GOLD THOUGHTS
by Ned W. Schmidt, CFA, CEBS
Schmidt Management Company
June 13, 2007

Reality can truly be a shocking experience. For more than a year, paper equity markets have been deluded into thinking interest rates would decline. Suddenly, looking around the world the discovery was made that interest rates in most countries were rising or were going to rise. Decades ago, the U.S. set domestic interest rates. Today, interest rates are controlled by global investors. At the margin, U.S. interest rates will be set by central banks of China, Japan, Korea, and others. With U.S. interest rates more likely to rise than fall, fantasy forecasts for U.S. economic growth will fade. The next phase of the collapse in housing & mortgage markets is now in sight. Rising rates also means that the hedge and private equity funds' leveraged mania is on seriously borrowed time. As the U.S. moves into a paper asset bear market and a financially dysfunctional state, dollar has only a long-term down trend.

The graph portrays year-to-year change in U.S. export prices. This measure gives some insight into rate of dollar inflation in the world. Globally, dollar inflation is rising as world is awash in U.S. dollars. Some may continue to talk about nonsensical concept of core inflation, but reality of world is a far higher rate of dollar inflation. Given that purchasing power of U.S. dollar, as shown in chart, is declining at about a 5% annual rate and that U.S. is headed into recession, protecting your wealth with Gold is an important act. 

Gold's price has fallen recently in sympathy with collapse of paper asset markets, providing an excellent chance to buy at a relatively low price. $650 Gold is a bargain relative to a long-term price target of $1,400+. 

© 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.