U.S. trade deficit on goods and services for last month was reported as $59 billion. For another month $59+ billion of green paper was exported by the U.S. During same period central banks reduced their holdings of U.S. debt by $30+ billion. Those values, when taken together, mean that around the world $90 billion of green paper was sold, or not not bought, by central banks. Little wonder U.S. dollar has rediscovered downward path and Gold has risen. Just as business media was proclaiming Gold an unwise investment, the price rose to above US$700. Any interest rate cut in the U.S. will only add encouragement to dollar's demise, and initiate next wave in Gold Super Cycle.
Fundamentals aside, investors are fixated on 18 September when U.S. FOMC is expected to bail out collapsing mortgage brokers, bleeding investment bankers, and poorly managed hedge funds. Entire business media, all small children in Nepal, and every goat farmer around the world now expects an interest rate cut. Discussion has shifted to how big will be rate cut. Unfortunately, Greenspan is no longer in charge. Mandate of Federal Reserve does not include saving poorly chosen investments. Enthusiasm now at such a level only disappointment seems possible. We enjoy $Gold being over $700, but must acknowledge over bought condition and possibility of "selling on the news" arising from FOMC meeting. Investors should be accumulating cash from sale of paper assets in order to take advantage of next period of price weakness in Gold which produces buying conditions.
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.