|Gold Price, $/oz.||1,056.20||1,084.50||28.30||2.7|
|Silver Price, $/oz.||14.008||14.505||0.497||3.5|
|Dow in Gold $ (DIG$)||348.35||340.20||-8.15||-2.3|
|Dow in gold ounces||16.85||16.46||-0.39||-2.3|
|Dow in Silver ounces||1,270.59||1,230.45||-40.15||-3.2|
|US dollar index||100.07||98.35||-1.72||-1.7|
|3 Day Gold Price Chart|
|30 Day Gold Price Chart|
|5 Year Gold Price Chart|
|3 Day Silver Price Chart|
|30 Day Silver Price Chart|
|5 Year Silver Price Chart|
The GOLD PRICE jumped $22.80 or 2.1% to $1,084.50 on Comex. SILVER soared 3.2% or 45.2 cents to $14.505. My tripwires for a metals' rally were $14.40 silver and $1080 gold price. Both tripped those wires and then some. Gold's close at $1,084.50 took it comfortably above its 20 DMA at $1,075. Silver's 20 DMA stands at $14.23, so a $14.505 close effortlessly left that behind. GOLD/SILVER RATIO fell today to 74.767, positive for a rally. Sliced through its 50 DMA (74.59) and 200 DMA (74.05), but didn't close down there. That's okay, it will come back down. Loaf has been sliced already.
Any gold strength elsewhere? Gold stock indices jumped like they hit a 440 volt line: HUI up 6.23%, GDX up 5.3%, and XAU up 5.9%. Gold/Bank Stock index spread (confidence in gold vs confidence in the financial system) appears to have double bottomed, July and end-November, and turned up.
Wow, it was a wild week. ECB head Mario Draghi threw markets into consternation when he announced the ECB would not be disemboweling the euro as quickly as they expected. Since every trader in the world was short euros and long dollars, they panicked, sending the euro soaring and the dollar tanking, down a massive 2.4%. Stocks plummeted but silver and gold prices moved little. Today markets remembered that gold and silver existed, and they jumped. Platinum and Palladium confirmed.
First, a footnote. I apologize, my explanation yesterday of why higher interest rates mean lower stock prices was neither clear nor exact. Let me explain it this way.
Suppose a bond pays $110 in one year. Never mind what the original buyer pays for it, the secondary market where you go to sell the bond will value the bond not by the rate it pays on its face, but by the future amount it will pay DISCOUNTED by the CURRENT interest rate.
So if you buy a bond in the secondary market when the prevailing interest rate is 10%, and the next day the interest rate rises to 12%, your bond is worth less.
For instance, a bond that pays $110 in one year, discounted at 10%, is worth $100.00 today in the secondary market. That same bond discounted at 20% is worth $91.67 today.
Stocks are simply securities like a bond, and in the secondary market their value is discounted by the prevailing interest rate. Like a bond's value, a stock's value, other things being equal, will drop when interest rates rise.
Or, in the shortest form, "Interest rate goes up, bond price goes down; bond price goes up, interest rate goes down. Stocks, too."
Never mind all that, no logic lives in stock market heads today. They've lived so long under the threat of the Fed raising rates they can't think of ought else. The LGER (Lying Government Employment Report) came out with more jobs created than expected (they're hiring at McDonald's and Walmart) and that sent stock buyers into a buying frenzy. Dow rose 369.96 (2.12%) to 17,847.63 -- not quite as high as its 4 December close. S&P500 leapt 42.07 (2.05%) to 2,091.69.
|Dow in Gold|
|Dow in Silver|
Now y'all ponder a moment: when everybody was on the same side of the short euros/long dollars trade and the ECB disappointed them, chaos erupted. Now markets show an 80% expectation that the Fed will raise rates on 16 December, so they're all long stocks.
But so what? What can a 1/4 of 1% rise mean? Nothing good, so why should anyone expect stocks to rise from a raise? Rather, this will be a classic instance of "buy the rumor, sell the news," even IF the Fed doesn't disappoint. What would happen if the Fed flinches? I leave that to y'all's imagination.
Whether the 2.4% fall yesterday broke the dollar rally's back or not remains to be seen, but the suspicion of that diagnosis will linger until the dollar climbs over 100.70. Interesting will be what it does when it reaches the 200 day moving average at 96.72, and whether holds or falls through.
Today the dollar recaptured some of yesterday's 239 basis point loss by rising 71 bps (0.73%) to 98.35. This says nothing, nor shows e'er a sign of recovery. Dollar would have to exceed its 20 DMA, now at 99.39, to show any optimism.
Euro gave back 0.58$% today to close at $1.0874. Needs to close above that 200 DMA ($1.1043) to confirm reversal. Yen closed down 0.45% at 81.21. No trend reversal upward yet.
Y'all enjoy your weekend.
Aurum et argentum comparenda sunt -- -- Gold and silver must be bought.
- Franklin Sanders, The Moneychanger
© 2015, The Moneychanger. May not be republished in any form, including electronically, without our express permission. 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 is up targeting 16:1 gold/silver ratio or $195.66; stocks' primary trend is down, targeting Dow under 2,900 and worth only one ounce of gold or 18 ounces of silver. or 18 ounces of silver. US $ and US$-denominated assets, primary trend down; real estate bubble has burst, primary trend down.
WARNING AND DISCLAIMER. 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 one 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.
One final warning: NEVER insert a 747 Jumbo Jet up your nose.