Trading Thoughts

By: Ned W. Schmidt | Sun, Dec 10, 2006
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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.

Two views on the economic prospects for the world exist. One of those is in New York. Group think has taken control there as hedge funds have come to dominate trading. Financial transactions are now about all the U.S. economy produces. Employment in the U.S. financial service industries is now the highest percentage of the work force in recorded history. And all that activity is built on financial leverage. Never again will real work be required of U.S. workers. Taking companies private and then reselling them to the gullible public later will create an endless stream of income and wealth.

While that is the view of the Street, the rest of the world has another view. When markets around the world are open, the rest of the world sells dollars and Gold rises. When trading is dominated by New York activity, the dollar is strong and Gold is weak. Which view will reign supreme, that of the debtor or that of the creditor?

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 hold long-term core position.

On Thursday $Gold generated a shortterm Buy signal as price moved toward $626. That sell off, triggered by the children managing money in New York, lasted only a few short hours. $Gold bottomed, and then move toward $640. A small sell off was attempted on Friday morning, but it lasted only a short time.

Friday afternoon trading becomes dominated by New York, with rest of world essentially gone for weekend. Word spread that Japan might not raise interest rates, a serious worry to hedge funds that have borrowed up to their eyeballs from Japanese banks to buy U.S. stocks and bonds. That happy note brought life back to equity markets and selling into Gold market. Friday's late selling in New York pushed Gold back down. At these prices, short-term indicator may give another buy on Wednesday and intermediate indicator will likely give a buy signal end of next week or beginning of the following week. Current price should be used to add to Gold holdings.

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

We added the next sheet of graph paper to the short-term chart at the top. That act has bullish connotations for the future. With Silver trading within striking distance of a new cycle high, optimism is high. That said, emotions may be running too strong. Silver has put in almost a ruler straight advance. Some of those emotions have started to cooled in the past week, as can be seen in the short-term oscillator. At this point, two paths are equally likely. First, Silver advances to a new cycle high and then corrects. Second, Silver does a rolling correction which builds the energy for a new cycle high later. Silver makes a new cycle high either in December or in January.

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

TRADING THOUGHTS is published 45 times per year, and distributed by e-mail. Email subscribers to THE VALUE VIEW GOLD REPORT receive TRADING THOUGHTS as part of a $99 e-mail package subscription to THE VALUE VIEW GOLD REPORT. TRADING THOUGHT is not available by regular mail. To receive TRADING THOUGHTS along with THE VALUE VIEW GOLD REPORT click on a link below or send your check or credit card information to: Schmidt Management Company, PO Box 846, Boca Raton FL 33429. Fax orders can be sent to 215-243-7161. Our phone number to place an order is 561-447- 0874. Under no circumstance will subscriptions be cancelled or refunds issued after the receipt of your first issue. To subscribe to THE VALUE VIEW GOLD REPORT, click on this link:

CN$Gold: CN$720.3 -18.3
CN$Gold has been rapidly burning off the over bought condition that had previously existed for several weeks. Short-term oscillator now moving toward over sold territory. A short-term buy signal is likely to develop in next week or so if prices remain in this area. Canadian investors can add to positions at prices below CN$720.

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

EU€Gold: €474.8 - 7.3
EU €Gold gave a short-term buy signal last week, as we reported to you in a brief email. The intermediate term indicator is rapidly moving toward over sold. EU investors should use this weakness in €Gold to add to positions. Prices below €475 are attractive. Next move from over sold territory should carry through €500 level. That will generate further optimism on Gold, and is a level all Gold investors should watch.

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

GBP £GOLD: £320.8 - 4.9
GP£Gold also gave a short-term buy signal last week. Intermediate indicator rapidly moving to over sold measure. GP£Gold investors should be adding to positions at these prices. When British pound is talked about as moving above $2.00, optimism is too high. Such talk and levels should be used to buy Gold.

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

THE VALUE VIEW GOLD REPORT is published monthly, about the 19th. To obtain a copy of the last issue, July, use the following link.

GDM: 1097.46, -29.36 or -2.6%
Gold stocks, as a group, made another attempt at breaking out. However, GDM was again stopped by 1150 level. Little reason seems to exist for stocks to sell off as Gold and Silver seem to have only limited downside risk as this time. Perhaps stocks just need to catch their breath in order to move higher. Oscillator is over bought at current levels. A rolling correction would seem likely that causes oscillator to decline to a more emotionally stable level. That would set up GDM to move through 1150, causing a lot of stocks to pop nicely.

PAPER ASSET GROUPIES: Hard to imagine that optimism on paper assets could get much higher. Each day seems to bring another leveraged buy out or merger. Not since December of 1999, has the market been this emotionally over bought.

What many investors do not realize or appreciate is how much of the current level of the paper market is due to borrowed money. Hedge funds are borrowing about $10-12 for every $1 of equity. Those borrowed funds have flowed into stock and bond markets. Bond market yields could not be this low without money borrowed from foreign sources. Stock prices could not be this high without those borrowed monies. Speculating with credit cards does not seem like a foundation for markets that can persist.

PUBLICATION SCHEDULE: The holidays are rapidly approaching. We will publish on schedule next Saturday. The 22nd we plan on sending out last letter of year. We will then publish on about January 3rd. Then back on the Saturday schedule on January 13. Plan on just relaxing on New Year's weekend. This old dog's party days are past.

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

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