Investing in paper equities has apparently become far easier. Either a stock will be taken private by a speculative investment fund or it will be purchased with money from China's foreign currency reserves. Investment gains have rarely been so assured. Not since internet stock bubble or Florida condo mania have investors faced such odds of winning. Combine those odds with a Federal Reserve dwelling in the la la land of core inflation creates a near perfect story for placing wealth into paper equities. How can it go wrong this time? Were not the talking heads right on internet stocks? Were they not right on Florida condos? Investing at the tail end of a mania is not wise. More wisely would be investing one's wealth in Gold and Silver markets, which are as we write trading at over sold conditions not seen in a year.
U.S. dollar, as even a dead cat bounces, has rallied modestly off the recent cycle low. That move has returned the oscillator to an over bought condition seen twice before in the above graph. Each time, the U.S. dollar has moved lower. Breaking to a new low on the dollar could very well be the match to the fuse for Gold and Silver. Additionally, recent rally of dollar had some non normal characteristics. The Japanese yen and the Swiss franc stood out with their negative trends versus the dollar. Values of these two national monies are being distorted by carry trade loans. When, not if, these loans are reversed, another leg down will unfold for the U.S. dollar. That means your wealth will buy less. Now, not tomorrow, is the time to start protecting what your wealth will buy by investing in Gold!
GOLD THOUGHTS are 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. June issue of The Agri-Food Value View, an exploration of unfolding agriculture and food investment super cycle, will be available next week. To receive a copy, write email@example.com.