The Moneychanger
Daily Commentary
Monday, 15 May a.d. 2017 Browse the commentary archive

Hot zig! Today was my lucky day: Bob the Technical Genius called about the gold/silver ratio. Now I am about to share with y'all what he said, but some of y'all will do that eye-glazing trick on me and just want to strip mine the conclusion, so I'll do it for you: This is a Big Trade from a Big Turning Point with Long Legs. The ratio is headed down, down, down, and a breach through 65 will be just the beginning. Note that this is not a trade, but a position for the long run.

Y'all get this chart in front of your eyes & pay close attention,

Peak came in March 2016 at 84.38, then fell in five waves down to a bottom at 64.84. See that?

Right. Subtract the low from the peak, 64.84 from 84.38. That difference is 19.54. Multiply that by 0.618, the Fibonacci correction number, and you get 12.08. Add that to 64.84 and you get 76.94. That's a 61.8% target for correcting the fall from 84.38 to 64.84.

Bob the Technical Genius wasn't finished triangulating on the target yet. Subtract the 64.84 low from the 74.11 high of the first leg, he says, and you'll get 9.27 points. If you add that 9.27 points to the 66.92 low off the 74.11 high, you'll get the target where the C leg of the correction equals the A Leg, or 76.19.

Ahhh. Now compare 76.94 to 76.19, and they nest pretty closely together. Close enough.

So the 76.47 gold/silver ratio high we've seen so far in May is at a "hard spot" in the market. It's near 76.59, the average of 76.19 and 76.94 targets. It's also (get ready for this) near the top of the 4th wave of lesser degree at 77.12 in May 2016.

So, Bob the TG reasons, this is not a common top in the ratio, but a MAJOR top. The huge leg from 84.38 to 64.84 was just the FIRST leg, and the next one coming is a Big One and will easily take out the 64.84 low of July 2016.

Bob says, it a Big Trade at a Big Turning Point with Long Legs. That first leg down lasted 4-1/2 months. This one (assuming the ratio has peaked) is only three days old.

Implication: swap gold for silver, NOW.

Wait just a second. Here's another way of looking at the ratio that confirms Bb's thoughts complete with a breakdown today from an island reversal, It is the price of the Gold ETF (GLD) divided by the Silver ETF (SLV).

Note first at the top how the RSI has plummeted: trend reversed. Note then on the graph where the GLD/SLV gapped down today. And owch! Move down to the MACD & mark how it has hooked over & turned down. Early yet, but looks like a peak & reversal downward.

Now Bob is the Technical Genius, not I. I don't know as much about Elliott Wave as a hog knows about a sidesaddle. What I do know is that over the long life of a metals bull market, silver outperforms gold and ends up at a 16:1 or lower ratio. And I know that 84 is the high end of the ratio's range since 2001, and that makes any number toward that end a favorable place to swap silver for gold. If you're interested, call us at 888-218-9226 or 931-766-6066.

But, listen, y'all don't pay no 'tenshun to me. I'm jes' a nat'ral born durn fool from Tennessee, trying to break a hog to a sidesaddle.


Today the Russians & Saudis announced they would continue oil production cuts through February 2018. WTIC Oil spiked 2.11% to $48.85/bbl. Chart's here, That sent energy stocks scrabbling higher. End of the day the Nasdaq Comp hit a new all-time high by 20.53 points at 6,149.67. S&P500 joined the Nasdaq Comp by rising 11.42 (0.48% to 2,402.32. Dow Industrials joined not in the jubilation, but rose only 85.33 (0.41%) to 20,981.94. The Dow gainsaying the other indices by lagging ought to raise at least an eyebrow hair of suspension, but we heard nothing about that. I have been saying stocks could show another leg up, but I am not convinced that the S&P500's move today proves that yet. Chart's here, y'all decide for yourselves,

I'd hate to be the friend or partisan of the US dollar index, which stabs its allies in the back more often than a medieval Italian duke. Chart's here,

Dollar index broke down from a rising wedge on Friday and today fell once again through its 50 & 200 day moving averages like a gawking fool stepping into an open manhole. From here it will drop toward 98, looking for another platform from which to backstab its supporters. Dollar index fell 33 basis points today to 98.80.

Comex gold gained 0.2% or $2.40 to $1,228.60 but silver added 21.5¢ (1.3%) 1656.1¢. Those numbers don't exactly reflect what I saw today, or where now in the aftermarket they're trading at $1,231.15 and 16.665.

