Wednesday, August 16, 2006

The Gold and Silver Review, Aug. 13th: 183rd Edition

August 13th, 2006
183rd Edition
Chris G. Waltzek
*$633 Gold - $11.87 Silver*
The gold and silver advance paused this week, following a sharp two week rally. Precious metals bulls have been victorious in 6 of the last 8 weeks. Gold closed at $633 off by only $11 while silver shed merely fifty cents to close at $11.87. This year, gold has climbed by $110, almost 25 percent - while silver is higher by $3.00 a 30% increase.
Gold market analyst James Turk commented on the market this week: "Why does the Fed no longer want to report the total quantity of dollars in circulation? They know what's coming - massive amounts of dollar creation to fund the worsening trade and federal government budget deficits."
He noted that his proprietary forecast model is indicating a $700 gold price by year end. James went on to discuss his next gold target of $900 per ounce. Another market pundit at commented: "Gold ... will continue edging higher as the prospect of flat U.S. rates, high fuel costs, ongoing unrest in the Middle East, Iran and North Korea's nuclear development programmes drive investors back towards gold,"
Meanwhile, following 17 consecutive rate hikes, the longest stint in decades, the Federal Reserve announced its decision on Tuesday to hold rates steady. The 9-1 FOMC vote resulted with merely a single Fed member opposing the move, Richmond, Va Fed officer, Jeffrey Lacker, who desired another quarter point increase.
Only two years ago, the fed's lending rate reached a 46-year low point of 1 percent at the start of the campaign and now holding at 5.25%. As a result, the prime lending interest rate, monitored for personal and business loans, is expected to hover at 8.25%. Many analysts believe that the effects of rate hikes can take as long as 6 months to manifest, leading to the Fed's note that: "Inflation pressures seem likely to moderate over time." Furthermore, government reports indicate a significant decline in the most recent economic growth statistic of 2.5 percent - half of the prior quarter's figure as well as near 5 percent unemployment. Such numbers clearly affected the Fed's decision this week, leading many economists to believe that the Fed is pausing to assess the impact of higher rates on the nations economy. Despite the Fed's decision to halt rate hikes, which tend to support the currency, the dollar rallied sharply this week, gaining about one point.
Moving on, this Thursday, British police thwarted terrorist plans to blow up aircraft scheduled for August 16th flights to New York, in the largest anti-terrorist surveillance mission in the nations history. Sources indicate that MI5 had been tracking the group for a year. U.S. Homeland Security Secretary Michael Chertoff suggested ties to al Qaeda in the foiled plan to destroy 6 planes between England and the United States - Authorities detained 24 suspects and one al Qaeda member is being held for questioning. Police reports revealed an unconventional gel like explosive device - concealed in seemingly innocuous sports drink containers, easily brought on board. As a result, security measures were raised to the highest level for all flights into the US from the UK and air marshals were sent to Britain to secure future trans Atlantic flights.
In related news, The U.S. Embassy in New Delhi warned Friday that terrorists may be planning to bomb two of India's major cities New Delhi and Bombay in the coming days - to disrupt India's August 15th independence day celebration. An official e-mail message was sent to American citizens in the country warning about the potential event.
Moving on to the energy markets, early in the week, crude futures surged toward $76 a barrel as reports of the BP Alaskan pipeline shutdown flooded in. By Thursday, black gold climbed close to record levels at $78 before reversing into the close. On Friday, oil gapped down hard, ending the week off about one dollar near $74 per barbell. Crude oil prices remain higher by approximately 25 percent for the year due in part to geopolitical tensions.
In geopolitical news this week, on Friday The U.N. Security Council unanimously accepted a resolution to end fighting between Israel and Hezbollah, as well as the deployment of 15,000 U.N. troops to aid Lebanese military in wrestling back control of Southern Lebanon from Hezbollah forces. Israeli Prime Minister Ehud Olmert notified the US regarding his decision to accept a cease fire. However, the Israeli army will continue to fight until its governments cabinet meeting slated for this Sunday. Additionally, the Lebanese Prime Minister told Secretary of State Condoleezza Rice that his country backed the resolution, according to a government press release.
In numismatic news this week, in just three hours, sales climbed to $100,000 as One Hundred U.S. Mint's 24 Karat American Buffalo Gold coins sold at $999 Each, on the Ultimate Shopping Network. The network announced its largest daily coin sales ever with a show dedicated entirely to the U.S. Mint's new first strike, mint-state (MS) 70 American Buffalo Gold coins.
The coins were modeled after James Earle Fraser's design of the Buffalo Nickel coined from 1913 to 1938. Only 300k of the new pure gold American Buffalo coins were minted and it is the first US 24k coin. In addition to the first strike, MS-70 coins, collectors can purchase the rarest proof coins, selling for $5,995.
In a related story, Joseph Bakes of the Star-Ledger reported on the US mints new "Westward Journey" nickels, The Westward Journey series nickel was redesigned, commemorating the 200th anniversaries of the Lewis and Clark Expedition and the Louisiana Purchase. The article indicates that 2004 and 2005 silver proof sets are available. Only 10 proof sets can be purchased per order. To find out more, go to the US Mint Web site,, or call (800) USA-MINT.
Next, a quick reminder for coin enthusiasts, there is still an opportunity to see the ten most valuable coins in the world on Aug. 16-19 at the American Numismatic Association's World's Fair of Money in Denver. The 10 U.S. Double Eagles minted from 1933 and one very rare 1933 Double Eagle that was auctioned for $7.5 million, the most valuable coin ever sold will be on display at the show.
Here's a review of the Gold Stocks & Precious metals charts. The following section is included to help investors identify low risk, short term entries for long term precious metals positions. Although the analysis may indicate a somewhat bearish stance, I expect gold to breach 1000 dollars in the next 12-24 months and silver to cross $20 per ounce.
Despite this years poor equities market performance, gold stocks are sporting a 10 percent gain for the year. However, Last week I noted the weekly candlestick was indicating selling pressure ahead: " the weekly candlestick was marginally bearish with a long upper tail. As expected, gold stocks sold off this week. Looking forward to next weeks trading: On Friday, gold stocks posted a bearish candlestick and in the weekly chart, the XAU has now recorded two consecutive bearish candlesticks, a bad omen. From a technical perspective, the market must make lower lows early next week. I expect to see lower prices as gold stocks continue to wind up within an increasingly narrow trading range.

