The Moneychanger
Weekly Commentary
Friday, 5 January a.d. 2018 Browse the commentary archive
Here's the weekly scorecard:
  29-Dec-17 5-Jan-18 Change % Change
Silver, cents/oz. 1,706.00 1,720.50 14.50 0.8
Gold, dollars/oz. 1,306.30 1,320.30 14.00 1.1
Gold/silver ratio 76.571 76.739 0.168 0.2
Silver/gold ratio 0.0131 0.0130 -0.0000 -0.2
Dow in Gold Dollars (DIG$) 391.17 396.06 4.88 1.2
Dow in gold ounces 18.92 19.16 0.24 1.2
Dow in Silver ounces 1,448.96 1,470.26 21.30 1.5
Dow Industrials 24,719.22 25,295.87 576.65 2.3
S&P500 2,673.61 2,733.52 59.91 2.2
US dollar index 91.98 91.72 -0.26 -0.3
Platinum 934.20 971.20 37.00 4.0
Palladium 1,073.75 1,084.85 11.10 1.0

Wow. Here is the single best explanation of Bitcoin I've seen, by J.P. Sears of Ultra Spiritual life. Go watch this, VERY spiritual.

This weird week has readers calling me wanting to know how stocks AND gold can climb at the same time. Stocks burst upward 2+% but gold added 1.1% & silver 0.8%. US dollar index is poisoned dog sick. Platinum is starting to recover, up 4% this week & palladium is still strong as a garlic milkshake.

Let's start with the S&P500 chart, Apparently I have been my usual wishy-washy, mealy-mouthed self and have not made perfectly clear that STOCKS ARE IN A BUBBLE, a bubble floating on a sea, yea, upon seven seas of central bank money gushing out since 2008. That, and low interest rates and "financial engineering" like debt financed stock buybacks are the sort of trifling finagling that have driven stocks higher. This bubble will pop, maybe this month but surely before the first quarter of 2018 grows cold.

Now why do you say that, nat'ral born durn fool from Tennessee? Behold the fatal rising wedge since early 2016. Behold, the exuberance waxed so irrational that the S&P500 threwover the upper wedge boundary, the final hyperdrive burst into oblivion. This exuberance comes in the teeth of a very old stock market bull and a Republican tax cut that will bloat the federal deficit by a couple gadzillion bucks. Never mind, it's okay, the corporations will fatten.

So why are stocks and gold rising at the same time? Because those folks I call Realizers because they realize what's happening, see the stock bubble drawing near its pop while they also recognize that gold is severely overbought -- and that it is the only haven of safety when bubbles bust. But I could be wrong, I'm jes' a nat'ral born durn fool anyway.

But I don't fergit easy. Back in January 2000 when the Dow topped gold was rising, and as the Dow really sank in February gold rallied strongly. Recall that the Dow topped January 14 but the S&P500 & others never topped till March 23. Now gold did not rise that entire January-March stretch, but the underlying conditions -- long-in-the-tooth stock bubble & severely undervalued gold -- were similar. As time explained, gold was beginning a new bull market and stocks were falling into a deep bear pit.

Today stock indices made new all time highs. Dow has passed 25,000 and rose 220.74 (0.88%) to 25,295.87. S&P500 climbed 9.53 (0.35%) to 2,733.52.

Dow in gold chart here strips out the noise and shows you how stocks & gold are reversing direction. Dow in gold DROPS when stocks lose value against gold. Pick out the important points: Peaked 12 December 2017 at 19.73, fell steadily, poked through the 20 day moving average, then through the rising uptrend line. Now it drew near the 50 DMA but will correct a bit before resuming its plunge.

US dollar index looks like somebody's been feeding it Round Up. Rose a puny 14 basis points (0.15%) today to 91.71. Chart shows the weakness, and how it broke through that shoulder line (arrow). You'd think that after plummeting so long it would rise a little while, but it just can't seem to pull itself up out of the gutter.

Don't y'all forget about those rising interest rates. Here's the 10 year T note yield, high and going higher. Here's what rising rates do to 30 year bonds' prices,

As interests rates rise, bond prices fall, but folks don't always recall that rising interest rates force the re-rating of ALL assets: bonds, stocks, real estate, you name it. Wherefore, rising interest rates promise bad things for stocks, which will also be re-priced according to higher interest rates.

Get out your jeweler's loupes: gold rose a microscopic 90¢ today to $1,320.30. Silver gained 1.6¢ to 1720.5¢.

