The Moneychanger
Weekly Commentary
Friday, 27 January a.d. 2017 Browse the commentary archive
Here's the weekly scorecard:
  20-Jan-17 27-Jan-17 Change % Change
Silver, cents/oz. 1,699.70 1,710.00 10.30 0.6
Gold, dollars/oz. 1,204.30 1,188.40 -15.90 -1.3
Gold/silver ratio 70.854 69.497 -1.357 -1.9
Silver/gold ratio 0.0141 0.0144 0.0003 2.0
Dow in Gold Dollars (DIG$) 340.35 349.52 9.18 2.7
Dow in gold ounces 16.46 16.91 0.44 2.7
Dow in Silver ounces 1,166.56 1,175.07 8.52 0.7
Dow Industrials 19,827.95 20,093.78 265.83 1.3
S&P500 2,271.31 2,294.69 23.38 1.0
US dollar index 100.83 100.56 -0.27 -0.3
Platinum 972.20 979.40 7.20 0.7
Palladium 787.80 738.00 -49.80 -6.3

What a tangle! Stocks rose this week taking the Dow across the River 20,000 into the promised land. Dollar index continues to trend down, but slowly. Silver & gold took a hit this week -- gold fell the same percentage stocks rose -- but at the week's end gainsaid each other. Platinum & palladium blew hot & cold out of both sides of their mouths, rising strongly then passing slap out.

Dollar Index first:

I have been calling this a megaphone top, but instead of falling through the bottom boundary, the Dollar Index has slid down it. Today it popped up 18 basis points (0.18%), but remains trapped beneath 100.75 support and both faster moving averages. RSI & MACD hint that the downtrend may be drawing to a close. None of that is heartening for metals.

Another possible harbinger of a renewed dollar rally are the other scrofulous fiat currencies, the yen and euro. Euro chart is here,

Y'all will notice first that in the last two days the euro has fallen through its uptrend line. Not fatal yet, but doesn't look good. Indicators are rolling over, too. Since the yen & euro are mere mirror images of the US dollar, their weakness whispers dollar strength.

Euro rose 0.14% today to $1.0697, but the yen fell 0.43%. Ow. Look,

Yen fell through its uptrend line today and nearly through its 20 DMA. Unless it catches footing on that 20 DMA Monday, it is destined for lower things.

The Dow pierced 20,000 on Wednesday, which shouldn't have surprised anyone. Odd thing is, that did NOT carry the Dow above the upper megaphone top boundary. See?

Of course, it would be foolish to stand in the stock market's way right now. Overvalued & overbought can always was overvalueder and overboughter. Stocks can certainly rise more, maybe the rest of this quarter. Dow today subtracted 7.13 (0.04%) to 20,093.78. S&P500 shaved off 1.99 (0.09%) to 2,294.69

I ain't no more'n a nat'ral born durn fool from Tennessee trying to make my way through the world, but I heered about this thing called the VIX, the volatility index. Think of it as measuring smug complacency. When the VIX is low, stock investors are smugly confident things will keep churning along just as they always have. When they're panicked, VIX skyrockets. Looky here,

This VIX chart shows that investors haven't been this smug since July 2014. Whatta y'all reckon that means?

Dow in Gold chart lies right here,

It's fish or cut bait time for the DiG. After making what looks like a double top with December 2015, the DiG sank through support at the old top, then fell to the 50 DMA. Momentum indicators look set for it to move higher. Truth is, if it indeed bounces off that 50 DMA and rises through that resistance at 16.85 again, it could rise much higher.

Add to the bumfuzzlement the Dow in Silver, right here,

The DiS looks more stoutly to have topped with double peaks about the same place, and a sharper fall of the top. Nor are the indicators as positive for the DiS as for the DiG.

What does it all mean? That's the problem, I can't tell you because silver's voice is talking over gold's.

And silver did that in the metals market today. Gold fell $1.4 (0.12%) to $1,188.40 but after silver fell off during the day it rallied back strongly to end up 28.6¢ (1.7%) at 1710¢

Silver was taking a licking down under 1680¢, and hit a low at 1668¢. Right there the buying kicked in, about noon-thirty, and within 30 minutes silver was sitting above 1715¢. At prices below 1670¢, clearly, somebody wants to buy silver.

Gold showed no such enthusiasm today, but after declining steadily the last five days, It turned up about 5:00 a.m. and left a bowl bottom on today's chart.

But let us cast a jaundiced eye on these proceedings. Fact remains that silver must conquer 1730¢ and gold $1,220. Otherwise they'll keep dropping or crabbing sideways.

Here's the gold chart,

Indicators promise more downward action, and gold has fallen back below that bowl lip to the 20 & 50 day moving averages nearby. This won't hurt anything as long as gold stays above the 50 DMA.

Y'all go look at the silver chart,

All that trading, including the last two weeks, are consistent with an upside down head & shoulders. If so silver is now forming the right shoulder and could fall back as low as 1615¢, and mess around here another three weeks. Key interpreter remains 1725¢ support/resistance. Got to conquer that mark.

I sure don't recommend foot surgery as a form of entertainment, but I thank God mine went well on Wednesday. They hit me with something that knocked me clean out for three hours, and I was none too perky when I woke up. Thanks in large part to your prayers, the pain is very mild today. I just look silly in this boot with a wedge in the sole. Makes me peg leg around on my heel.

While I was doing foot surgery the printed version of At Home in Dogwood Mudhole Volume 3 arrived. One of my sons spent a couple of hours reading it last night and commented that he thought it had more love and thoughtfulness than the other two. Well, I hope I'm learning SOMETHING as I get older. Vol 3 is full of Susan stories. You'll find it here,

We've bundled all three volumes together here at a SALE price,

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
27-Jan-17 Price Change % Change
Gold, $/oz 1,188.40 -1.40 -0.1
Silver, $/oz 17.10 0.29 1.7
Gold/Silver Ratio 69.497 -0.094 -0.1
Silver/Gold Ratio 0.0144 0.0002 1.7
Platinum 979.40 1.50 0.2
Palladium 723.85 14.15 2.0
S&P 500 2,294.69 -1.99 -0.1
Dow 20,093.78 -7.13 -0.0
Dow in GOLD $s 349.52 0.32 0.1
Dow in GOLD oz 16.91 0.02 0.1
Dow in SILVER oz 1,175.07 -20.41 -1.7
US Dollar Index 100.56 0.18 0.2
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GOLD Fine Tr.Oz. BID ASK $/oz
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US 40% silver 1/2s 0.30 4,852.75 5,002.75 16.96
100 oz .999 bar 100.00 1,700.00 1,725.00 17.25
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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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