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-- Posted Wednesday, 16 January 2008 | Digg This Article | Source: GoldSeek.com

Gold's explosive start of year move has been enjoyed by all. Has it been over enjoyed? Fundamentals of the U.S. dollar did not suddenly get worse on the first day of the year. Current euphoria in the Gold market may have been over done. One way of assessing that possibility is to compare the Gold price of the dollar to what is happening to the value of the dollar in other national monies. In the chart below, the red line is the Gold price of the U.S. dollar. It is how much Gold is required to purchase a single dollar, and is measured in ounces. The calculation is 1 divided by the dollar price of Gold. When that red line is falling, the dollar price of Gold is rising. When rising, dollar price of Gold is falling. 

The blue line is a proprietary measure of the dollar's value, which does not have distortions of the popular trade weighted index. The two lines run together most of the time. As can be seen in chart, the dollar has been trying to put in place a short-term bottom. Given the over sold condition for the dollar, that short-term bottom may have some meaning. Primary weakness is against the yen and Swiss franc due to repayment of carry trade loans. Currently, the Gold price of the dollar is diverging from the dollar's trend, as it did in early 2007. That divergence suggests a correction in Gold is increasingly likely. The catalyst for such a correction is likely to be weakness in the oil price, which is in a topping formation. Oil is likely to trade below $85 in next month, barring some unusual event. While $1,400+ is still the long-term target, we have to live through a period of short-terms which may include a temporarily lower Gold price.

GOLD THOUGHTS are from Ned W. Schmidt,CFA,CEBS, publisher of The Value View Gold Report, monthly, and Trading Thoughts, weekly.

For a subscription go to http://home.att.net/~nwschmidt/Order_Gold_EMonthlyTT.html

-- Posted Wednesday, 16 January 2008 | Digg This Article | Source: GoldSeek.com

Ned W. Schmidt, CFA CEBS is publisher of THE VALUE VIEW GOLD REPORT - Coverage of the emerging GOLD SUPER CYCLE. Explores the situation in Gold that may carry it to $1,225. To subscribe Click Here. A trial period is available by Clicking Here

Ned W. Schmidt, CFA CEBS is a nationally recognized authority and speaker on a variety of investment topics, including value investing and global capital flows. Currently, Ned is Resident of Schmidt Management Company in DeLand, Florida, specializing in financial engineering. The firm’s proprietary research influences about $15 billion in assets, and is investment advisor to the Argyle Global Equity Appreciation Fund.

Most recently Ned served as the Visiting George Professor of Applied at Stetson University where he taught institutional money management. Preciously he had been a Senior Vice president with a trust company where he had the responsibility for discretionary investments of $3.5 billion.

Previous Articles by Ned W. Schmidt

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