The Moneychanger
Daily Commentary
Wednesday, 10 May a.d. 2017 Browse the commentary archive

I saw a headline that said Bitcoin had doubled since 2017 began, to $1,800 yesterday. First, I couldn't verify those figures. See chart here,

According to this Yahoo Finance chart, the Bitcoin high is $1,759.70, and the 30 January 2016 close was $969.89, not $1,800 & $900. But let that go as a niggling detail. What is Bitcoin seeing?

A parabolic rise. Near doubling in 5 months is NOT a sign of lasting strength, but a peak.

Bitcoin is a toy for speculators, differing from national fiat (imaginary) money in this, that Bitcoin is issued by computer nerds instead of out-of-touch-with-reality academic central banking criminals. Both are nerd-backed, irredeemable fiat money.

Remember that the mob loveth & chaseth rising prices, & the faster prices rise, the more the mob buys in a self reinforcing cycle. This is the road to sorrow and gnashing of teeth & empty pockets, because the faster the price rises, the closer looms the disaster, and the disaster is 100% certain. ALWAYS crashes.

Which brings to mind other parabolic rises with lit and brightly burning fuses: Tesla (up 81% since November, 7 months), Apple (up 76%), Google (up 29%), Microsoft (up 23%), Amazon (up 35%), and Facebook (up 35%). As my old first sergeant used to say, "A word to the wise is suffice."

About that gold/silver ratio: The Relative Strength Index promises to show when a market is overbought with an RSI reading above 70 or oversold with an RSI below 30. You can see the RSI above the chart here,

The Gold/Silver ratio's RSI yesterday stood at 81.28. That's the highest reading since the 85 in September 2008 -- much higher than February 2016, when the ratio hit 83.13 (against 75.37 today) but the RSI rose only to 76. So the ratio is intensely oversold, relative to the past 9 years. In 2003 the ratio made double peaks February & June, but the RSI never exceeded 79.6. Ratio topped at both peaks toward the end of the oversold RSI reading.

I checked also when tops occurred relative to the RSI highs. In 2008 the RSI peaked long before the ratio peaked and in 2014, but in 2016 the RSI peaked at the same time. So we don't have a clue whether this high reading marks the high in the ratio or not, but it tells us at least a high lieth not far in the future, if it has not already occurred.

US dollar index chart hides here,

On Friday the dollar index showed the first day of a key reversal, lower low for the move with a close higher than the previous days. That reversal was confirmed by a higher close the next day and today. Today also carried the dollar index above the 20 day moving average. All that says, "Dollar is going higher."

Think a moment on the euro,

First round of the French presidential election sent the euro rocketing up through the downtrend line and upper range boundary. It even climbed above the 200 DMA, & stayed there for a couple of weeks.

Then the second round arrived, and it was, "Buy the rumor, sell the news." Euro sank. Trying to drill through its 200 DMA now, and will likely succeed, heading to the earth's core.

Consider also the yen,

It also sought to break the chains binding it to earth, and flew all the way up to the 200 DMA, where its wings fell off. Gapped down yesterday -- maybe an exhaustion gap. Should fall at least to the bottom boundary of that range, about 86.50.

Comex gold added $3.00 (0.2%) to $1,217.30. Silver jumped up 14.3¢ (0.9%) to 1615.1¢.

Positive, but neither metal rose past the cutoffs for a bottom I prescribed yesterday, namely, $1,224 & 1620¢. Gold closed near the day's low. Both messed up any sign of a bottom on their charts.

So what's next? If they can climb over $1,224 and 1620¢ tomorrow then maybe we'll see some rally. Silver now has a 17 day losing streak less two (2) up-days, including today. That begs for a turnaround.

On 10 May 1775 the Second Continental Congress met in Philadelphia and named George Washington supreme commander of Continental forces, a good thing. Same day that Congress also issued its first paper currency, the Continental, a very bad thing. It went the way of all fiat currencies. By end-1778 the Continental had fallen to one-fifth to one-seventh of face value. By 1780, to 1/40. By May 1781, six years after the first issue, they had ceased to circulate because they were worthless.

Yet not so worthless that a political scam could not be organized under the table to milk the government and enrich insiders. After the 1789 constitution was ratified, Congress authorized the exchange of Continentals for treasury bonds at 1% of face value. Let's see, if you scooped 'em up when they were worthless and sold 'em at 1% for treasury bonds, that's an infinite profit, ain't it?

And y'all thought federal government corruption was invented in 1861. No, it's been with us always.

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
10-May-17 Price Change % Change
Gold, $/oz 1,217.30 3.06 0.25%
Silver, $/oz 16.15 0.14 0.89%
Gold/Silver Ratio 75.370 -0.482 -0.64%
Silver/Gold Ratio 0.0133 0.0001 0.64%
Platinum 907.40 9.00 1.00%
Palladium 799.20 5.75 0.72%
S&P 500 399.63 2.71 0.68%
Dow 20,943.11 -33.67 -0.16%
Dow in GOLD $s 355.65 -1.47 -0.41%
Dow in GOLD oz 17.20 -0.07 -0.41%
Dow in SILVER oz 1,296.71 -13.69 -1.04%
US Dollar Index 99.56 0.12 0.12%
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: 1,217.50      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,232.72 1,242.72 1,242.72
1/2 AE 0.50 614.33 642.23 1,284.46
1/4 AE 0.25 307.17 326.59 1,306.38
1/10 AE 0.10 122.87 133.07 1,330.73
Aust. 100 corona 0.98 1,182.65 1,191.65 1,215.72
British sovereign 0.24 286.60 291.60 1,238.74
French 20 franc 0.19 227.31 231.31 1,238.92
Krugerrand 1.00 1,226.02 1,236.02 1,236.02
Maple Leaf 1.00 1,227.50 1,238.50 1,238.50
1/2 Maple Leaf 0.50 700.06 639.19 1,278.38
1/4 Maple Leaf 0.25 310.46 325.68 1,302.73
1/10 Maple Leaf 0.10 129.06 132.71 1,327.08
Mexican 50 peso 1.21 1,454.61 1,465.61 1,215.57
.9999 bar 1.00 1,215.50 1,228.50 1,228.50
SPOT SILVER: 16.13      
SILVER Fine Tr.Oz. BID ASK $/oz
VG+ Morgan $B4 1905 0.77 22.50 25.50 33.33
VG+ Peace dollar 0.77 15.00 18.00 23.53
90% silver coin bags 0.72 11,389.95 11,747.45 16.43
US 40% silver 1/2s 0.30 4,566.60 4,716.60 15.99
100 oz .999 bar 100.00 1,593.00 1,638.00 16.38
10 oz .999 bar 10.00 159.30 164.80 16.48
1 oz .999 round 1.00 15.93 16.53 16.53
Am Eagle, 200 oz Min 1.00 17.28 18.28 18.28
SPOT PLATINUM: 907.40      
Plat. Platypus 1.00 917.40 930.40 930.40
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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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