Let's see if we can sort this out. Bank One invests client money in leveraged CDO fund managed by Bank Two. Bank One lends money to leveraged fund. Leveraged fund collapses to "negligible value" under Bank Two's expertise with CDOs. Clients of Bank One lose their money. But, loans from Bank One to leveraged fund are repaid. Bank One considering suit against Bank Two over leveraged fund's collapse. Bank One gets loans repaid. Clients of Bank One get interest in lawsuit against Bank Two. Those appear to be the facts. Is that way it is supposed to work? Nice to know that Gold never declines to a "negligible value." Only paper asset fantasies of the Street seem to go to zero.
Global investors took one look at unraveling of U.S. debt delusion, and took their toys home. The U.S. dollar plummeted to new lows versus most major national monies. That selling has dollar now over sold and due for a rally against some, with perhaps exception of yen. $Gold has rallied, and is over bought. $690 may scare off some buyers in short-term due to over bought condition. Any retracement from these levels should be used to add to positions as move above $700 is likely on next push upward. Solid red line in chart is Gold price, in ounces on right axis, of U.S.$. One(1) divided by dollar price of Gold provides that value. Divergence between two lines suggests $Gold continues undervalued relative to values in currency market. Price above $700 continues to be justified by dollar's fundamentals and relative value of currencies. That price is likely to become the new floor for $Gold.
GOLD THOUGHTS are from Ned W. Schmidt,CFA,CEBS, publisher of The Value View Gold Report, monthly, and Trading Thoughts, weekly. For a subscription go to http://home.att.net/~nwschmidt/Order_Gold_EMonthlyTT.html. Ned will be exploring the Gold Super Cycle at The Wealth Expo in NYC, 19-21 October. For information go to www.wealthexpo.net. To receive copy of July issue of The Agri-Food Value View, an exploration of Agri-Food Super Cycle. write firstname.lastname@example.org.