May 29, 2006

The following are the Gold and Dollar excerpts from the May 29, 2006 issue of the Sid Klein Comment (SKC), which is available in its entirety via www.sidklein.com. The full SKC report is uploaded on a six-month lag. This excerpt for Gold-Eagle has been published on June 20, 2006.

PRECIOUS METALS & DOLLAR:

From last month's May 7, 2006 report:

"In Elliott wave terms, insofar as technical analysis is concerned, a wave 5 of 3 is completing in the $14 - $15 area, which should precede a consolidation above $12, and an ensuing wave 5 advance to complete this particular intermediate term move. While silver entries have to-date been timed with gold, SKC's approach may change, as the silver chart is providing cleaner and perhaps less manipulated trading patterns. SKC's view that $850 gold was possible this year flew in the face of the bulls' own expectations, as a breakout into an accelerating wave 3 pattern went unrecognized. $850 is where bullishness will finally note that this isn't just a Dollar debasement, but a move that echoes concerns about all-time highs and an imminent $1000/ounce price. We'll see if I consider another intermediate term call for un-invested investors or short term traders, but fully invested SKC readers will be reminded that this wave 3 is within a larger wave 1. Therefore, $2000/ouce is a more reasonable wave three target for this cycle in 2007."

Silver has behaved exactly as described above. Silver advanced to just over $15, completing wave 5 of 3, before retreating to $12. Perfection. Meanwhile, gold, after busting through $700, violently retreated almost $100 per ounce. Assuming that I'm still exact about silver and that that is providing a "cleaner chart" (pattern) by which to measure gold, this would mean that gold will advance toward the highs, before completing its intermediate term peak (wave 5 of 5 for this move). Against this background, look for silver to re-test the $15 area, before again correcting toward $12.

Regarding the precious metal stocks, their violent retreats forewarn of a key intermediate term peak, so, as per above, I am indeed calling for a tradable top, for non-core positions. Remember, 50% of one's entire wealth should be in gold (or 40% gold and 10% silver). Therefore, when there is a tradable level such as this, one can remove half of the precious metal holdings in favour of the Yen.

The stock decline forewarns of a stock market debacle, during which all stock groups are in peril. The gold and silver stocks should not confirm any final highs (or re-tests of the peak areas) in the metals.

Also from last month's May 7, 2006 report:

"The Yen is the best fiat currency in the world and it is signaling huge potential for domestic Japanese stocks. It also confirms a developing Nikkei peak, which will cause large-cap exporters to yield to domestic economy and investment plays."

The Japan section above underscores the reasons for the Yen's low and the underpinnings for its strength as the world's best fiat currency.

CONCLUSION:

Sell gold and silver into cyclical highs, above their respective recent peaks (see third paragraph above). While $600 was a third achieved target point and so a possible short term stop with a potential 6% pullback, this coming peak is of greater significance. Therefore, this time, I recommend partial trading. If the run-ups don't come, then simply stay long. As it is, any selling must come from the trading position of one's holdings. From a long term perspective, the metals comprise 50% of one's entire asset allocation. We've had nothing to do with bonds for a very long time.

The Dollar has peaked, as described above and, as forecast, has completed its lower high, having turned convincingly. These short term pullbacks in the Yen, Euro, and Swiss Franc are just that.

Sid Klein

LEGAL NOTICE: On this 20th day of June 2006, Mr. Sidney Klein has donated this market letter to the public domain.

DISCLAIMER: This market letter is intended to assist in the dissemination of information to private subscribers. The information contained herein represents Mr. Klein's best efforts in good faith to advance knowledge to his clientele, but there can be no implied guarantee as to its accuracy or completeness. The information is given as of the date appearing on this market letter, and Mr. Klein assumes no obligation to update the information or advise on further developments relating to the information provided herein. No solicitation to buy or sell securities is intended, and none should be inferred. Investments are inherently risky, but investment risk itself is a function of individual preferences. Thus any opinions, recommendations, or judgments expressed in this market letter are of necessity abstract and general. They must be modified, accepted, or rejected by individual subscriber/investors whose risk averseness cannot be known to Mr. Klein.