The Moneychanger
Daily Commentary
Monday, 22 May a.d. 2017 Browse the commentary archive

Friday flushed out profit takers in silver & gold & offered stocks the chance to rally back for a kiss good-bye to the breakdown point

Here's an S&P500 chart,

You see the huge fall, a key reversal next day, then a rise back to the line where the SP500 broke down in the first place. This does no more than fill the gap left behind by the plunge. The Old Market Proverb says, "Gaps are always filled, and this one just was. Time to continue falling now.

My outlook remains that after a painful correction stocks will see one final all-time high, although that expectation would be demolished by an S&P close below 2,195.

Now behold the US dollar index at

It broke support at 98 and has kept right on falling. Shooting for 95? This is getting serious. At some point here the dollar index won't be able to recover. The Nice Government Men and central bankers in Washington & Brussels will soon be running to the department store for extra deodorant.

On Comex gold rose $8.00 (0.6%) to 1,260.70. Silver vaulted 39.3¢ (2.3%) to 1714.3¢, pretty well smashing 1700¢ resistance. Five day charts for both metals leave me thinking Friday was a little correction that introduced the next leg up.

On the six month chart here, y'all will note that after cracking the uptrend line from December 2015, gold caught its footing on the neckline of that November - January upside down head & Shoulders, and is now bumping its head on the downtrend line from the July 2016 high -- and resistance from $1,260 - $1,265.

Nat'ral born durn fool from Tennessee that I am, why do I believe gold will climb yet more? Look at the RSI up top -- it has only just crossed the 50% mark, so has plenty of room to rise. Look beneath the chart at the MACD. The fast line has just crossed above the slow and has not yet risen above zero -- plenty of room to rise. AND gold stands above its 200 DMA.

Now glance at the Gold/Silver Ratio,

That high from 9 May still holds. The ratio recovered slightly, but fell again and today gapped down through the 20 Day Moving Average, probably a breakaway gap, which usually is not filled (despite the proverb). Since the ratio usually drops in strong gold/silver rallies, the ratio is also pointing to higher prices.

Bear in mind (he said, hedging,) that gold must wade through an Okefenokee swamp of resistance betwixt here $1,260 & $1,306. Not far above that, about $1,320 today, lies the downtrend line from the 2011 high. Gold above that point will attract buyers like teenage girls attract teenage boys.

I will miss y'all most of this week. I have ot finish my monthly Moneychanger newsletter for paid subscribers tomorrow, and Wednesday I'm driving with my daughter Liberty & two of her sons to a wedding in Wichita. I'm worried about getting across the border into Kansas since I'm from Tennessee, but we may try it at night on a backroad. I'll be back next Tuesday.

Wednesday I get to celebrate my birthday travelling. I'm not going to tell y'all how old I am, but y'all can be sure the Nice Government Men know.

Every month in the Moneychanger I write a personal letter to my readers. I came across the January 2013 issue today with a picture of Susan in an elegant green dress, sitting at a table wineglass in hand, in front of the stone fireplace at The Shoe. I'll share it with y'all, because it will give you some insight into her sweet & romantic character:

"Although I'm looking forward to spring, winter is not over yet, and I am still enjoying it. Our log house, the Shoe, has one very long room where you enter, about 30 feet long and maybe 12 feet wide. About half way there is an offset 12 feet wide and six feet deep where our limestone fireplace stands, with a raised stone hearth. I call this the Fireplace That Should Not Work. Built without any bend in the flue, it goes straight up to the sky. Oddly enough, it's the most efficient fireplace I've ever used. That limestone heats up course by course, then through then night gives back its heat. Above in the offset a window opens into the second floor, so the heat rises upstairs.

"Only problem is, Susan and I usually eat in the kitchen/dining room, and don't get to enjoy the fire. This week I was upstairs in my study, working on this newsletter as a matter of fact, and she was bustling away downstairs fixing supper. When she called me downstairs, I found she had set up a card table in front of the fire, lit the candles, opened a delicious bottle of wine, a gift from a friend in California, and grilled a steak.

"It was the best restaurant I've ever eaten at, sitting right in front of the fire."

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
22-May-17 Price Change % Change
Gold, $/oz 1,260.70 8.00 0.64%
Silver, $/oz 17.14 0.39 2.35%
Gold/Silver Ratio 73.540 -1.248 -1.67%
Silver/Gold Ratio 0.0136 0.0002 1.70%
Platinum 947.80 10.10 1.08%
Palladium 758.95 -1.60 -0.21%
S&P 500 2,394.02 12.29 0.52%
Dow 20,894.83 89.99 0.43%
Dow in GOLD $s 342.61 -0.70 -0.20%
Dow in GOLD oz 16.57 -0.03 -0.20%
Dow in SILVER oz 1,218.85 -23.23 -1.87%
US Dollar Index 97.27 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: 1,259.80      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,272.40 1,282.40 1,282.40
1/2 AE 0.50 635.69 664.54 1,329.09
1/4 AE 0.25 317.85 337.94 1,351.77
1/10 AE 0.10 127.14 137.70 1,376.96
Aust. 100 corona 0.98 1,223.74 1,232.74 1,257.64
British sovereign 0.24 296.56 301.56 1,281.04
French 20 franc 0.19 235.20 239.20 1,281.22
Krugerrand 1.00 1,269.88 1,279.88 1,279.88
Maple Leaf 1.00 1,269.80 1,280.80 1,280.80
1/2 Maple Leaf 0.50 724.39 661.40 1,322.79
1/4 Maple Leaf 0.25 321.25 337.00 1,347.99
1/10 Maple Leaf 0.10 133.54 137.32 1,373.18
Mexican 50 peso 1.21 1,505.15 1,516.15 1,257.48
.9999 bar 1.00 1,257.80 1,270.80 1,270.80
SPOT SILVER: 17.11      
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 12,051.33 12,337.33 17.26
US 40% silver 1/2s 0.30 4,854.23 5,004.23 16.96
100 oz .999 bar 100.00 1,690.50 1,735.50 17.36
10 oz .999 bar 10.00 169.05 174.55 17.46
1 oz .999 round 1.00 16.91 17.51 17.51
Am Eagle, 200 oz Min 1.00 18.26 19.26 19.26
SPOT PLATINUM: 947.80      
Plat. Platypus 1.00 957.80 970.80 970.80
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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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