The Moneychanger
Daily Commentary
Wednesday, 17 May a.d. 2017 Browse the commentary archive

As John Milton wrote in "Paradise Lost," today "All hell broke loose."

The excuse touted by the media for a nearly 2% plunge by stocks is the "deepening political crisis" over Trump's this that or t'other. From a technical standpoint, this is hogwash. The market was already exquisitely overbought, & has been till memory runneth not to the contrary, and the Smugness index (VIX) was at a 23 year low. If ever there was a market begging, "Hit me in the head," it's the present stock market. With or without Trump, it's living on borrowed time. Not accurate to blame the fuse for the explosion.

Dow dove 372.82 or 1.8% to 20,606.93. S&P500 fell 1.8% or 43.64 to 2,357.03. In case y'all are wondering, the must-hold levels below are 20,400 and 2,322. Here's the S&P500 chart,

Observe that the index gapped down hugely through the uptrend line, punching through the 20 & 50 day moving averages at the first fall. That's bad news similar to, "Attila the Hun's camping outside the city gates."

And feast your eyes on the Volatility Index (VIX), It has leapt from 23 year lows 42.72% today (not a misprint).

It gets juicier. Financial stocks were hit particular hard, thanks in part to falling interest rates. Look at the Bank Stock Index (BKX),

More to the point, get a gander at this, the Gold/BKX spread (gold divided by the BKX),

Mark the Seven-League Boot gap o'erleaping the 20 & 50 DMAs. What you are seeing is confidence flowing OUT of the financial system and into gold.

Amidst all this fun the US dollar index sank 55 basis points (0.6%) to 97.45, plumb through the bottom of support and in new, uncharted low territory.

Euro chart here, plainly shows two runaway gaps and strongly implies much higher prices to come.

Hand in hand with stocks plunging investors are pouring out of stocks & into the "safety" of bonds. Since bond prices move opposite to bond yields, that is driving yields down to lows not seen in a month, a serious break. Look at

Neither should y'all forget the Dow in Gold, which felt today the combined effects of much higher gold and much lower stocks. Look here,

Gold jumped $22.50 or 1.8% flatfooted, to end Comex at $1,257.50. Silver climbed 15.9¢ (1%) to 1685.2¢.

Gold/silver ratio rose today as gold played catch up with silver, Doesn't change my conclusion that it topped on 9 May.

Overnight gold cracked $1,235 and then there was no stopping it. Chart's here,

Gold sliced through its ganged 50, 20, & 200 day moving averages and stopped slap up under the downtrend line from the July 2016 high - and $1,260-ish resistance. Strike always a note of caution even during the loudest jubilation. It keeps you from having to eat those BIG helpings of crow. All hangs on gold clearing resistance here, because, however little its seems like it today, it might run out of steam here. I don't expect that, but it is a possibility. Look at that huge surge in volume today: that makes ay slowdown in gold far less likely.

Silver's hole was deeper than gold's so its escape has not advanced quite as far.

Today silver pierced that downtrend from July 2016 and cleared the 20 DMA. However, for all the good progress this only brings it to the 1680¢ resistance area. To get clear of any suspicion of failure, silver must hurdle 1750¢. Looks like it's making a run to do just that.

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-May-17 Price Change % Change
Gold, $/oz 1,257.50 22.50 1.82%
Silver, $/oz 16.85 0.16 0.95%
Gold/Silver Ratio 74.620 0.637 0.86%
Silver/Gold Ratio 0.0134 -0.0001 -0.85%
Platinum 943.60 9.10 0.97%
Palladium 776.85 -15.00 -1.89%
S&P 500 2,357.03 -43.64 -1.82%
Dow 20,606.93 -372.82 -1.78%
Dow in GOLD $s 338.75 -12.41 -3.53%
Dow in GOLD oz 16.39 -0.60 -3.53%
Dow in SILVER oz 1,222.82 -33.98 -2.70%
US Dollar Index 97.46 -0.55 -0.57%
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SPOT GOLD: 1,260.20      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,276.58 1,286.58 1,286.58
1/2 AE 0.50 635.90 664.76 1,329.51
1/4 AE 0.25 317.95 338.05 1,352.19
1/10 AE 0.10 127.18 137.74 1,377.40
Aust. 100 corona 0.98 1,224.13 1,233.13 1,258.04
British sovereign 0.24 296.65 301.65 1,281.44
French 20 franc 0.19 235.28 239.28 1,281.62
Krugerrand 1.00 1,270.28 1,280.28 1,280.28
Maple Leaf 1.00 1,270.20 1,281.20 1,281.20
1/2 Maple Leaf 0.50 724.62 661.61 1,323.21
1/4 Maple Leaf 0.25 321.35 337.10 1,348.41
1/10 Maple Leaf 0.10 133.58 137.36 1,373.62
Mexican 50 peso 1.21 1,505.62 1,516.62 1,257.88
.9999 bar 1.00 1,258.20 1,271.20 1,271.20
SPOT SILVER: 16.84      
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 11,965.53 12,251.53 17.14
US 40% silver 1/2s 0.30 4,774.58 4,924.58 16.69
100 oz .999 bar 100.00 1,663.50 1,708.50 17.09
10 oz .999 bar 10.00 166.35 171.85 17.19
1 oz .999 round 1.00 16.64 17.24 17.24
Am Eagle, 200 oz Min 1.00 17.99 18.99 18.99
SPOT PLATINUM: 943.60      
Plat. Platypus 1.00 953.60 966.60 966.60
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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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