Silver flat shook off its laziness today by jumping over 1635¢ to 1656.1¢. Good move, but stopped by 1680¢, so that becomes the hurdle tomorrow. Now look at the chart,

Notice how dramatically silver has worked off that terribly overbought RSI. Mark as well that it is knocking on that red downtrend line from the July 2016 high. Look at the dip below that line in March. This one has lasted about the same time and plunged to a comparable depth. No doubt long lines of shortsellers are just a-waitin' and a-droolin' to short silver at 1680¢, but they will be disappointed in the short term. Look at that MACD's upturn.

Behold & visit the gold chart,

MAYBE gold can whup $1,235 tomorrow. Above awaits a tangled snarl of 20, 50, & 200 day moving averages, right smack on top of the uptrend line from the December 2017 low, all around $1,250. It's be an eye-gougin', ear-bitin', finger-choppin' fight to pass that level, but gold's RSI has turned up, adding steam, as has the MACD. One of these days soon gold will wake up & shake off its slumber, pull out a Bowie knife, and jump in the fray.

One last little tidbit. Premium on US 90% today rose to 40¢ over spot. The premium is climbing as silver climbs, the perfect combination. A little sign, a faint whisper, but still a sign.

Saturday before Mother's Day what do I find at home but pictures from 1974 when Susan bore our first baby, Liberty. Now over the yearseven dull as I am I have observed that all woman have some special attraction to babies, but Susan beat all I've ever seen. She trained for that delivery like an Olympic athlete, and made me train, too. Unfortunately most of the pictures are faded but not all, and there are several of Susan nursing and changing diapers and an especailly sweet one I remember seeing in person, when she got home (to her mother's house) the day after Liberty was born (too cheap to stay in the hospital). In it Susan has fallen asleep with Liberty in the crook of her arm, plumb worn out but across the goal line at last.

We lived in Little Rock then, and my grandparents lived about an hour away in Conway. My grandmother loved babies almost as much as Susan. She prepared for Liberty a bed in a laundry basket, and one of the pictures shows the laundry basket from the side, two tiny feet sticking up in the air.

I am so glad God gave us children: it gave me more reasons to love Susan.

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-May-17 Price Change % Change
Gold, $/oz 1,222.70 5.40 0.44%
Silver, $/oz 16.21 0.06 0.36%
Gold/Silver Ratio 75.433 0.063 0.08%
Silver/Gold Ratio 0.0133 -0.0000 -0.08%
Platinum 915.20 11.20 1.24%
Palladium 798.80 -6.50 -0.81%
S&P 500 2,394.44 -5.19 -0.22%
Dow 20,919.42 -23.69 -0.11%
Dow in GOLD $s 353.68 -1.97 -0.55%
Dow in GOLD oz 17.11 -0.10 -0.55%
Dow in SILVER oz 1,290.61 -6.10 -0.47%
US Dollar Index 99.50 -0.06 -0.06%
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: 1,225.00      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,240.31 1,250.31 1,250.31
1/2 AE 0.50 618.12 646.19 1,292.38
1/4 AE 0.25 309.06 328.61 1,314.43
1/10 AE 0.10 123.62 133.89 1,338.93
Aust. 100 corona 0.98 1,189.94 1,198.94 1,223.16
British sovereign 0.24 288.37 293.37 1,246.24
French 20 franc 0.19 228.71 232.71 1,246.42
Krugerrand 1.00 1,233.58 1,243.58 1,243.58
Maple Leaf 1.00 1,235.00 1,246.00 1,246.00
1/2 Maple Leaf 0.50 704.38 643.13 1,286.25
1/4 Maple Leaf 0.25 312.38 327.69 1,310.75
1/10 Maple Leaf 0.10 129.85 133.53 1,335.25
Mexican 50 peso 1.21 1,463.57 1,474.57 1,223.00
.9999 bar 1.00 1,223.00 1,236.00 1,236.00
SPOT SILVER: 16.36      
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 11,518.65 11,876.15 16.61
US 40% silver 1/2s 0.30 4,634.45 4,784.45 16.22
100 oz .999 bar 100.00 1,616.00 1,661.00 16.61
10 oz .999 bar 10.00 161.60 167.10 16.71
1 oz .999 round 1.00 16.16 16.76 16.76
Am Eagle, 200 oz Min 1.00 17.51 18.51 18.51
SPOT PLATINUM: 915.20      
Plat. Platypus 1.00 925.20 938.20 938.20
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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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