The Moneychanger
Weekly Commentary
Friday, 3 November a.d. 2017 Browse the commentary archive
Here's the weekly scorecard:
  27-Oct-17 3-Nov-17 Change % Change
Silver, cents/oz. 1,670.20 1,679.40 9.20 0.6
Gold, dollars/oz. 1,268.56 1,266.50 -2.06 -0.2
Gold/silver ratio 75.953 75.414 -0.539 -0.7
Silver/gold ratio 0.0132 0.0133 0.0001 0.7
Dow in Gold Dollars (DIG$) 381.87 384.21 2.33 0.6
Dow in gold ounces 18.47 18.59 0.11 0.6
Dow in Silver ounces 1,403.08 1,401.64 -1.43 -0.1
Dow Industrials 23,434.19 23,539.19 105.00 0.4
S&P500 2,581.07 2,587.84 6.77 0.3
US dollar index 94.82 94.86 0.04 0.0
Platinum 910.60 918.50 7.90 0.9
Palladium 959.35 992.90 33.55 3.5

'Twas, as I will explain, a rotten week for silver & gold, but the numbers above already show it. US dollar index struggled to gain 4 basis points for the week, but stocks kept on climbing, barely.

Lets' start with eh US dollar index, and get the most unpleasant things out of the way first. At last today the dollar index attempted to break out of its congestion zone, To ended at 94.86, up a hefty 33 basis points (0.35%) and is tucked smack under that downtrend line from the July high. Next week it ought to crack that line and move toward the 200 DMA target (about 97). Looks like silver & gold will find no relief next week.

On dwindling volume the Dow edged to a new high today, as did the S&P500. Dow chart can be found here Dow added 22.93 (0.1%) to 23,539.19 and the S&P500 edged up 7.99 (0.31%) to 2,587.84.

Overbought can always get overboughter. Dow continues to crawl up that upper wedge boundary it threw over mid-October. RSI is painfully overbought, and MACD has actually turned down. How long can it rise? Until it stops. And that ought to be soon.

These are just numbers and not targets or forecasts, but I looked at the Dow/Gold's drop from 42.39 in 1999 to 5.71 oz. in 2011. Markets often correct by a Fibonacci 38%. If you take 38% of that difference and add it to the low, you get a "target" of 19.65 oz. Today the market's at 18.55 oz. With the Dow at 24,000 a Dow/Gold of 19.65 oz. implies a gold price at $1,221.40. Y'all listen, now, this is not a forecast or target, just a meditation with numbers.

For what it's worth inflation-driven markets other than silver & gold are pulsing with life. Oil (WTIC) is working at breaking out through 55 resistance, Copper has been steadily climbing sink 2015 began, CRB commodity index is promising to break upside out of a flat-topped rising triangle.

But not silver & gold. Today silver & gold gave back those big Wednesday gains, and proved that move a fluke or simple run to the top of a still ruling range. Comex gold lost $8.40 (0.7%) for a close at $1,266.50. Silver gave up 30¢ (1.8%) to 1679.4¢.

The gold/silver ratio which gapped down so bravely on Wednesday gapped UP today, through the 20 & 50 DMAs.

The one day silver chart, shows the magic that happened when silver took a run at 1720¢ about 11:30: massive selling counterattack took silver gapping down to 1680¢ by 1:00. I won't even conjure up Nice Government Men to explain this. Silver was weak at the top of the range and sellers hit it. It broke. No more buyers until 1680¢. Premiums on physical silver and the dearth of our business say that presently there's just very little interest in silver or gold.

The three month silver chart, makes plain silver's trajectory from the bottom of the 1650¢ - 1720¢ range on 26 October to the top of the range Wednesday. Next stop? Bottom of the range, or breaking through that support. It will be the third visit, and third try's oft the charm.

Gold's one day chart, shows the same course. Gold reached toward $1,280 & an anvil was dropped on its head By 1:00 it had fallen from $1,278 to $1,266. Once again, look at the three month chart, Gold is plainly trapped beneath the 20 DMA ad being squeezed toward support at $1,262. The 200 DMA also lieth there. If it breaks $1,262 then it falls toward $1,220.

I only report the news, I don't enjoy it.

We are back to that same expectation: a rising dollar hampering silver & gold till mid-November. Don't lose patience or hope. After all, silver & gold have both the Federal Reserve and the almighty yankee government working for 'em, cranking out that new money and blowing up those deficits as fast as they can. Before too long that will show in silver & gold's prices

Probably not much to y'all's surprise, we found out today that behind all the loud talk of democracy and self government in Spain and the European Union there actually stands: a truncheon. Spanish government today answered Catalonia's calls for democracy & self government with: an arrest warrant for the Catalan leader. Others have already been arrested.

Watch what people do, not what they say.

Bitcoin closed today at $7,191.02. Y'all are probably tired of me warning about markets gone parabolic, but they always end in tears, gnashing of teeth, and pulling of hair. This time is never different.

Chart is here, You can set it to periods from one hour (1h) to 1 year to All data ("All"), which begins in 2010. Set it to "All" and tell me that's not a parabolic chart.

I took the month opening prices for the last two years. The rate of change between August & September was +80.7%. Between October & November, +54%, between 1 October & today, +63.6%. Year over year rate of change has moved from +125% in January 2017 to +886% today.

