Trading Thoughts

By: Ned W. Schmidt | Sat, Sep 2, 2006
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from THE VALUE VIEW GOLD REPORT

TRADING THOUGHTS is about what the name in implies, is to promote timely and profitable trading of precious metals. We do not believe every turn in the market can be called. Our goal is that our recommendations should be profitable. These goals are not the same. Profits are the goal. Trades are not the goal. DO NOT EXPECT ALL RECOMMENDATIONS TO BE PROFITABLE. No system can achieve that lofty goal. TRADING THOUGHTS is not intended to be a lengthy news letter filled with witty comments. The goal is simply to state whether conditions in the precious metal's market are favorable or not. Traders are advised that unless they have exceptional experience not to trade against the basic trend. Trades against market trend not expected to be as productive as those with trend.

Gold = US$624.40 + 2.60 Silver = US$12.92 +0.59 Vol. 2008-32/136 2 SEP 2006

In a world before political correctness became the norm, we would have some great one liners right here. In southern Lebanon, the U.N. has put the French in charge and the Italians are to be the largest contingency. At the same time the Syrians are going to be disarming the terrorists. That is some great material.

Bears on the metals are starting to have a real problem as the metals will not go down. Every Street expert that I have heard in the business media says sell them and buy some paper asset. Silver and the GDM are both pointing to higher prices, and the Street still does not accept that reality.

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

A new feature has been added to the Gold and Silver charts to help use the buy signals. Generally speaking, the signals do not last long. But, if the price continues down after a buy signal that signal usually persists. In the charts we have added some symbols to indicate when the signal is continuing. Hopefully this will help some in their buying.

Tuesday and Wednesday were informative days. On Tuesday, NYC tried to sell Gold off on the FOMC minutes release, pushing it down to $609. However, the market came quickly back. On the next day Gold was up again. The media explanation was that money was moving to a "safe haven" due to Iranian deadline. However, the U.S. dollar was down sharply that day. What this really suggests is that fundamental buying exists. NYC can be bearish on Gold, but the rest of the world is not. Let the Street dance with Goldilocks. Use buy signals to add to positions. The bottom was in June.

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

The top chart on Silver tells the story. That structure is one of fundamental demand working prices cautiously higher. $12.50 was taken out so the bears have to make a stand between current prices and $13.25. This area may take some time, and short-term Silver is over bought. Those realizing that Silver is in a positive pattern will be buying on any price declines.

Nickel has demons t rated the fundamental difference between a real market and a paper market . Transactions in the futures markets do not create real assets. Paper assets and paper equities can be literally created out of thin air. Real assets can not be.

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

CN$Gold: CN$690.0 + 0.2 The CN$ has maintained its strength on the basis of primarily one set of buyers, Canadians. In earlier times, Canadians receiving U.S. dollars might have retained them. Now they seem to prefer the CN$. But, who else wants the CN$? When the housing collapse drags the U.S. into recession, will investors around the world flock to the CN$? Use strength in CN$ to diversify into Gold. Recommendation: Use strength in CN$ and buy signals to add to holdings. CN$ long-term sell.

EU€Gold: 486.6 +-0.80 Generally accepted among impartial observers is that the Euro should appreciate against the U.S.$ over time. That, however, is not the real issue. Will the Euro be stronger than Gold? The Middle East will continue to be important to the answer to that question. The goal is now to destabilize the Iranian government until regime change occurs. However that is done means oil is vulnerable, and therefore Europe is vulnerable. When everlasting joy and peace reign in the Middle East, EU investors will not need Gold. Until then, use signals to buy Gold. EU€Gold Recommendation: EU€ investors can hold Gold for long-term. EU€ likely to appreciate against US$.

GBP £GOLD: £327.8 - 1.8 Will the £ reach US$2? Some think it will. Always use bullish sentiment to take profits. While that positive attitude on the £ is prevalent, use it to switch from over priced pounds into under priced Gold on buy signals. Recommendation: Use strength in GB£ to add to Gold positions.

GDM: 1109.35, +24.15 or +2.2% That chart on the GDM does not look like a top. Bullishness is built on successful buying. When buyers are rewarded, bullishness increases. Look at that chart. Buyers have been rewarded. GDM eased itself above 1100 at the close on Friday. When traders go home for a three-day weekend, in the U.S., on a positive note the psychology is good for higher prices in the future.

Another big merger in the Gold industry announced this week. Gold companies want to be bigger. Sometimes that may not be good. What is the real message of these mergers? Is the real message that future production of Gold will require bigger companies with greater resources? If that is part of the motivation, then Gold prices and the stocks are likely to go higher.

PAPER ASSET GROUPIES: Paper assets have corrected a significant part of the over sold condition. An over bought condition is likely to be evident over the next two weeks. Too much optimism, and too much of a bet on what the Federal Reserve will do.

Your Eternal Optimist;

 


 

Author: Ned W. Schmidt

Ned W. Schmidt,CFA,CEBS
The Value View Gold Report

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 The Value View Gold Report. 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 ned@valueviewgoldreport.com

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