-- Posted Wednesday, 4 June 2008 | Digg This Article | Source: GoldSeek.com
As is readily apparent, the Gold market had been living this past year in those rare best of times. The Federal Reserve was on a determined course to lower interest rates. That encouraged selling of the U.S. dollar, pushing it down in value. At the same time, a mini mania developed in the paper oil market. While no shortage of physical oil could be found, the paper oil market moved higher. Those factors emboldened Gold traders to bid the metal higher. At the same time some connection was made between commodity prices and the value of the dollar. Together these forces pushed $Gold to an unsustainable level. That rally reversed itself, and $Gold continues to consolidate in a trend toward lower prices.
As this week's chart shows, the U.S. dollar has been moving sideways for a number of weeks. The plots in that graph are end of week observations. Current condition of the U.S. dollar would have to be considered as neutral, neither over bought nor over sold. With the Federal Reserve moving to a neutral position on U.S. interest rates, few are motivated to sell the dollar. Paper oil prices have apparently peaked, at least for the short-term. And yes, even small children in Tibet have heard the consensus view that oil supply is 85 mmbd and demand is 87 mmbd. If that were true, the news media would be filled with stories of riots over oil shortages. Since none of these reports exist, we must assume that the consensus oil view is in error. That leaves $Gold in the position of having no reason to not finish the consolidation in which it is caught. The longer term, yes, is extremely positive, for the dollar's essential problems remain. Investors would be better served by waiting for price weakness to add to their holdings, rather than chasing Gold when it moves higher on some day's hot news.
GOLD THOUGHTS come from Ned W. Schmidt,CFA,CEBS, publisher of The Value View Gold Report, monthly, and Trading Thoughts, weekly. To receive these reports, go to http://home.att.net/~nwschmidt/Order_Gold_EMonthlyTT.html
-- Posted Wednesday, 4 June 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.
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