Does anybody REALLY believe that such growth rates can continue? The spirit of Carlo Ponzi is alive and well on the internet.

Assuming no sudden collapse, a top usually comes as a sharp break, then a recovery to the top followed by a lasting collapse. If you own Bitcoin, set yourself a mental stop to sell at that second peak. Better yet, use a mental trailing stop, pulling that stop higher every day until the market on some dip hits your stop and you get out.

My granddaddy tole me, "Son, it ain't NEVER different this time."

Because I don't follow those markets closely I haven't said much about palladium's one and a half year surge against platinum. Here is the spread, palladium price less the gold price,

Makes you gasp. From $502.30 BELOW platinum in July 2016 palladium has climbed to $66.20 ABOVE platinum, a $568.50 climb in about 18 months. Back this summer palladium futures contracts were backwardated over $10 (spot month over nearby active month) and are still backwardated $1.40. Backwardation shows a high demand for immediate delivery. I don't know what is driving this, but it is eye-catching.

Last time this happened was in 2001 when a Ford made a bad decision & were fed palladium by the Russians who produce about 45% of the world's palladium & had a big stockpile. That drove palladium to $1,090. Right now palladium is only dimes away from breaking through $1,000.

Here's a 20 year chart of the palladium - platinum spread,

Here's the palladium chart since 1980. I'd like a better grip on the reasons for the recent surge before I considered buying an breakout above that channel line. Note the swings from $1,020 to $14.50 ad from $165 to $862. Gonna need some rock hard nerves to trade palladium.

I had to drive to Nashville this morning -- 2 hours --- so on the way out the door grabbed an audio book of C.S. Lewis' Mere Christianity. It was vastly more engaging than I remembered from 30 years ago -- maybe I was too ignorant to appreciate it then. Today I am still ignorant, but a little less so.

Lewis mentioned the 7 Cardinal Virtues. Faith, hope, and love are the particularly Christian virtues, but the so-called "natural virtues" are common to every civilization: Prudence, Temperance, Justice, and Courage (Fortitude).

Prudence is common sense, knowing what to do and when to do it. Temperance is not tee-totaling, but "right use in right measure." Justice we call "fairness," giving every person and act what it is due. Finally courage is being able to face and overcome fear.

Suddenly a ton of bricks dropped on my head: Susan NAILED all of those. Her judgment about what needed to be done was always sound, she was the only naturally temperate person I have ever known, amazing self-control, she was always fair but strict, and she had more moral and physical courage than anyone I have ever known.

Oh, Susan certainly wasn't perfect (don't think that), and my writing about this would probably embarrass her, but remember that the natural virtues don't come naturally. They have to be deliberately, assiduously cultivated. I know, partly from experience and partly from transcribing 10 years' worth of her prayer journals, how stubbornly she pursued those virtues, as well as faith, hope, and love.

I don't tell y'all this simply to torture you by invidious comparison, but to encourage y'all by her example. Rather than making me measure my own shortcomings to my misery, her example lifts me up and encourages me to conform myself to Christ's image. And that's no burden, it's a joy.

Y'all enjoy your weekend.

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-Nov-17 Price Change % Change
Gold, $/oz 1,266.50 -8.40 -0.7
Silver, $/oz 16.79 -0.30 -1.8
Gold/Silver Ratio 75.414 -0.487 -0.6
Silver/Gold Ratio 0.0133 -0.0002 -1.7
Platinum 918.50 -5.60 -0.6
Palladium 992.90 -2.50 -0.3
S&P 500 2,587.84 7.99 0.3
Dow 23,539.19 22.93 0.1
Dow in GOLD $s 384.21 2.94 0.8
Dow in GOLD oz 18.59 0.14 0.8
Dow in SILVER oz 1,401.64 25.94 1.9
US Dollar Index 94.86 0.33 0.3
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SPOT GOLD: 1,270.80      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,288.59 1,300.03 1,300.03
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Aust. 100 corona 0.98 1,236.30 1,245.64 1,270.80
British sovereign 0.24 297.20 304.10 1,291.83
French 20 franc 0.19 234.89 238.01 1,274.82
Krugerrand 1.00 1,280.80 1,288.80 1,288.80
Maple Leaf 1.00 1,274.80 1,284.80 1,284.80
1/2 Maple Leaf 0.50 644.93 657.33 1,314.66
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Mexican 50 peso 1.21 1,520.71 1,533.20 1,271.63
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SPOT SILVER: 16.85      
SILVER Fine Tr.Oz. BID ASK $/oz
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VG+ Peace dollar 0.77 14.50 17.50 22.88
90% silver coin bags 0.72 11,761.75 12,119.25 16.95
US 40% silver 1/2s 0.30 4,793.75 4,941.75 16.75
100 oz .999 bar 100.00 1,675.00 1,713.00 17.13
10 oz .999 bar 10.00 167.00 175.00 17.50
1 oz .999 round 1.00 16.85 17.35 17.35
Am Eagle, 200 oz Min 1.00 18.45 18.80 18.80
SPOT PLATINUM: 918.50      
Platinum Platypus 1.00 916.50 963.50 963.50
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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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