Tuesday, August 22, 2006


August 20th, 2006
184th Edition
Chris G. Waltzek
*$611 Gold - $11.97 Silver*


This week, the summer doldrums put downward pressure on gold related assets. Precious metals experienced mixed results - the yellow metal closed at $611 off by $22 while silver advanced ten cents finishing at $11.97. In 2006 alone, the metals remain the hottest major asset class around, gold has climbed by approximately $100, near a 25 percent gain - while silver is maintaining a $3.00 profit, higher by 30%.

Weaker than expected consumer inflation figures combined with this weeks lowered geopolitical concerns, put downward pressure on crude oil and precious metals. The CPI figure climbed less than expected - easing fears that the Fed will raise rates at future FOMC meetings. The Labor Department report indicated inflation increased by merely .2 percent in July, the lowest reading in five months. Decreased inflation fears were supported by The Index of Leading Economic indicators figure of 1.4 percent, the largest fall in five years according to media sources.

Meanwhile, crude oil prices fell to a 2 month low point due to easing middle eastern tensions and seasonal changes in demand. On Monday, news of a cease-fire in the month long Israeli - Hezbollah war resulted from U.N. plans to send troops to the Southern Lebanon region. The Lebanese military will receive support from 3,500 United Nations peacekeeping troops to decrease Hezbollah resistance and curb conflict in the region.

In related gold news, Peter Grandich of the the Grandich letter, noted that gold may enter a rally mode following the current consolidation. Mr. Grandich expects a new yearly high point in excess of the $730 level recorded earlier this year, before the end of 2006 - due to improved seasonal gold market conditions and weakening dollar related fundamentals. He expects the market to present a buying opportunity within the next few weeks.

Moving on, strengthening investment demand for gold was noted by a GFMS report this week. Gold demand increased by almost twenty percent to 130 metric tons. In fact, jewelry demand climbed by 12% during the period, according to the report.
Jon Nadler at Kitco noted that many market followers are expecting an increase in seasonal jewelry purchases during the end of this year, which could lead to a significant increase in demand for gold.

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 at times, I expect gold to breach $1000 dollars in the next 12-24 months and silver to eclipse $20 per ounce.

Gold stocks closed near the break-even level as anticipated in last weeks commentary. I noted that downward pressure on the sector was likely due to the bearish daily and weekly candlesticks. Looking ahead to next weeks trading: On Friday, gold stocks recorded a somewhat bullish close. I expect gold stocks to rally early on in next week.

Shifting over to the gold and silver charts: The charts indicated that the markets were clearly susceptible to a move lower. Right on cue, gold and silver did indeed decline this week. Precious metals retested their trading range lows, but posted a marginally bullish close on Friday. In the days ahead, I expect gold and silver to move higher within their trading ranges.

Shifting over to the stock markets
In equities news, the major indexes moved sharply higher. Investors were encouraged by lowered Middle Eastern tensions. The Dow Jones and the S&P recorded positive closes every day this week and rallied into Friday. The Dow closed at 11,381, tacking on nearly 300 points. Meanwhile, the S&P finished at 1,302, up 36 and the Nasdaq rocketed higher to 2,163, adding almost 100 points, more than five percent. Last week I suggested that the major indexes all posted marginally bullish candlesticks and I expected higher prices to follow. The markets did move higher this week, even further than anticipated. I expect higher prices early next week, followed by a normal reaction to such a powerful move.


August 20th Goldseek Radio Highlights:

*Peter Schiff & Justice litle*

After a quick review of this weeks top market headlines, in the first hour, all of the Goldwizards return with their combined market expertise. Jack Chan is bullish on the bond market and continues to think that we've seen the top in energy related investments. Gary Kaltbaum also likes bonds and turns cautiously optimistic on the stock market. Lastly, Bob Chapman and I discuss the markets and this weeks articles of interest.

In the second hour, Peter Schiff from Euro Pacific Capital, tells us why he expects gold to soar to $5,000-$10,000 in the years ahead. He also discusses how various electronic forms of gold may be implemented to help insulate the economy from the declining dollar. Next, Justice Litle joins me to discuss various economic issues. Justice shares Peter's ideas regarding a solution to the falling dollar. Don't forget to bookmark commentary.goldseek.com for your required daily precious metals news.

To This Weeks Guests and the Trading Wizards Gold & Silver Forecasts, Please Go To:

Thanks for reading.
Chris Waltzek
Please visit my blog and web site for free daily market articles, audio broadcasts and analysis.
Click Here. http://silverinvestor.blogspot.com/
or radio.goldseek.com
and for the entire 4 year archives.