This first thrust up off the 12 December bottom has gained briskly but has now slowed almost to a stop. Gold has gained $89 (7.2%) and silver 165¢ (10.5%). Both have risen four weeks running. Good start.

Look at gold's chart here, and pay attention to the volume. See how it had been rising but has now slowed. RSI (above) is also overbought, and gold has again bumped into long-standing resistance about $1,325. It's time for a recess to digest these gains.

Silver's chart here shows the RSI entering overbought territory and volume peaking and tapering the last few days. Also a candidate for a correction.

However, don't underestimate them. If they can push through resistance at 1725¢ and $1,325 then they'll take off on a mad dog run. You'll know they've said no to a correction if they close smartly ABOVE that resistance. Otherwise they will correct a few days, and I do mean "a few." Here's a place I feel safe saying, "Buy the dips."

I feel compelled to tell the sequel to that Susan story from last week for it contained an epiphany for me. My parents came to stay with us that Christmas, and little Zachariah looked just as tan and healthy as if he had been vacationing in the Bahamas. Tan? Wait a minute, newborns aren't supposed to be tan! Right -- he was jaundiced, and had to go to the hospital to soak under a blue light to break down the bilirubin.

Off Susan goes to the hospital with Zachariah, leaving me with six children and my parents. Enter the stomach bug, brought home by some child. That first night Susan was in the hospital, my mother woke me up in the middle of the night croaking my father's name over and over: "Frank. Frank. Frank." Although he was sleeping in bed next to her, he couldn't hear a box of hammers dropped on a tin roof. He slept soundly while she got sick. I rose to find out what was the matter and it was a mess. I spent some time cleaning her up and the bed. This was a stomach bug, by the way, that left you nearly delirious. As I remember, a couple of the children came down with it, too. Sleeping was out of the question.

By the next afternoon I was finally able to extricate myself and drive nearly an hour to LeBonheur Hospital in downtown Memphis. After a couple of hours there with Susan and the baby I began very suddenly to grow lightheaded and sick at my stomach. I had to leave to try to spare Susan and Zachariah, but am not to this day sure how I managed to drive home. That was probably a criminal act.

And what was the epiphany? I realized that there comes a time in our lives when we are a parent to our children AND a parent to our parents. More surprising still, I was glad to be there -- ready to love and serve both generations.

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
5-Jan-18 Price Change % Change
Gold, $/oz 1,320.30 0.90 0.1
Silver, $/oz 17.21 0.02 0.1
Gold/Silver Ratio 76.739 0.052 0.1
Silver/Gold Ratio 0.0130 0.0000 0.1
Platinum 971.20 5.10 0.5
Palladium 1,084.85 -12.55 -1.1
S&P 500 2,733.52 9.53 0.3
Dow 25,295.87 220.74 0.9
Dow in GOLD $s 396.05 3.23 0.8
Dow in GOLD oz 19.16 0.16 0.8
Dow in SILVER oz 1,470.26 11.47 0.8
US Dollar Index 91.72 0.14 0.2
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: 1,319.20      
GOLD Fine Tr.Oz. BID ASK $/oz
American Eagle 1.00 1,333.71 1,363.39 1,363.39
1/2 AE 0.50 672.28 695.88 1,391.76
1/4 AE 0.25 339.44 354.54 1,418.14
1/10 AE 0.10 138.41 144.45 1,444.52
Aust. 100 corona 0.98 1,280.15 1,293.08 1,319.20
British sovereign 0.24 312.87 325.87 1,384.32
French 20 franc 0.19 243.83 247.83 1,327.43
Krugerrand 1.00 1,327.12 1,337.12 1,337.12
Maple Leaf 1.00 1,327.20 1,343.20 1,343.20
1/2 Maple Leaf 0.50 758.54 692.58 1,385.16
1/4 Maple Leaf 0.25 336.40 352.89 1,411.54
1/10 Maple Leaf 0.10 139.84 143.79 1,437.93
Mexican 50 peso 1.21 1,578.50 1,589.50 1,318.32
.9999 bar 1.00 1,314.20 1,332.20 1,332.20
SPOT SILVER: 17.18      
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 11,851.13 12,137.13 16.98
US 40% silver 1/2s 0.30 4,874.88 5,021.88 17.02
100 oz .999 bar 100.00 1,697.50 1,732.50 17.33
10 oz .999 bar 10.00 173.25 178.25 17.83
1 oz .999 round 1.00 16.98 17.58 17.58
Am Eagle, 200 oz Min 1.00 18.43 19.18 19.18
SPOT PLATINUM: 971.20      
Platinum Platypus 1.00 986.20 1,016.20 1,016.20
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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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