Shifting over to the gold and silver charts: Gold and silver consolidated into Thursday which lead to a sell off on Friday. Last week I suggested that gold and silver were overbought and I expected the markets to pause. The markets were overbought and did indeed pull back. Looking toward next week, gold and silver both posted mildly bearish candlesticks on Friday. I expect further weakness early followed by more backing and filling.

In equities news the major indexes witnessed a broad based sell off this week. Traders sold stocks following the FOMC decision on Tuesday. Investors were further concerned by the potential terrorist airplane bombings. Stocks sold off all week, but recovered somewhat on Friday. The Dow declined 148 points to 10,088. The Nasdaq gave back 28 points finishing at 2,057, while the S&P declined to 1266. The Dow and S&P closed within their broad trading ranges and the Nasdaq remains below resistance. However, all three indexes posted marginally bullish candlesticks on Friday. I expect strength early next week followed by further consolidation.


August 12th Goldseek Radio Highlights:

*John Loeffler*
*In the first hour, after a quick review of this weeks top market headlines, we'll hear from the Goldwizards. Gary K, explains what makes a bear market as well as his the indicators that he's watching to help gauge market direction. Next, Bob Chapman arguably the most experienced man in the precious metals field, examines every aspect of this weeks markets, including the FOMC meeting, precious metals, stocks and real estate market.
In the second hour, John Loeffler from the financial sense news team and Steel on Steel shares his 40 years of investigative journalism experience with the listeners. John is a big silver bull and expects precious metals to go into orbit in the years ahead. He also shares his insightful and entertaining geopolitical perspective. John is offering a free month of his show exclusively to Goldseek listeners, simply direct your internet browsers to and enter the word goldseek for your login and password. Once you do, you'll have access to their current shows as well as the archives. Plus, accredited investors should investigate goldseek's latest investment opportunity near the top of the page at Don't forget to bookmark for your required daily precious metals related reading.
To This Weeks Guests and the Trading Wizards Gold & Silver Forecasts, Please Go To:

Thanks for reading.
Chris Waltzek
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