Trading Thoughts
from The Value View Gold Report

Ned W. Schmidt, CFA, CEBS
Jul 5, 2005

TRADING THOUGHTS is about what the name in implies. The purpose of this publication is to promote timely and profitable trading of precious metals. We do not believe every turn in the market can be called. Our goal is that our recommendations should be profitable. These goals are not the same. Profits are the goal. Trades are not the goal. DO NOT EXPECT ALL RECOMMENDATIONS TO BE PROFITABLE. No system can achieve that lofty goal. TRADING THOUGHTS is not intended to be a lengthy news letter filled with witty comments. The goal is simply to state whether conditions in the precious metal's market are favorable or not. Traders are advised that unless they have exceptional experience not to trade against the basic trend. Trades against market trend not expected to be as productive as those with trend.

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.

chart | chart

Five days came together to let the markets sag on Friday. Thursday was  the FOMC meeting. Friday was Canada Day, then the weekend, and Monday is 4th of July in the U.S. With five days of  buyers stepping back, or headed for the back yard to do ribs, the markets sagged. Simply no buyers around.

One has to wonder, though, why anyone would be selling yesterday, unless they had to do so. The Metals have experienced weak days in association with bad times in the equity markets. Weak equity markets put pressure on the  margin needs of highly leveraged hedge funds. They are forced to raise funds, and the Metals are a source of those funds.

The only trade the funds have that is working is the dollar. Euro was pushed further down on Friday, as no buyers appeared before the weekend. The markets were void of buyers on Friday.

Friday's lack of buyers is taking the over bought pressure off the Gold market. Short-term indicator moving rapidly toward a Buy signal. Intermediate indicator also moving lower. Gold setting up for a buying opportunity next week. Buy on any price weakness in coming week.

Basic Trend: Silver: Up  Investors should focus on Buy signals.

Strategy: Positive, Per Investment Policy of October 2004

Investment Policy: Emphasize Buys

chart | chart

Silver is over sold, and it should be bought. Both indicators are giving Buy signals. Prices in early part of the week likely to be a buyer's bargain.

Recent price action has brought Silver to lower edge of lateral pattern. Buyers should develop this week on that condition. Most traders will expect Silver to move back to $7.50. Will this be the move that takes Silver through that resistance? Yes, could be the one. This level is too popular, and Silver is still a market with buyers dominating. Move above $7.50 will give us $9 Silver in short order.

Recommendation:
Silver a buy. Gold building toward a buy. Buy both on any price weakness this week! Then hold both for higher prices, and profits!

SOME OTHER THOUGHTS:

Periodically some graphs that we have used in either the monthly letter or in a posted article may be of continued interest. We will run them on this page. The comments will be brief as the graph is the real message. Will appear when something interesting, and time permits.

Graph is of U.S. currency in circulation, wherever it might be. Most is in the U.S., but a goodly portion is held outside U.S. Willingness of foreigners to hold U.S. currency is a sign of their confidence in the money. However, the policies of the U.S. government and bureaucracy are making the use of U.S. currency a near crime. If one has U.S. currency, the U.S. presumes you are involved in some criminal activity. If that activity is not now a crime, they will move to make it one. Ultimately, these activities will drive foreigners out of U.S. money, making it go down in value. Two items in this chart. First, the slope of the currency in circulation line is flattening. Such action means less willingness to hold U.S. currency. Second, the year-to-year change line is weakening later than usual. Normally it bottoms before June, but this year after June. Perhaps a different pattern developing. And, we will be watching it to see if it turns negative meaning liquidation of U.S. money by holders. Do not believe that interest rates are high enough yet to be a factor.

For the latest in economic news and evaluation, click on this link:
http://www.gillespieresearch.com

Your Eternal Optimist;

Jul 2, 2005
Ned W. Schmidt
email: nwschmidt@earthlink.net

TRADING THOUGHTS is published 45 times per year, and distributed by e-mail. Email subscribers to THE VALUE VIEW GOLD REPORT receive TRADING THOUGHTS as part of a $99 e-mail package subscription to THE VALUE VIEW GOLD REPORT.  TRADING THOUGHTS is not available by regular mail. To receive TRADING THOUGHTS along with THE VALUE VIEW GOLD REPORT click on link below or send your check or credit card information to: Schmidt Management Company, PO Box 846, Boca Raton FL 33429. Fax orders can be sent to 215-243-7161. Our phone number to place an order is 561-447-0874.  Under no circumstance will subscriptions be cancelled or refunds issued after the receipt of your first issue.
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