GOLD THOUGHTS
by Ned W. Schmidt, CFA, CEBS
Schmidt Management Company
September 26, 2007

Bailout Ben Bernanke, Chairman of U.S. Federal Reserve, last week demonstrated the intellectual bankruptcy at that institution. No broad based economic need for a 50 basis point interest rate cut was evident. Only purpose of rate cut was to aid investment banks and mortgage brokers. Further, that interest rate cut is now politically impossible to reverse without a crisis in the value of U.S. dollar. This rate cut was a clear signal that dollar, intentionally or due to indifference, would be sacrificed to meet Fed's unspecified agenda. U.S. dollar, as shown in graph, in an undulating bear market, moved to a new low on Fed's action. If chart was of price of a stock, most would call it a sell. Federal Reserve's willingness to sacrifice value of U.S. dollar was reflected in the strong rally by Gold. 

Despite U.S. dollar's bear market, confirmed by policy actions of Federal Reserve, foreign exchange markets may have over reacted in the short-term. “Over shooting” is the term used to describe such action by the foreign exchange markets to an unanticipated event. In the short-term, U.S. dollar is over sold, and at a minimum due for a bounce. Loonie's over extended rally is also a result of this turmoil, and should be recognized as such. As a consequence of these events, $Gold became extremely over bought. $Gold should correct the “over shoot”. As $Gold moves to perhaps $700 or lower, investors should add to positions. We can then begin talking about the $800 level. And longer term, the actions of Federal Reserve makes the $1,400+ target more likely than ever to happen. 

© 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.