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Daily Commentary
Tuesday, 20 June a.d. 2017 Browse the commentary archive

Stocks backed off yesterday's gains: Dow gave back 61.85 (0.3%) to close at 21,467.14. S&P500 lost 16.43 (0.675) to 2,437.03.

Adding to my observation yesterday about tech stocks breaking on 9 June, look at this chart of the Nasdaq Composite, Tis legendary that in bull markets "cats and dogs fly last," that is, the smaller, more speculative stocks rise hardest at the end of a bull market, outpacing blue chips, and they break first & hardest. Too early to judge this break as that harbinger, but it throbs with bad juju the way those background drums in a 1930s Tarzan movie signaled cannibals ahead for the safari.

To wit, note the red arrows: Peak with dramatic key reversal on 9 June, confirmed next day. Near break of the uptrend line. RSI about to drop below 50. Volume increasing on down days, not up. MACD avalanching downslope. Today the Nasdaq Comp failed to hold above its 20 day moving average. Nothing here suggests it will recoup the loss of that break.

Oooo, and look at the Dow Jones Transportation Average here,

Theory says that the Transports & Industrials should speak with one voice, confirming each other. Yet while the industrials have made a new high since March, Transports have not. In fact, have established a downtrend.

US dollar index rose 15 basis points (0.15%) to 97.41. Why was I yesterday trashing our noble public servants, those Nice Government Men at the Fed? They raise interest rates, which makes it more expensive for businesses to borrow, adding to their costs. This acts more like a boa constrictor after they've suppressed interest rates for 9 years, offering businesses that could borrow a free ride. Next they announce they are reducing their balance sheet. Remember, when the Fed BUYS assets, it creates money to buy them and EXPANDS the money supply, i.e., inflation. When the Fed SELLS assets, it destroys money and REDUCES the money supply, i.e., deflation. Even if they don't sell assets & just let the bonds mature, it makes no sense because they will reducing further the rate of money supply growth. They are doing this after an artificially-induced 8 year boom in stocks, which is already primed to pop. All this is in the teeth of the world's biggest debt bubble. When that pops & everyone scrambles for money, the word "deflation" won't hardly touch it.

As I said, their cornbread ain't done all the way to the middle.

More evidence of the present confusion: Crude oil appears to be cooked, read to fall back toward $30 -- see this chart,

Bellwether 10 year treasury yield chart's here, Is that climbing out on a limb till it breaks (meaning lower interest rates to come), or is that a bullish flag signaling an upward breakout in waiting?

Bib Mama of all confusion is the Gold/Bank Stock Index spread,

Broke out upside in April, topped at 14.66, sank like your heirloom Rolex in the lake while you were waterskiing, squealed to a halt at 13.14 in May, turned right back around and screamed to 14.58, only to fall to pieces again -- a fine picture of confusion.

Gold on Comex lost $3.20 (0.3%) to $1,241.00. Silver gave up 8.5¢ (0.5%) to 1639.8¢.

First, gold, right here

Hit its 200 Day Moving Average today. That's often the turnaround target of corrections in uptrending markets, and I contend gold has been uptrending since December 2016. Bear in mind, too, that the end of June - beginning of July shows a seasonal low for gold (average of 30 years). Last year was just the opposite, with a gold high on 1 July, but that's the odd man out. Terrible idea to judge a market by what it's doing at a seasonally low time. I expect gold to hold here.

Silver is right here,

Touched today the downtrend line from the July 2016 high, conceding with the May low -- a likely place to turn around.

I conclude that right here is a propitious place to BUY silver or gold, not panic or despair. I believe the Gold/Silver ratio agrees with me. Behold,

A double top is forming between May's 76.47 and yesterday's 76.19. Needs a two-day close above 76.50 to gainsay my expectation the ratio will fall.

Footnote: A strange backwardation has taken palladium. June closed $885.15 today, a massive $18 higher than the September contract. Very odd.

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
20-Jun-17 Price Change % Change
Gold, $/oz 1,241.00 -3.20 -0.26%
Silver, $/oz 16.40 -0.09 -0.52%
Gold/Silver Ratio 75.680 0.196 0.26%
Silver/Gold Ratio 0.0132 -0.0000 -0.26%
Platinum 920.60 -5.40 -0.58%
Palladium 885.15 9.30 1.06%
S&P 500 2,437.03 -16.43 -0.67%
Dow 21,467.14 -61.84 -0.29%
Dow in GOLD $s 357.59 -0.11 -0.03%
Dow in GOLD oz 17.30 -0.01 -0.03%
Dow in SILVER oz 1,309.13 3.00 0.23%
US Dollar Index 97.41 0.15 0.15%
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: 1,241.40      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,252.57 1,282.99 1,282.99
1/2 AE 0.50 632.60 654.84 1,309.68
1/4 AE 0.25 319.40 333.63 1,334.51
1/10 AE 0.10 130.24 135.93 1,359.33
Aust. 100 corona 0.98 1,205.87 1,214.87 1,239.41
British sovereign 0.24 294.42 307.42 1,305.94
French 20 franc 0.19 229.45 233.45 1,250.41
Krugerrand 1.00 1,248.85 1,258.85 1,258.85
Maple Leaf 1.00 1,249.40 1,265.40 1,265.40
1/2 Maple Leaf 0.50 713.81 651.74 1,303.47
1/4 Maple Leaf 0.25 316.56 332.07 1,328.30
1/10 Maple Leaf 0.10 131.59 135.31 1,353.13
Mexican 50 peso 1.21 1,483.16 1,494.16 1,239.25
.9999 bar 1.00 1,245.74 1,253.40 1,253.40
SPOT SILVER: 16.41      
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 11,804.65 16.51
US 40% silver 1/2s 0.30 4,663.95 4,818.95 16.34
100 oz .999 bar 100.00 1,621.00 1,656.00 16.56
10 oz .999 bar 10.00 165.60 170.60 17.06
1 oz .999 round 1.00 16.21 16.81 16.81
Am Eagle, 200 oz Min 1.00 17.91 19.41 19.41
SPOT PLATINUM: 920.60      
Plat. Platypus 1.00 935.60 965.60 965.60
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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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