Monday, October 16, 2006

THE GOLD AND SILVER REVIEW, OCT. 15th 192nd Edition.

October 15th 2006
192nd Edition
Chris G. Waltzek
*$588 Gold - $11.57 Silver*

Gold rebounded sprightly from last weeks lows as bargain hunters and jewelers gleefully picked up precious metals at discounted prices. Investors flocked to the yellow metal on Friday as the price exploded higher into the market close. Escalating geopolitical tensions put upward pressure on the metals, encouraging safe haven investing. Gold soared on the heels of North Korea's supposed Oct. 9th underground nuclear weapons detonation. While, The Organization of Petroleum Exporting Countries cartel cut oil output by 1 million barrels

Meanwhile, gold advanced despite the US dollar's continued climb. The domestic currency erased nearly 3 months of loses in merely 3 days, ending at the highest point in almost 6 months . Gold and the dollar tend to move conversely, in a competitive dance for monetary supremacy. For the week, gold put on an impressive act, regaining most of last weeks loss closing at $588 up $16, while silver trounced the bears, climbing near 50 cents to close at $11.57 The yellow metal is now up more than 20 percent in the last 12 months, while silver is up near 40% in same period, incredible returns by any measure.

In global precious metals related news, India's Diwali festival of lights holiday and the marriage season are leading to record precious metals sales, reported one media source. The worlds largest gold purchasing nation's top bullion dealer announced sales approaching 50% higher than the previous years. The recent pullback in metals has created an irresistible buying opportunity, leading to a surge in demand.

In economic news, this week, the Federal Reserve released the September 20th FOMC minutes. Despite the housing slump and falling commodities prices, the document revealed concern regarding inflation pressures. As a result, the Fed. will be keeping a watchful eye on economic growth in the second quarter. Many economists now believe the Fed. must hold rates steady with an upward bias to contain the inflation specter while carefully monitoring economic growth for signs of a recession.

Meanwhile, the dollar staged a repeat performance, mirroring last weeks near vertical rally. The Fed's hawkish comments lead investors on a dollar buying spree as the likelihood of a rate cuts diminished somewhat. The FOMC minutes indicated inflation fears which suggests higher rates are in the cards for the domestic economy. Rate hikes are dollar supportive as US debt becomes more attractive to global investors. Clearly, the usual tight correlation between the dollar and gold has slackened in recent months. The yellow metal is taking its marching orders from the crude oil market.

In geopolitical news, North Korea announced the successful detonation of a nuclear warhead on Monday. South Korea confirmed that a major blast was recorded. Only last year, North Korea launched several missiles towards Japan, one of which was believed capable of reaching as far as the Hawaiian Islands. The explosion coincided with the new Japanese Prime Minister, Shinzo Abe's visit to South Korea. The Japanese government retaliated on Wednesday promising increased economic sanctions. In response, North Korean authorities warned of additional tests and stated that economic reprisals could lead to war.

In related news, after plunging to lows not seen since 2005 last week, crude oil rocketed to almost 63 dollars per barrel on Monday following news of the North Korean nuclear blast. However, traders regained their senses as the initial shock passed. Black gold declined for the remainder of a highly volatile week, briefly dipping below 58 dollars per barrel to finish the week at 60 dollars.

Media sources indicated that the Organization of Petroleum Exporting Countries prime minister announced on Wednesday that the group would drop oil production by 1 million barrels. OPEC supplies the world with almost half of its oil demand. Investors are anxiously awaiting OPEC's plan regarding the reduced output.


In gold equities news, shares of metals and mining companies retested last weeks bottom leading to an impressive close. Gold stocks gapped higher on Friday and closed strong after filling last weeks gap on Thursday.
THE BOTTOM LINE ON GOLD STOCKS: The weekly candlestick couldn't be more bullish. I expect further market strength early next week followed by an attempt to fill Friday's gap.

Moving on to the precious metals charts: Gold and silver retested last weeks lows on Monday before rallying with renewed vigor. The metals consolidated for the remainder of the week.
THIS WEEKS BOTTOM LINE ON PRECIOUS METALS: Gold recorded a very bullish candlestick on Friday and both metals are winding up for a move. Considering the strength in gold stocks and the crude oil markets, I expect gold to firm early on and then retest the fifty period moving average.

And wrapping up this weeks market report, in equities news, already inebriated from last weeks record close bash, the party continued with gusto this week. The market benchmark Dow Jones Industrials soared above its all time high point recorded in January of 2000. The Dow added another 110 points, closing at 11,960, within a stones throw of 12,000. Meanwhile, the S&P 500 broke out of its trading range, also posting the best finish in years at 1,360 up 11 and the Nasdaq rallied to 2,357 by an impressive 58 points.

THIS WEEKS BOTTOM LINE FOR STOCKS: The markets rallied early as expected, but the retracement never materialized as investor appetites remained ravenous for equities. I expect the stock rally to continue early and for a normal consolidation to unfold later next week.

October 14th, Goldseek Radio Highlights:

*Peter Elides*

First up on the show, this weeks market headlines and forecasts. Next, financial powerhouse, Bob Chapman presents his latest market findings and tackles more listeners questions. Plus, the trading super-stars Jack Chan and Gary Kaltbaum return to the show. Jack warns investors not to chase the runaway stock market at these lofty levels. Conversely, Gary Kaltbaum has begrudgingly moved into the bull camp with one finger directly above the sell button. The first hour wraps up with another audio excerpts boraloge from Benjamin Graham's: The Intelligent Speculator. Hang in there folks, you've almost finished the entire text and this one can only help improve your investing results.

In the second hour, you may feel the urge to exclaim, "Eureka!" as Peter Eliades hypnotizes you with Archimedes like deductive powers. Don't miss Peter explain how all markets are comprised of a primary trend with a cyclical component. Next, he tells listeners how to determine the bull or bear market phases with technical analysis.

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

Thanks for reading.

Chris Waltzek
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