury refused to indict Zenger, the Attorney General charged him with libel. As I remember, Zenger was charged with "seditious libel," and at the time truth was not a defense.

All the same, Zenger pled that he had only told the truth. After a long trial the jury came back in 10 minutes with a not guilty verdict. It was a foundational case for freedom of the press.

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
17-Nov-16 Price Change % Change
Gold, $/oz 1,216.50 -6.90 -0.56%
Silver, $/oz 16.76 -0.15 -0.90%
Gold/Silver Ratio 72.579 0.249 0.34%
Silver/Gold Ratio 0.0138 -0.0000 -0.34%
Platinum 942.60 -1.90 -0.20%
Palladium 729.10 10.85 1.51%
S&P 500 2,187.12 10.18 0.47%
Dow 18,903.82 35.68 0.19%
Dow in GOLD $s 321.23 2.41 0.76%
Dow in GOLD oz 15.54 0.12 0.76%
Dow in SILVER oz 1,127.85 12.31 1.10%
US Dollar Index 100.99 0.55 0.55%
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: 1,216.60      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,253.10 1,257.36 1,257.36
1/2 AE 0.50 619.96 641.76 1,283.51
1/4 AE 0.25 313.02 326.96 1,307.85
1/10 AE 0.10 127.64 133.22 1,332.18
Aust. 100 corona 0.98 1,185.36 1,194.36 1,218.48
British sovereign 0.24 288.54 301.54 1,280.95
French 20 franc 0.19 224.87 228.87 1,225.86
Krugerrand 1.00 1,233.63 1,243.63 1,243.63
Maple Leaf 1.00 1,226.60 1,240.60 1,240.60
1/2 Maple Leaf 0.50 699.55 638.72 1,277.43
1/4 Maple Leaf 0.25 310.23 325.44 1,301.76
1/10 Maple Leaf 0.10 128.96 132.61 1,326.09
Mexican 50 peso 1.21 1,459.40 1,470.40 1,219.54
.9999 bar 1.00 1,220.86 1,228.60 1,228.60
SPOT SILVER: 16.71      
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 12,444.58 12,730.58 17.81
US 40% silver 1/2s 0.30 4,736.23 4,886.23 16.56
100 oz .999 bar 100.00 1,650.50 1,685.50 16.86
10 oz .999 bar 10.00 168.55 173.55 17.36
1 oz .999 round 1.00 16.51 17.01 17.01
Am Eagle, 200 oz Min 1.00 18.21 19.71 19.71
SPOT PLATINUM: 942.60      
Plat. Platypus 1.00 957.60 987.60 987.60
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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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