Yes, the US dollar closed slightly higher, but intra-day it was lower by about 40 points, and only scrambled feebly back into the black.  There is so much talk in the mainstream media about a weakening dollar that at the very least a contrarian might be inclined to expect a corrective bounce in the greenback.  Considering gold is denominated in US dollars, with currencies such as the EC being able to purchase more gold, the gold market is benefiting from potentially increased demand.  Central bank sales from various countries are now old news, and many of the largest gold producers have unwound their hedges or aren’t planning on adding more.  Plus, with the war on terror ingredient in the recipe, with a lack of consumer confidence and investment alternatives, with rates near historic lows, it’s easy to see why gold has garnered newfound attention from investors.

Equities are reeling and rolling in a holding pattern and financials hit new highs again today.  Obviously the market is assuming that rates surely won’t move up anytime soon, and with mortgage rates near 40-year lows, perhaps the market is correct for now.  Energy prices have plummeted in the last month or so, but they are now nervously edging higher as terrorism fears and Mid East concerns escalate.  The Fed continues to fend off deflation by increasing liquidity and US officials don’t seem concerned about a falling dollar.

Economic stimulus in the form of tax relief is supposedly on the way via Washington, but I’m not too optimistic that the final iteration of reform will be substantial enough to have much of an impact in regards to short-term stimulus.  Certainly lower taxes in any form will be welcomed by us regular folks, but from what I’ve read they will be simply raising taxes or creating new ones in other arenas to “pay” for the cuts they make.  Brilliant!  Besides, if the government continues with pork barrel politics as usual, we’ll spend ourselves into oblivion and increase the burden on taxpayers even further!

Warren Buffet, America’s runner-up wealthiest man, and George Soros of Yen and British Pound fame have recently derided the concept of tax cuts to boost the economy.  On the other hand, they’re both billionaires, and besides there are many others who would argue otherwise.  Whatever the case, gold is moving in sympathy with the US dollar so pay attention to currencies!  The Fed is frightened of deflation and injecting liquidity into the economy, and if rates stay low or get lower, if the dollar drops more, and if equities meander, it’s highly probable that gold will stay in an uptrend.

We keep marching higher day after day, and as much as we’ve felt gold would go up, we didn’t anticipate it would do so with such authority in such short time.  Don’t try to guess the top, but certainly one should be aware that stochastics are WAY overbought and that a dip is imminent.  You might look to buy puts and subsequently buy futures on a dip.  There is a gap near 355, so any pullback should be expected to fill in that area.  If you are long from the $324 area as per TradeScope be sure you aren’t leaving yourself too vulnerable to a sporadic correction.  With futures and options one can just as easily go short or long, feel free to contact me to discuss trading strategies.  Each contract/option = 100 ounces, a $1 move in a futures contract = $100.

To open an account and receive trading recommendations on gold futures or options contracts (also stock indices, energies, currencies, etc.), or to use PaperTrader Online contact me at erik@altavest.com.  Visit www.altavest.com to request a Free Starter Kit.  Keep in mind that there is risk of loss in all trading.
 
July Silver:  Close = 472.5, -4.7-cents