Perhaps the most baffling behavior is that investors continue to allow their wealth to be plundered by the paper asset groupies. Billions of dollars have been allowed to wither under the mismanagement of paper asset firms. For the past five years, the return on U.S. equities has been less than 3%, compounded annually. Investment managers charged their customers a fee for that paltry return. For the same period the compound return on $Gold was just shy of 19%. Most investment management firms continue to avoid putting Gold in client portfolios. Why would anyone pay a fee for such miserable service?

The results for the past week provide much encouragement for investors in Gold and Silver. Performance of Silver market and Gold stocks are suggesting better times ahead. Don't let those paper asset groupies get your money in this environment. All they want is a fee in exchange for miserable returns.

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.

While Silver provided the best hint of a positive future for metals, the Gold chart at the top is worth noting. In that chart two lines have been added, forming what might be called a triangle by some. That structure portrays a battle between buyers and sellers being played out.

How the price comes out of such a pattern is generally considered an indication of future price action. Any reading of price patterns is initially a guess, but the situation looks good. Price of $Gold moved up out of the pattern. That action suggests higher prices in the future. $Gold investors should be using all buy signals to add to positions.

Basic Trend: $Silver: Up Investors should focus on Buy signals. Strategy: Positive, Per Investment Policy of October 2004 Investment Policy: Emphasize Buys

Silver market provided extremely encouraging action in the past week. As is readily evident in both graphs, Silver finally got through that $12 price level. That action moves Silver above the previous high.

Silver has now created a new structure, independent of the hedge fund driven action of a few months ago. For all practical purposes we can probably ignore the price move created by the hedge funds. Most of those positions have probably been already sold. The new structure developing is due to fundamental demand for Silver. Buy Silver on all buy signals.

Recommendations: Hold existing Gold and Silver positions for higher prices, and further profits! Add to positions on buy signals.

CN$Gold:

Given the continued mail of the past week, a lot of Canadian dollar bulls still out there. The chart to the right, though, suggests that CN$Gold is preferred by a good number of investors. CN$Gold is within a short move of taking out previous high. A move through that high is a real possibility this coming week. That action would set the stage for a new cyclical high for CN$Gold.

Canadian dollar investors should be adding to Gold positions on all buy signals.

CN$Gold Recommendation: CN$ investors should be holding Gold. Use buy signals to add to holdings. CN$ long-term sell.

EU€Gold:

€Gold picture shows the more difficult situation for an investor living in a strong money. The Euro is demonstrating that the world will reward the moneys of central banks with a strong commitment to maintaining the value of the money. Dollar, on the other hand, is being punished for the poor commitment to disciplined monetary policy by the Federal Reserve.

However with the risk rising in the Middle East, Euro investors should have Gold in their portfolios. The world will respond to the problems being created by Iran and Syria. Euro investors should have Gold in their portfolios as insurance against adverse consequences of Middle East developments. One cannot buy insurance after the fire starts.

EU€Gold Recommendation: EU€ investors can hold Gold for long-term. EU€ likely to appreciate against US$.

GBP GOLD: £337.3 -4.5

We have received a number of requests for a chart of Gold in British pounds. A chart of £Gold can be found to the right. We have not backdated it as we have some reservations about doing so. Only the last two signals have been included in the chart. As with the other charts, we are watching to see if that last short-term high can be taken out. If it is, higher £Gold will develop.

GDM: 1076.36, + 25.78 or +2.5%

The GDM caused our heart to beat a little faster this week. We have been watching those two previous short-term highs at about 1100. On Thursday, GDM closed above the last one. An important area of resistance has developed. All such over watched price levels are usually breached. GDM likely to confirm positive future for metals and stocks this coming week.

PAPER ASSET GROUPIES:

Paper asset groupies are now burning candles, cutting up chickens, and offering their first born to Federal Reserve. All of their clients' moneys are being placed on one big bet. Investment gurus and taxicab drivers are in near unanimous agreement. After next week, only a matter of time till U.S. interest rates fall. West coast bond guru has proclaimed the end of the bond bear market. Has the future ever been so clear to so many?

Your Eternal Optimist;

Ned W. Schmidt,CFA,CEBS

Click to email me: nwschmidt@earthlink.net

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-- Posted Monday, 7 August 2006 | Digg This Article