The Moneychanger
Daily Commentary
Monday, 11 December a.d. 2017 Browse the commentary archive

I offer y'all a bit of evidence, as the lawyer might say at trial, not to prove the truth of the proposition stated but only to show state of mind. Article is right here, entitled "The real creator of Bitcoin is NSA." Speculation that some party in the intelligence community created Bitcoin, that it's a trap, that's it's a massive pump-and-dump scheme is all over the internet. I do not offer this as "proof" of anything, because clearly if these spooks actually did create Bitcoin they wouldn't tell you or me. I have no clue whether this article is accurate or not.

But 'tis true that CBOE futures trading for Bitcoin started last night. Carefully mark that these are "cash settlement" contracts, which means you need not own any Bitcoin to buy or sell them. This offers paper Bitcoin futures even greater supply leverage -- they can create an infinite number of Bitcoins in theory -- than other futures contracts such as gold or silver. With those, at least, you must finally deliver or accept the physicals if you hold the contract to maturity. At least that small restraint exists, but not with Bitcoin futures.

Because of the gigantic leverage in metals -- for a futures contract you put up only 3.56% of the value as margin, say -- so if gold is selling at $1,250 you can control 100 oz by putting down $4,450. The margin drops if you're a bigger trader. Very quickly the futures market becomes the tail that wags and controls the price dog.

And let's not talk about naked shorts, those brave speculators who, owning no Bitcoin, yet sell it short. Wonder how Bitcoin will behave when traders treat it like silver and gold, dumping hundreds of contracts in seconds?

That said, I'm going to start using the CBOE Bitcoin futures closes, because doesn't really offer a definitive close. On Coin desk right now Bitcoin stands at $16,681.58, up 12.27% or $1,844.63. Futures spot month closed at $17,150.11, up 998.82 from when trading started at 11:30 last night. Two month futures were trading at a whopping 11% premium to spot, 3 month futures at 12%.

Get ready for a roller coaster ride.

US dollar index pushed & shoved, but couldn't burst through resistance at 94 today. Ended up late in the day down three basis points (0.03%) at 93.84. Chart's right here, Today doesn't dispose of the question, "Will the dollar index rally more?" It's above the 20 & 50 DMAs, and 'tain't unusual for a market to make more than one try at tough resistance. Jury's still out.

Euro ended at $1.1812, down 0.2% & looking peaked. Yen lost 0.08% to 88.06.

By the way, let this chart twist your mind into knots, Red & black line is the Japanese yen, green line is gold. Notice any correlation? Yep, since end of 2015 they've stuck to each other like two teenagers slow-dancing. Not sure the cause, but all the same the relation plainly exists.

Stocks rose again today. Dow Industrials ended at 24,386.03, up 56.87 or 0.23%. S&P500 did a little better, closing 2,659.99 on an 8.49 rise (+0.32%). Santa Claus is in charge -- or the Easter Bunny or Hanukah Armadillo or Bigfoot, I don't know.

Twas another weepy day for silver & gold, not tragic, just dull & uninteresting. Gold lost $1.50 on Comex and closed at $1,243.70. Silver shed another 3.9¢ to 1569.7¢. Silver volume is drying up.

Silver chart is right here, Notice how volume is drying up as price falls, suggesting the move has about ended. Look at the oversold RSI above. Hasn't turned around, but momentum has braked.

Gold chart isn't as oversold, but looks much the same with dwindling volume.

From all this we might begin to make some guesses except on 13 & 14 December the Federal Reserve will meet and probably raise its discount rate. This will likely prompt speculators too play with gold, expecting a higher interest rate will drive down the price. You know, governments and their minions like the Fed are like cockroaches: it's not so much what they steal and carry off as it is what they fall into and foul up. Sure do leave a bad taste in your mouth.

On 11 December 1901 Marconi sent the first transatlantic radio signal from Cornwall in England to Newfoundland. What was the message? "Buy Bitcoin!"

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
11-Dec-17 Price Change % Change
Gold, $/oz 1,243.70 -1.50 -0.12%
Silver, $/oz 15.70 -0.04 -0.25%
Gold/Silver Ratio 79.232 0.101 0.13%
Silver/Gold Ratio 0.0126 -0.0000 -0.13%
Platinum 891.90 9.10 1.03%
Palladium 1,012.10 2.35 0.23%
S&P 500 2,659.99 8.49 0.32%
Dow 24,386.03 56.87 0.23%
Dow in GOLD $s 405.33 1.43 0.35%
Dow in GOLD oz 19.61 0.07 0.35%
Dow in SILVER oz 1,553.55 7.46 0.48%
US Dollar Index 93.84 -0.03 -0.03%
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: 1,240.40      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,265.21 1,281.95 1,281.95
1/2 AE 0.50 632.09 654.31 1,308.62
1/4 AE 0.25 319.15 333.36 1,333.43
1/10 AE 0.10 130.14 135.82 1,358.24
Aust. 100 corona 0.98 1,203.68 1,215.84 1,240.40
British sovereign 0.24 294.18 307.18 1,304.93
French 20 franc 0.19 229.27 233.27 1,249.42
Krugerrand 1.00 1,244.12 1,254.12 1,254.12
Maple Leaf 1.00 1,248.40 1,264.40 1,264.40
1/2 Maple Leaf 0.50 713.23 651.21 1,302.42
1/4 Maple Leaf 0.25 316.30 331.81 1,327.23
1/10 Maple Leaf 0.10 131.48 135.20 1,352.04
Mexican 50 peso 1.21 1,480.47 1,491.47 1,237.02
.9999 bar 1.00 1,244.74 1,252.40 1,252.40
SPOT SILVER: 15.63      
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 10,853.70 11,139.70 15.58
US 40% silver 1/2s 0.30 4,419.10 4,566.10 15.48
100 oz .999 bar 100.00 1,543.00 1,578.00 15.78
10 oz .999 bar 10.00 157.80 162.80 16.28
1 oz .999 round 1.00 15.43 16.03 16.03
Am Eagle, 200 oz Min 1.00 17.13 18.63 18.63
SPOT PLATINUM: 891.90      
Plat. Platypus 1.00 906.90 936.90 936.90
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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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