TRADING THOUGHTS
by
Ned W. Schmidt,CFA,CEBS
THE VALUE VIEW GOLD REPORT
TRADING THOUGHTS is about what the name in implies, is to promote timely a n d profitable trading of precious metals. We do not believe every turn in the market can be called. Our goal is that our recommendations should be profitable. These g o a l s a r e not the same. Profits are the goal. Trades are not the goal. DO NOT EXPECT ALL RECOMMENDATIONS TO BE PROFITABLE. No system can achieve that lofty goal. TRADING THOUGHTS is not intended to be a lengthy news letter filled with witty comments. The goal is simply to state whether conditions in the precious metal' s market are favorable or not. Traders are advised that unless they have exceptional experience not to trade against the basic trend. Trades against market trend not expected to be as productive as those with trend.
Guessing what the central banks were doing was the principal activity of market players this past week. So, as this is being written the television is turned to The Three Stooges. Kind of background material for writing about central bankers, in particular the Federal Reserve. To start, the Street has decided that the Federal Reserve will only raise rates twice more, and then begin to lower them. Suddenly, they are collectively capable of clear vi s ion out into the future.
That " group think" sent just about all markets up. The stock market in particular, soared on Tuesday. That thinking also helped Gold market, as implications of such a development are
extremely negative for the U.S. dollar. This " group think" is going to be a true disappointment, to be kind.
Over in China, the second central bank (PBofC) drove the dollar down and the Gold market up. Most important announcement of the week, and it got little media attention. Was small article on the last page of The Financial Times. The Chinese central bank allows the renminbi to appreciate
by 0.3% per day. Previously that measure was from the day before close. That policy has been changed. The measure is now from the consensus opening price. In short, that small change essentially means that the Chinese renmin b i i s near free floating, and free to appreciate.
Th e U.S. dollar, by this action, is now free to depreciate.
Basic Trend: $Gold: Up Investors should focus on Buy signals. Strategy: Positive, per Investment Policy of Oct 2004. Investment Policy: Looking for buy signals, and holding long-term core position.
Combined impact of " group think" on Federal Reserve and the PBofC's policy change made Gold shine. That dollar's bear market will continue has been confirmed. Gold shot to a new cycle high on high emotions. Gold is now well over bought. Gold investors are clearly in the right investment mode. Some weakness is likely this week as thinking cools. Markets tend to over shoot on news announcements , and then settle. In this case, the market bought on the news. Just watching is probably the best action.
Basic Trend: $Silver: Up Investors should focus on Buy signals. Strategy: Positive, Per Investment Policy of October 2004 Investment Policy: Emphasize Buys
Silver tried to follow Gold, but the primary action was in the Gold market . Silver's churning pattern is likely what we will see in Gold. Silver investors should remain patient. Both indicators
suggest Silver was trying to correct over bought condition. Any move to $8.25 would not be a concern, and set the stage for another buying opportunity.
$Gold & $Silver Recommendations: Hold existing Gold and Silver positions for higher prices, and further profits! Note that a positive announcement on Silver ETF would send Silver dramatically higher and that possibility is not included in above comments for we have no idea when that might happen.
Ned W. Schmidt, CFA,CEBS
Click to email me: nwschmidt@earthlink.net
January 8, 2006
Ned W. Schmidt,CFA,CEBS is publisher of THE VALUE VIEW GOLD REPORT. That report now
includes a weekly message, TRADING THOUGHTS, to help investors identify timely points for buying
Gold and Silver. You can join him for the Gold Super Cycle at
http://home.att.net/~nwschmidt/Order_Gold_EMonthlyTT.html His monumental report, "$1,265
GOLD", which has now been read in 12 countries, has 255 pages and 98 graphs, is available at
www.amazon.com or from the author. Ned welcomes your comments and questions. His mission in life is
to rescue investors from the abyss of financial assets and the coming collapse of the U.S. dollar. He can
be contacted at nwschmidt@earthlink.net.
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