The Moneychanger
Daily Commentary
Wednesday, 18 October a.d. 2017 Browse the commentary archive

I suspect that stocks , having reached Dow 23,000, are nearing the end of their run. Interesting that the Dow today rose 160.16 (0.7%) while the S&P500 rose only 1.9 (0.07%) to 2,561.26. Nasdaq rose 0.01% and the Nasdaq 100 actually fell 0.13%. That suggests that fewer and fewer stocks are participating in the rise. Ahh, but a break is needed to confirm, and there's ne'er a sign of that yet, only suspicions.

Here is the Dow Industrials chart, so that you can see where it today "threw over" the upper boundary of a tightening wedge, which often signals a move's end. Notice how overbought the RSI (above) is.

Doesn't matter what the market is, parabolic rises are always fatal.

US dollar index lost 7 basis points (0.7%) to end at 93.31. Here's the chart, but only updated through yesterday. Yes there's no change -- dollar index is still tracing out the right shoulder of an upside-down head and shoulders reversal.

I wish there were some way I could make this waiting game exciting and fun, but it's just a dud that nobody enjoys, like eating Spam casseroles at pot luck dinners. You keep doing it to be nice, maybe even put a little of that spew jello salad on your plate, too, in case the maker is watching, but that don't mean you like it and "nice" can't make it taste good.

Y'all won't believe this, but my mother grew up in the Depression and she actually liked Spam, I believe. At any rate, occasionally she would cook it by sprinkling brown sugar on it and roasting it in the oven till the sugar melted.

Buddy, growing up in the 1950s was no picnic.

Y'all go look at the gold/silver ratio, Observe that during this silver & gold decline it has risen a little, back to the 50 day moving average it had crashed through & up to the top downtrending channel boundary. So far, that's whispering that there's not much to fear from the decline, but I would like to see it fall through the last low at 74.26 and keep falling through the 200 DMA.

I reckon that stocks & Bitcoin have so stolen the investment limelight that my phone may never ring again. I'm thinking about bringing a pallet to work so I can nap during the day. Actually, that inactivity is probably a contrarian sign that silver and gold are near re-entering the limelight. Human nature dictates that investors never buy when prices are low; they always wait to buy a rising market. I reckon we are herd animals after all.

Comex trading saw gold lose $3.10 (0.24%) to end at $1,279.90. Silver peeled off 4.4¢ (0.265) to 1694.3¢.

Stare at gold's chart a minute, There's a proverb that "Gaps are always filled." True, but the timing is not specified. Today gold filled the gap left when it jumped higher. So let's see tomorrow if that stops the slide, or it continues. By the way, notice that both metals fell much less today, and that volume fell.

Silver's chart, shows declining volume, a filled gap, and silver above the 20 DMA and holding on at the green uptrend line from the 2015 low. If that was roast chicken and I was eating it, I'd say that was pretty stringy.

Bottom line of all this is that no evidence appears yet that silver & gold have stopped falling.

I get right tired of people rubbing my nose in stocks & how they are outperforming gold. I was thinking today about a customer who came to us in 1998. She bought a lot of gold around $300 - $250 and a lot of silver around $5, and periodically has added a little to it. Now in a world with a four second attention span focused on hoppin' from hot market to hot market, the naïve might conclude she made a mistake passing up all those stock market gains.

A chart explains this plumb quick. Here's the S&P500 valued in gold since 1980,

What does it say? Remember as the graph rises, stocks are gaining value against gold, and as it falls stocks are losing value against gold.

Stocks rose against gold from 1980 to 1999, so you would have been better off holding stocks during that long gold bear market. The S&P500 cost 5.55 oz. of gold at the peak.

But from 1999 to 2011, stocks fell, down to 0.60 oz, losing 89% of their value against gold. No, ma'am, that is NOT a typo: 89%.

Today the S&P500/Gold spread closed at 1.996 oz, down 3.596 oz from the peak or 65%.

Y'all don't forget this is a log scale chart, where the scale reflects percentage, not absolute moves. All things weighed and pondered, my customer looks pretty shiny sitting in silver & gold.

But what do I know? I'm jes' a nat'ral born durn fool from Tennessee.

One more thing? How many of y'all this morning on your way to work saw eight young wild turkeys walking down the road and leaping into the air to fly off? How about a deer that raced up to the side of the road, spied you, and turned and hightailed into the woods?

I did. I wouldn't trade all that for pavement and traffic jams.

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
18-Oct-17 Price Change % Change
Gold, $/oz 1,279.90 -3.10 -0.24%
Silver, $/oz 16.94 -0.04 -0.26%
Gold/Silver Ratio 75.542 0.013 0.02%
Silver/Gold Ratio 0.0132 -0.0000 -0.02%
Platinum 921.90 -10.20 -1.09%
Palladium 954.05 -23.00 -2.35%
S&P 500 2,561.26 1.90 0.07%
Dow 23,157.60 160.16 0.70%
Dow in GOLD $s 374.02 3.48 0.94%
Dow in GOLD oz 18.09 0.17 0.94%
Dow in SILVER oz 1,366.79 12.97 0.96%
US Dollar Index 93.31 -0.07 -0.07%
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: 1,280.60      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,303.65 1,312.62 1,312.62
1/2 AE 0.50 646.20 657.95 1,315.90
1/4 AE 0.25 326.30 332.95 1,331.79
1/10 AE 0.10 131.80 135.80 1,357.99
Aust. 100 corona 0.98 1,245.83 1,255.24 1,280.60
British sovereign 0.24 299.49 304.99 1,295.64
French 20 franc 0.19 236.70 241.70 1,294.57
Krugerrand 1.00 1,290.60 1,298.60 1,298.60
Maple Leaf 1.00 1,282.60 1,292.60 1,292.60
1/2 Maple Leaf 0.50 649.90 662.30 1,324.61
1/4 Maple Leaf 0.25 326.30 332.95 1,331.79
1/10 Maple Leaf 0.10 132.22 136.57 1,365.72
Mexican 50 peso 1.21 1,532.44 1,545.02 1,281.43
.9999 bar 1.00 1,282.60 1,294.60 1,294.60
SPOT SILVER: 17.00      
SILVER Fine Tr.Oz. BID ASK $/oz
VG+ Morgan $B4 1905 0.77 21.00 24.00 31.37
VG+ Peace dollar 0.77 14.50 17.50 22.88
90% silver coin bags 0.72 11,831.11 12,117.11 16.95
US 40% silver 1/2s 0.30 4,837.12 4,985.12 16.90
100 oz .999 bar 100.00 1,674.70 1,727.70 17.28
10 oz .999 bar 10.00 168.47 173.47 17.35
1 oz .999 round 1.00 16.95 17.50 17.50
Am Eagle, 200 oz Min 1.00 18.55 18.95 18.95
SPOT PLATINUM: 921.90      
Plat. Platypus 1.00 919.90 966.90 966.90
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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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