The Moneychanger
Daily Commentary
Monday, 3 July a.d. 2017 Browse the commentary archive

I'm taking a short vacation this week and won't return until next Tuesday, 11 July Given the large moves in gold and silver today, I thought I ought to leave y'all some guideposts.

The US dollar index popped up 55 basis points (0.57%) to 95.97. Chart tells the whole story, http://schrts.co/OkJ5UT

Toda's pop only brings the dollar index (scabby beggar!) up to the lower boundary of the range it tumbled out of -- normal touchback behavior. However, the dollar has been pummeled for nine days, so some countertrend rally should be expected. Forget not that governing the scene is that big completed head & shoulders top. The green line on this chart marks the neckline of that H&S, so that ought to stop any rally. Before it reaches that, the dollar index must conquer the long unconquered 97.50 resistance. Dollar should see 93 before it sees 103. In plain words, trend has definitively turned down.

Meanwhile in Japan Prime Minister Abe's party got slaughtered in an election by an "outsider." Do y'all notice a pattern emerging in elections since Brexit? Yen has been rolling downhill since mid-June, and today closed at 88.18 down 0.93% on the day and down from 91.23 on 14 June. Behold the chart, http://schrts.co/UuqBFa

Interest rates are on a tear rising. Here's the yield on the 10 year Treasury, http://schrts.co/pF66iv

That red line across the chart is the downtrend line from 2007, so, yes, breaking up through it is fraught with meaning. The yield has been fighting that line, trying to cross and stay above it, since last December. Today (red arrow) it punched through the top boundary of the trading channel. Needs to confirm by rising another day, but looks determined.

Since they move opposite to each other ("are inversely correlated," for you engineers), rising interest rates means falling bond prices. Mercy! Look at the 10 year Treasury note, http://schrts.co/8tWGcM or the 30-year Treasury bond, http://schrts.co/IoR0Nw Probably adding to that momentum is a rising stock market, which tends to suck money out of bonds.

Another reason for US dollar strength is a leetle change in the differential between interest rates on US Treasury debt and German. The differential widened, favoring the dollar.

Stocks are a walking self-contradiction. Dow today rose 129.64 (0.67) to 21,479.27 & the S&P500 added 5.60 (0.23%). All's great in stock-land, right?

Not a-tall. Consider the Nasdaq 100, rite-chere, http://schrts.co/TxwAHm From the high 9 June at 5897.69 it has fallen to 5596.96 today, down 5%. Fail not to notice that it has broken down out of an even sided triangles. Indicators forecast more plunging.

Or ponder the Nasdaq Composite, lo, here, http://schrts.co/DPyfC8 After a 9 June high at 6,341.70 it closed today 6,110.06, down 3.6%. Also hath broken the floor out of an even sided triangle. These two indices look like breaking markets.

Dow Industrials chart shows a megaphone or broadening top, http://schrts.co/Q6KUW0 as does the S&P 500, http://schrts.co/vtdPMb Yet in the midst of all this the Dow Transports make a new high today, seen here http://schrts.co/wCgJv7 That also looks like it might be a broadening top, although Dow Theory says that a new high in the Transports confirms a new high in the Industrials.

Regardless, the smash-down in technical stocks gainsays strength in senior indices. This is a very confused market, and confused markets are not trustworthy. Boom-boom draweth nigh.

Gold took a massive body blow today, losing $22.80 (1.84%) to close Comex at $1,217.90. Silver was hit worse, down 53.1¢ (3.2%) to 1603.7¢.

Part of the blame lies with a shortened trading day before a holiday. On such days the big traders are absent and sometimes the little traders run the stops. Light attendance might exaggerate the move, but a rising dollar and rising interest rates didn't help. Or rising stocks stealing all the headlines.

Gold just eroded from about $1,240 at midnight down to $1,230 at 11:00. Then it gapped down and fell head over heels. In the aftermarket it has recovered to $1,222.75.

