http://stockcharts.com/def/servlet/SC.web?c=%24gold%3A%24xeu

http://stockcharts.com/def/servlet/SC.web?c=%24gold

Gold is now above both US $427 (200 DMA) and 350 Euros.

Check out my outlook given last November

http://goldinsider.com/outlook.htm

(under scenario)

The outlook will give you an idea of what I look for. $500 for sure but $800 breakout will depend on what happens when Greenie retires at year end.

Yes, I was a bit wrong with timing (better late than never!), but I believe the blow off phase for gold is now finally in motion, seeing dollar topping while gold on major supports.

Now it's safe to really step up in microcaps. If you follow those, undoubtedly you have your favorites. It doesn't really matter which ones you follow, they will all go bananas. If you don't follow microcaps, stick with what I outlined in the newsletter. STICK with gold and silver. That should narrow down your selections.

I have said 4% short rate as profit taking level. Sticking to that. One note on interest rate news came in from ft.com

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GLG Partners, Europe's largest hedge fund manager, has admitted that flaws in its trading models were partly to blame for a 14.5 per cent drop last month in the value of its Credit Fund.

In particular, it has acknowledged that the mathematical model it used to price complex credit derivative products failed to foresee market swings after last month's ratings downgrades of General Motors and Ford.

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Just how much did GLG lose? Considering Morgan Stanley (involved in the credit swap market) fired chief executive Purcell, I’d say the loss was probably A LOT.

Hedge funds are beginning to get shaken at only 3% short rate, At 6%, GM and GE will need to fork out $10billion more per year for interest payments. sky would fall off. And 6% is not even enough to reign in commodity prices and inflation. Folks, we are in interesting times…

Lastly I want to caution again, this last gold leg will last around 12 months, max. Be prepared and don't get caught up. All commodities are due for a hard breather, just not now yet.

John Lee
john@losb.net
www.maucapital.com

14 June 2005