The Moneychanger
Daily Commentary
Wednesday, 28 June a.d. 2017 Browse the commentary archive

Yesterday evening the dollar broke badly as did stocks. The dollar kept on sinking today but stocks bounced back -- sort of.

Yesterday the US Dollar Index, Vlad Dracula on the Global Economy's Carotid Artery, broke to a new low close for the move, sinking 100 basis points (1%) to 96.13. Today was no kinder to the dollar index, which shrank another 38 basis points (0.4%) to 95.75. A break to a new low followed next day by a lower close is a confirmed key reversal, i.e., break downward. Chart's here,

Meanwhile the Euro hit a new high for the move, up 0.37% to $1.1378. Yen is going the other way fast, but managed to rise 0.01% today to 89.03.

The Jubilatin' on Wall Street is a mite premature. Look at the S&P500 chart,

After yesterday's breathtaking slide -- Dow lower 99.89 & S&P 19.63 -- stocks rallied. I will refrain myself and resist adding "Thanks to the Nice Government Men on the Plunge Protection Team." Today the Dow leapt 143.95 (0.7%) to 21,454.61 & the S&P vaulted 21.31 (0.88%) to 2,440.69.

Since the new all-time high on 19 June stocks have made a series of lower highs and lower lows -- a downtrend. MACD points down, RSI is lackluster. Despite the feverish one day/two day rallies, stocks are running out of energy, signaling exhaustion.

Interest rates have been rising the last two days. Here's the 10 year Treasury yield,

It had dropped under its 200 day moving average, but has climbed back up to close nearly on the 200 DMA today. Higher interest rates sent financial stocks higher -- banks make more money when rates rise. Financials, in turn, dragged up the stock indices. Here's the Bank Stock Index chart, as tepid a sight as I've ever seen.

Gold on Comex closed $1.60 (0.1%) higher at $1248. Silver handily outran gold --- well, out-walked -- by rising 13.9¢ (0.8%) to 1672.7¢.

Silver's stronger run today took the ratio to 74.610 (basis Comex close). Chart's here,

Well, now -- ratio has fallen to the 20 day moving average. Pattern more and more resembles a double top. Momentum indicators all point further down. A close well below the 50 DMA (74.11) ought to cinch it. I remind y'all that generally the ratio FALLS when silver & gold RISE, so a falling ratio points to higher metals' prices.

Silver is behavin' itself, as I expected it would. On the chart, y'all can see how it flirted with punching down through the green uptrend line from the December 2015 low in May, then rallied, then traded through it once again in June. It was sliding down the downtrend line from the July 2016 high, which supported it.

Whew. Looked sorry as gully dirt there for a moment, but has come back from the brink. Momentum is turning up. Absent an explosion in the world's financial system, the seasonally low period of June - July promises to be quiet, edging up.

Gold shared not silver's enthusiasm today. Glance at the chart,

Since mid-May's debacle gold's 200 day moving average has caught and supported it. After bouncing off that line, today it punctured the downtrend from last July and the uptrend from December 2015. Gold is nearly right side up again, but all this sidewise trading proves nothing. Gold needs to bull its way through $1,265 & then $1,300.

In some 36, no, 37 years of trading gold I have only seen gold coin premiums fall this way once, when Y2K buyers liquidated after the world didn't end. Falling premiums indicate a wash out of sellers and price lows. I know y'all are probably saying, Well, he ain't no more'n a nat'ral born durn fool from Tennessee -- what does he know?" I know it ain't right for premiums to fall like they have. We'll get a warning metals are fixin' to turn up when those premiums strengthen again, but the "strength" will likely be small and subtle at first. Yes, I watch premiums every day.

Hurts to recount it, but on 28 June 1914 Archduke Franz Ferdinand of Austria-Hungary, was assassinated in Sarajevo with his wife Sophie. Diplomatic shuffling danced around in the next weeks, but by July's end the world was at war. More than 70 million military personnel were mobilized. Nine million combatants and 7 million civilians died. The war looks like a suicide of Western civilization. It drew in virtually all of Europe and the Ottoman Empire. In the end everybody lost and dynasties that had ruled Europe for centuries vanished, as did the Ottoman Empire, replaced by unstable democracies and dictatorships. Russia went Communist. No matter how long you think about World War I, only one word will keep echoing in your mind: "Why?"

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
28-Jun-17 Price Change % Change
Gold, $/oz 1,248.00 1.60 0.13%
Silver, $/oz 16.73 0.14 0.84%
Gold/Silver Ratio 74.610 -0.529 -0.70%
Silver/Gold Ratio 0.0134 0.0001 0.71%
Platinum 921.70 3.00 0.33%
Palladium 871.50 -3.75 -0.43%
S&P 500 2,440.69 21.31 0.88%
Dow 21,454.61 143.95 0.68%
Dow in GOLD $s 355.37 1.93 0.55%
Dow in GOLD oz 17.19 0.09 0.55%
Dow in SILVER oz 1,282.63 -2.07 -0.16%
US Dollar Index 95.75 -0.38 -0.40%
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SPOT GOLD: 1,248.40      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,260.88 1,290.22 1,290.22
1/2 AE 0.50 655.51 646.05 1,292.09
1/4 AE 0.25 321.21 330.83 1,323.30
1/10 AE 0.10 132.22 135.45 1,354.51
Aust. 100 corona 0.98 1,212.67 1,221.67 1,246.35
British sovereign 0.24 296.08 309.08 1,312.99
French 20 franc 0.19 230.75 234.75 1,257.34
Krugerrand 1.00 1,255.89 1,265.89 1,265.89
Maple Leaf 1.00 1,253.39 1,263.39 1,263.39
1/2 Maple Leaf 0.50 717.83 655.41 1,310.82
1/4 Maple Leaf 0.25 318.34 333.95 1,335.79
1/10 Maple Leaf 0.10 132.33 136.08 1,360.76
Mexican 50 peso 1.21 1,491.53 1,502.53 1,246.19
.9999 bar 1.00 1,250.40 1,258.40 1,258.40
SPOT SILVER: 16.77      
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 11,633.05 11,919.05 16.67
US 40% silver 1/2s 0.30 4,770.15 4,925.15 16.70
100 oz .999 bar 100.00 1,627.00 1,702.00 17.02
10 oz .999 bar 10.00 166.70 170.20 17.02
1 oz .999 round 1.00 16.72 17.12 17.12
Am Eagle, 200 oz Min 1.00 18.42 18.82 18.82
SPOT PLATINUM: 921.70      
Plat. Platypus 1.00 936.70 966.70 966.70
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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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