On the daily chart here, http://schrts.co/HVNUhZ today's fall trashes the uptrend line from December 2015 & returns nearly to the May low ($1,214.30) and the bowl lip of the bowl that formed Nov 2016 - January 2017 and presaged gold's upward breakout.

Silver broke about the same time today that gold did, but had already given up more ground. However, the daily chart isn't quite the same mess as gold's, perhaps because silver's was messier already. It broke through that uptrend from the December 2015 low. It's below all three moving averages, which are in bearish (downward) alignment. Indicators are poisonous.

Yep, we are at the seasonal low period for silver & gold, weakest time of the year. Must be time to buy.

Here are some limits. Either silver holds the line at 1600¢ or it risks returning to 1580¢ or lower. Should find strong support at 1580¢. If gold fails at $1,215, it can fall to $1,194.50.

Here are some milestones for stocks. The S&P500 below the last low, $2,406, risks freefalling, as does the Dow below 21,200. Dollar index is just playing rebound unless it can seriously penetrate 96. But even that won't amount to a hill of beans if it can't overcome 97.50.

July 4, 1863 brought unrelieved disaster to the Confederate States. On 3 July Lee withdrew is army of Northern Virginia from Gettysburg, conceding the battle and losing his risky gamble of invading the north -- although he almost succeeded in wheeling through Virginia to take Washington. But in the end, he didn't.

In Mississippi on 4 July CS General John C. Pemberton (actually a Pennsylvanian) surrendered Vicksburg, the Gibraltar of the Mississippi, to Union forces under Grant. Pemberton had foolishly allowed himself to get bottled up in Vicksburg. These two disasters together marked the high tide of the Confederacy. We lost the Second War for Independence.

Y'all enjoy your Fourth of July Holiday. I'll see y'all again on 11 July, God willing.

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
3-Jul-17 Price Change % Change
Gold, $/oz 1,217.90 -22.80 -1.84%
Silver, $/oz 16.04 -0.53 -3.20%
Gold/Silver Ratio 75.943 1.058 1.41%
Silver/Gold Ratio 0.0132 -0.0002 -1.39%
Platinum 903.80 -19.90 -2.15%
Palladium 854.75 -5.75 -0.67%
S&P 500 2,429.01 5.60 0.23%
Dow 21,479.27 129.64 0.61%
Dow in GOLD $s 364.57 8.86 2.49%
Dow in GOLD oz 17.64 0.43 2.49%
Dow in SILVER oz 1,339.36 50.75 3.94%
US Dollar Index 95.97 0.55 0.58%
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: 1,222.75      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,234.98 1,263.71 1,263.71
1/2 AE 0.50 642.03 632.77 1,265.55
1/4 AE 0.25 314.60 324.03 1,296.12
1/10 AE 0.10 129.51 132.67 1,326.68
Aust. 100 corona 0.98 1,187.75 1,196.75 1,220.93
British sovereign 0.24 289.99 302.99 1,287.15
French 20 franc 0.19 226.00 230.00 1,231.95
Krugerrand 1.00 1,230.09 1,240.09 1,240.09
Maple Leaf 1.00 1,227.64 1,237.64 1,237.64
1/2 Maple Leaf 0.50 703.08 641.94 1,283.89
1/4 Maple Leaf 0.25 311.80 327.09 1,308.34
1/10 Maple Leaf 0.10 129.61 133.28 1,332.80
Mexican 50 peso 1.21 1,460.88 1,471.88 1,220.77
.9999 bar 1.00 1,224.75 1,232.75 1,232.75
SPOT SILVER: 16.18      
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 11,139.70 11,425.70 15.98
US 40% silver 1/2s 0.30 4,596.10 4,744.10 16.08
100 oz .999 bar 100.00 1,568.00 1,643.00 16.43
10 oz .999 bar 10.00 160.80 164.30 16.43
1 oz .999 round 1.00 16.13 16.53 16.53
Am Eagle, 200 oz Min 1.00 17.83 18.23 18.23
SPOT PLATINUM: 903.80      
PLATINUM Fine Tr.Oz. BID ASK $/oz
Plat. Platypus 1.00 918.80 948.80 948.80
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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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