Trading Thoughts
from The Value View Gold Report

Ned W. Schmidt, CFA, CEBS
Jun 6, 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.

That another week of strange behavior would develop did come as a surprise. As equity markets around the world opened on Monday they continued to sell off as had been the case the previous week. Nearly all have taken substantial hits. On Tuesday the U.S. equity market had a turn in the tank. The sell off clearly was creating considerable pain for many funds. At about 10am on Wednesday, selling appeared in the Gold and Silver markets. That time would have been about when the fund managers would have been able to fully assess the damage done the previous day to their risk profile and margin requirements. Funds were selling either because of a need to raise cash or because they now decided that the metals were going down. Always amazing how some decide something is going down in price after it has already gone down in price.

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.

How long Gold market will be vulnerable to fund related selling is not easy to guess. With prices down from well over US$700, a fair assumption would be that most of the selling that is going to happen has happened. Just as markets experienced a long period of over bought conditions, metals are likely to experience repetitive over sold conditions, or buying opportunities.

The positive background for Gold was reinforced on Friday. That any reluctance to raise interest rates in the U.S. is negative for the dollar's value was certainly demonstrated. Further, Iran is not going to fade into history quietly. Iran is a reason to own Gold.

Short-term buy signal on $Gold as of Friday. Gold investors should be using these buying opportunities to add to positions.

Two positive signs arose this week. Silver appears to have put in at least a temporary panic induced bottom. The GDM also appears to have bottomed. Charts on the GDM are at the bottom of this page.

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

Silver's correction is now several months along. Time is as important as price in completing a correction. Buyers seem to still be out there as fund induced attempts to sell seem to stall out.

Short-term buy signal on Silver will arrive on Monday.

Recommendations: Hold existing Gold and Silver positions for higher prices, and further profits!

CN$GOLD = CN$701.1 -11.8
EU€Gold = €492.7 -12.6

CN$ Gold:
Canadian investors seem to be getting an opportunity to buy. Buy signal of early last week has not been reversed. What that means is that the indicator continues in deeply over sold territory. CN$ rallied through the middle of last week, and then faltered. Is the rally in CN$ running out of steam? Perhaps.

The indicators on the U.S. economy are going to deteriorate rapidly for the rest of the year. Canadian investors should be using this opportunity to move into CN$Gold from paper assets.

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

EU€ Gold: €Gold got another buy signal on Wednesday. The indicator persists in over sold territory. Euro-based investors should be buying €Gold at these levels. Implications of Iran situation for Euro difficult to assess. Negative is proximity to Iran, and vulnerability to oil supply interruptions. Positive is that Iran likely to move to price oil in Euros.

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

AMEX GOLD MINERS INDEX (GDM) = 1064.20 +16.14 or +1.5%

GDM is giving a lot of encouragement to the outlook for the metals. On Friday the index actually closed in positive territory. While perhaps over bought on purely a short-term basis, that the bottom was more than a week ago is good news.

Buyers of Gold stocks are moving back into the market as they believe the price of Gold will be materially higher in the fall. These investors take a longer term view when putting their money to work, unlike hedge funds. Gold stock buyers should be making selections at this time.

The hedge fund phenomenon has been one that was fun while pushing up the prices of so many assets. Now, the markets must live through the unraveling of their influence. Their power was built on leverage, borrowing money, at lower and lower rates. Around the world that situation has come to an end.

As a consequence of this changing global situation, from falling interest rates to rising interest rates, markets of all kinds have been hammered. From Silver to Indian equities, prices have been pushed lower as the leveraged buying becomes selling pressure. As this process continues, the odds of a serious dislocation rise. Somewhere in the wood pile is the proverbial snake.

Your Eternal Optimist,

Jun 3, 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.

Copyright ©2006 Ned W.Schmidt... All Rights Reserved.

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