How much has Gold benefited from the carry trade loans? How much of the run from US$640 to US$690 has been fueled by the same borrowed money that has pushed paper equities higher? Is Gold vulnerable when the carry trade loans are forced to unwind? How much price vulnerability might occur? These are the questions being mulled by serious investors in Gold. Unfortunately, these same questions as they apply to paper equities are being largely ignored. Too many speculators in paper equities believe the rise in the prices of their stocks is because they are talented, rather than being due to cheap money from foreign sources. Confusing brilliance with a debt funded rally is probably not wise. Now, as to the questions on Gold. The short-term price risk in $Gold should a rapid unwinding of yen carry trade loans occur is probably $30-40. Should that happen, buy!

Is Silver moving toward another short-term buy signal? Part of the concern that Gold might react to a reversal of the yen carry trade loans is the lack of action in the Silver market. If the movement in Gold was a pure currency related move, Silver would likely also be benefiting. As the chart shows, that has not been the case. Silver investors should be preparing for an important over sold condition. The movement out of that over sold condition will likely carry Silver to a new high. Price risk on Silver in the event of a rapid reversal of yen carry trade loans is probably a $1+. Use any such reaction or the coming oversold condition to add to Silver holdings.

© 2007 Ned W. Schmidt
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Ned W. Schmidt,CFA,CEBS is publisher of THE VALUE VIEW GOLD REPORT. That report now includes a weekly message, TRADING THOUGHTS, to help investors identify timely points for buying Gold and Silver. His monumental report, "$1,265 GOLD", with 255 pages and 98 graphs, is now widely known, and is available at www.amazon.com or from the author by clicking HERE This work has now been read by investors in over twelve countries around the world. Ned welcomes your comments and questions. His mission in life is to rescue investors from the abyss of financial assets and the coming collapse of the U.S. dollar. He can be contacted by Email.