Complacency over the demise of the U.S. dollar has allowed continued expansion of the yen and Swiss carry trade loans. Likewise, the imminent U.S. recession is being glossed over. This week the FOMC will confirm the ineptness of U.S. monetary policy by doing and saying either something or nothing, which may or may not be interpreted positively by some. With this background, speculative funds have pushed paper equities higher. In doing so multiple buying opportunities have been created in the Gold and Silver markets. In particular, the Gold stocks, as measured by the GDM, have moved to an over sold condition. As today's chart show, the GDM has given a buy signal on this over sold condition. With plenty of fuel, skepticism, GDM is likely to move higher. Rising above the previous high would suggest that the Gold stocks are predicting a new and exciting leg in the metals. Investors should have established their positions in the GDX, the ETF based on the GDM, or their favorite stocks.
Silver has followed the previously discussed short-term buy signal with an important intermediate buy signal this week. The last time Silver gave one of these signals it went on to add $1.50. Such a move, if repeated, would have seriously bullish ramifications for the price of Silver. Given the long time period that has elapsed since Silver's last exciting run, the potential buying power of investors not in Silver at the present is high. Investors would be well advised to look to also increasing their holdings of Silver at this time. For those new to Silver, SLV is perhaps best approach, and is the Silver ETF that trades on the Amex.
GOLD THOUGHTS come from Ned W. Schmidt,CFA,CEBS, publisher of The Value View Gold Report, monthly, and Trading Thoughts, weekly. To subscribe to these publications go to http://home.att.net/~nwschmidt/Order_Gold_EMonthlyTT.html. The May issue of The Agri-Food Value View, an exploration of unfolding agriculture and food investment super cycle, is now available.. To receive a copy, write firstname.lastname@example.org.