Trading Thoughts
from The Value View Gold Report

Ned W. Schmidt, CFA, CEBS
Jul 17, 2006

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 newsletter 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.

Summer doldrums? A quiet summer has not been served up to investors. July has been a rocket month thus far both in the news and in the market for real assets. Paper assets, however, are like the last stage of a rocket's short life, headed down. But, is the action in Lebanon really the impetus for oil price rising, Gold moving up, and the flushing of the NASDAQ market?

Sometimes events are no more than catalysts that allow markets to move more quickly along the inevitable path. Catalysts are not really part of a chemical process, they are just facilitators. Oil prices, in dollars, were going higher with or without Lebanon. Stock prices on the NASDAQ were already headed down, the Lebanese catalyst simply made that slide easier.

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.

Gold, as the only true safe haven investment, likely did benefit from the Lebanese situation. Investors in that area of the world probably did shift funds from local banks and money into Gold. That buying has pushed Gold into an over bought condition.

Buying into a market that might be moving on the news of the day is rarely a wise idea. Gold is one of those fairly illiquid markets that reacts quickly to panic buying from those scared and those covering their shorts. Watching and waiting is probably a better idea.

Gold is overbought, and will likely consolidate much of this past week's gain. Strong chance that net for next week will be negative. Be patient, and wait for the next buy signal. The week ahead will likely have less panic buying.

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

Silver is having real trouble with the $12 level. In the top chart an arrow has been drawn to highlight that price. Notice that $12 has received attention several times. That would suggest a lot of focus on it by traders.

Most likely case is for Silver to do not much of anything this week. Silver should then start becoming over sold. That situation will set the stage for a move through $12. While two tries might be necessary, Silver is moving into a pattern that will make $12 history. That process would set Silver up for much higher prices.

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

CN$Gold:
CN$Gold had a nice week, and Canadian investors in Gold are within striking distance of a new high price. That new high price will not likely be achieved in the coming week. CN$Gold is over bought and needs to consolidate some of the recent gain first.

Higher oil and Gold prices along with some recovery in other commodities did not help the Canadian dollar this past week. The Canadian central bank after last meeting sounded soft on interest rates. The markets quickly reminded the Bank of Canada that it does not set monetary policy independently of the U.S. CN$ was sold, and that should be a warning to bulls on CN$.

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

EU€Gold:
€ caught between economics and politics. UAE has moved 10% of currency reserves into Euro investments(FT,14 Jul 06). Such a move is the equivalent of pricing oil in Euros. Turmoil in Lebanon threatening to some Europeans, perhaps. €Gold is over bought. Euro investors should wait for buy signals before adding to positions.

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

AMEX GOLD MINERS INDEX (GDM) = 1056.54 - 1.76 or - 0.2%

GDM action was again a disappointment this past week. That 1100 level is flashing on every amateur technician's screen. An over bought condition developed at that level week before, and buyers backed off of the stocks. More lateral to down movement likely in order to develop over sold condition. That should set the stage for a move through 1100, and generate some excitement in the Gold stocks.

The lackluster performance of this index reinforces the view that the coming week will see less excitement in the Gold market. Panic markets are normally short-term events. GDM action suggests Gold will consolidate for a short time.

Did Lebanon cause the slump in the NASDAQ market? That market broke the low of two three weeks ago, and buying support disappeared. All Lebanon might have done is accelerate two weeks of down into one week of down. This market was on borrowed time anyway. Note that the index took out the last intermediate low. That was a flashing sell signal to traders. 1920 will be next level on which they focus.

Structural developments in hedge fund industry may push this market down further than any imagine. A secular bear may again be at work here due to these changes. Monthly letter will discuss this situation. Should be out on Thursday.

Your Eternal Optimist,

Jul 15, 2006
Vol. 2006-21/124
Ned W. Schmidt
Ned W. Schmidt, CFA,CEBS is publisher of THE VALUE VIEW GOLD REPORT. That report nowincludes a weekly message, TRADING THOUGHTS, to help investorsidentify timely points for buying Gold and Silver.

You can join him for the Gold Super Cycle here.

His monumental report, "$1,265 GOLD," with 255pages and 98 graphs, is now widely known, and is available atwww.amazon.com or from the author. This work has nowbeen read by investors in over twelve countries.

Ned welcomes your comments and questions. His mission in lifeis to rescue investors from the abyss of financial assets andthe coming collapse of the U.S. dollar. He can be contacted atnwschmidt@earthlink.net.

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