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Trading Thoughts - Gold and Sillver Bullish, Equities at risk on Yen Carry Trade unwinding

Commodities / Gold & Silver Apr 16, 2007 - 11:23 AM GMT

By: Ned_W_Schmidt


Last weekend we noted that the U.S. dollar had closed out that previous week at a new low, based on the Median U.S. Dollar Index. That weakness suggested that more weakness for the dollar would develop. Such was what happened this week as the dollar was sold against almost all other national monies. The latest valuations have the U.S. dollar closing at another new low on Friday. That condition makes the U.S. dollar over sold in the short-term, but continuing in a major bear market.

The strategic view that precious metals will do well is being confirmed.

Basic Trend: $Gold Up. Investors should focus on Buy signals. Strategy: Positive, per Investment Policy of Oct 2004 . Investment Policy: Act on buy signals. Hold long-term core position.

$Gold is over bought in both graphs. $Gold investors should just be watching this coming week. Your investment wisdom is being validated where it counts, in market prices.

The U.S. consumer price index(CPI) is scheduled for release on Monday. Odds favor a strong number, at least on the headline announcement. A strong reading on the U.S. CPI is likely to lead the Street to decrease the odds of the Federal Reserve lowering interest rates. That sort of reasoning could push the U.S. dollar higher from an over sold condition.

A dollar rally early in the week should take some of the froth off $Gold. That attitude should then start to fade during the week. Strong likelihood then of $Gold moving above $690 on Friday or the first part of the next week.

G-7 is meeting this weekend, and nothing is expected from it. Last we read not everyone will be there for the meeting. Above comments assume that nothing of importance is announced.

In short, just watch this week.

Basic Trend: $Silver: Up Investors should focus on Buy signals. Strategy: Positive, Per Investment Policy of October 2004 Investment Policy: Emphasize Buys

Silver continues over bought. That said, each run to a new rally high has been during an over bought condition. Silver continues to act if disconnected from economic or political events. A pause is possible this week in sympathy with what is expected in Gold. A move then to another high is then expected.

According to recent email a rather vocal analyst has published a report on 10-k for Silver ETF. 10-k is the annual filing with the SEC. Have not read the report as this analyst has already demonstrated his biases in previous writings. When one has an economic interest in a competing product, a fair and unbiased analysis is rarely produced. Owning physical metals is always superior to ALL electronic forms. However, physicals are not practical for many investors. Electronic ownership of Gold and Silver through ETFs remains superior to all other forms of electronic ownership.

Recommendations: Hold existing Gold and Silver positions for higher prices, and further profits! Add to positions on buy signals.

CN$Gold: CN$778.7 + 3.2 CN$Gold continues to be nervous about moving to new cycle high. Current price within 3% of that new high. Holding CN$Gold back this week was inordinate strength in CN$. That strength is not justified in long-term. With U.S. economy moving into recession, Canadian economy will shortly follow. Only part of Canada enjoys high oil and commodity prices. Given situation, Canadian investors should aggressively use all buy signals to add to Gold.

Recommendation: Use strength in CN$ and buy signals to add to holdings. CN$ long-term sell.

EU€Gold: €505.8 + 1.8 World again discovered the Euro this week. Strength in Euro was readily apparent. With the yen and Swiss franc being influenced by carry trade loans to buy risky assets, Euro is best choice. Would not be surprised if China was buying Euros. Less than 18 months till Israel & U.S. attack Iranian nuclear sites. Slightly more than 18 months till Iran assumes effective control of Iraq. Euros are nice, but Gold needs to be bought prior to 2008 U.S. presidential election.

EU€Gold Recommendation: EU€ investors can hold Gold for long-term. EU€ likely to appreciate against US$.

GBP £GOLD: £344.7 + 1.8 Will GB£Gold make a new high in next ten days? That GB£Gold continues just shy of high indicates that many investors are not being fooled by strength in sterling. Use all buy signals to increase Gold holdings.

Recommendation: GB£ now in long-term bear market. Add to Gold positions.

GDM: 1148.72, +29.21 or +2.6% Well, GDM is back again to 1150. Some weakness in Gold stocks is possible early in the week, assuming no substance to takeover rumors of last week. Then would expect the Gold stocks to gather energy later in week. GDM then likely to finally move decisively above the 1150 level. That will give strong encouragement to buyers. Those that have been shorting the stocks repeatedly at this level will be punished. Being short Gold stocks at this time is foolish. Since you already own your favorites, just watch the action this week.

PAPER ASSET GROUPIES: Takeover news again dominated the paper asset markets, with rumors on several companies going around. That talk emboldened the funds. Markets have tried to move into oversold condition but excessive optimism is still the norm. Fund managers have already put out of their mind what a yen rally did to the markets a few weeks ago. Japanese yen remains a major threat to the paper asset markets. A rally in the Japanese yen would force massive selling of paper equities to cover yen loans. While the past couple weeks have given investors encouragement, participation in the paper equity markets is not wise.

Agri-Food Value View: The inaugural issue of The Agri-Food Value View became available last week. As the economic dynamic in Asia, China in particular, has altered the economics of the metal markets so has it changed the dynamics of agriculture and food. With economic growth comes greater demand for higher quality agricultural products. That shift combined with the demand for renewable energy is converting agriculture into a growth industry. If China is going to buy a lot of Gold in the future then imagine how much corn and other agricultural products they will buy. To get the introductory issue of The Agri-Food Value View simply send an email to

Your Eternal Optimist;

By Ned W Schimdt

Copyright © 2007 Ned W. Schmidt - All Rights Reserved
Ned W. Schmidt,CFA,CEBS is publisher of THE VALUE VIEW GOLD REPORT and author of "$1,265 GOLD" , published in 2003. A weekly message, TRADING THOUGHTS , is also available to electronic subscribers. You can obtain a copy of the last issue of THE VALUE VIEW GOLD REPORT at Ned welcomes your comments and questions, and tries to answer most all. His mission in life is to rescue investors from the abyss of financial assets and the coming collapse of the U.S. dollar. He can be contacted at

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


20 Jul 08, 02:55
gold forecasts

pls email us ur gold forecasts.thank you

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