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THE VALUE VIEW GOLD REPORT
Ned W. Schmidt,CFA,CEBS
Friday caused a serious case of reality to break out on Wall Street . For some time, a consensus had been reached that interest rates in the U.S. would be raised one more time. Then, interest rates would be going down. A kind of "Goldilocks" interest rate forecast came to be widely accepted. No real reason existed for this simplistic
forecast other than it rationalized the
prevalent investment thinking. Markets
need to go up to justify investment
management fees so the strategists
develop out looks that support that
market view.
U.S. employment report, released Friday,
stronger than many expected. Realization
that the consensus interest rate forecast
was in error spread rapidly. The long-term
Treasury bond went over 5%, and
the markets corrected. Interest rates, to
date, have not had the normal influence
on financial markets, and some of that
non normal activity has spread to the
metals. In the monthly, we will explore
this strange behavior in depth.
Basic Trend: $Gold Up . Investors
should focus on Buy signals. Strategy:
Positive, per Investment Policy of Oct
2004. In vestment Policy: Looking for
buy signals, and holding long-term core
position.
Gold pleased al l by moving to a new high
last week. That action certainly brought
smiles to many. Some reaction did occur
on the shift in interest rate expectations.
Buyers did move in after the break, giving
$Gold a net gain for the week. New highs
for Gold in other national monies
certainly supported this view.
One question dominates. Will investor
demand absorb any retrenchment on part
of hedge funds ? A move to below $520
would be a normal retracement, if one
should develop. Investors would be
stimulated by such a move. A continuing
pattern of new highs followed by
retracements is likely. Such is way markets
move. T his week? Probably flat to down,
barring surprise in FOREX market. One is
lurking there! Watch Chinese renminbi for
break below 8 to US$.
Basic Trend: $Silver: Up Investors
should focus on Buy signals. Strategy:
Positive, Per Investment Policy of
October 2004 Investment Policy:
Emphasize Buy:
Silver has been living on borrowed time
for weeks. The market got to over $12
this week, making smiles the dominant
facial characteristic of Silver investors.
However, the overextended nature of this
parabolic move should not be ignored. If
financial market s extend Friday's reaction
into next week, Silver is vulnerable. Lower
stock prices would mean hedge funds will
need to rebalance their overall risk
exposure. Selling Silver could be part of
that rebalancing of risk exposure.
Downside risk on Silver is $9.35, within a
longer term bull market. Hold, but have
antacids handy.
Recommendations:
Hold existing Gold and Silver positions for higher prices, and further profits!
CN$Gold: CN $Gold led the overall
Gold market to higher ground. We
noted that leading indication a couple
of weeks ago. CN$Gold leading on the
downside this past week was only,
therefore, normal . The short-term
indicator is moving down. CN$ Gold
likely to mark time, erode slightly over
coming weeks into another buy signal.
S ee comments on Canadian housing
prices on last page.
CN$Gold Recommendation: CN$
investors should be holding Gold.
Accumulate cash for next buy signal.
CN$ long-term sell.
 EUiGold: EUi Gold seems to be a
good indicator of underlying global
investment demand. Euro traded as
high as $1.23 this past week, which
should have pushed the price of Gold
lower, and it did for a couple of days.
Then the metal's price carried back up.
Only the existence of an underlying
desire to buy Gold by investors globally
could create this action. I may
weaken in coming weeks on changing
U.S. interest rate expectations. That
situation could create an opportunity
for Euro investors. Gold investors
should be preparing cash for next buy
signal.
EUiGold Recommendation: EUi
investors can hold Gold for long-term. EUi likely to appreciate against US$.
AMEX GOLD MINERS INDEX (GDM) = 1087.75
+36.21 or + 3.4%
GDM index finally gave us new highs this
week. Rather than being a leading
indicator, the stocks have been a lagging
indicator. CN $Gold was the better
predictor this time. Silver, in my opinion,
continues to draw money that might have
been drawn to mining stocks. Silver is
likely to crack by 20-30% after Silver
ETF arrives. Mining stocks should move
in sympathy with that action. Afterwards,
mining stocks should again be attractive to
traders that exited Silver.
Received email from Canadian reader with
question s o n Canadian housing.
Vulnerable? What should he do? Canadian
economy and housing have a higher
" bet a" to that of the U.S. Both Canadian
economy and housing prices are vulnerable
to developments in U.S. Canadian interest
rates are not set in isolation, but in
relation to those in U.S. If you own an
average house in an average neighborhood
in Canada or U.S., your vulnerability is
lowest. If you bought a spec or vacation
condo in any hot markets, say Florida, all
you have done is create future capital
losses . If you have not leveraged
phantom price appreciation by borrowing
m o n e y on inflated value, your
vulnerability is lowest . Do? Your cash
flow should be toward Gold, and away from
financial assets. Balance your risk by
offsetting risk in housing with potential in
Gold. More on this in monthly.
Ned W. Schmidt, CFA,CEBS
Click to email me: nwschmidt@earthlink.net
April 9, 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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