By Mary Anne & Pamela Aden
September 22, 2006
Courtesy of www.adenforecast.com

STAY FOCUSED ON GOLD’S MAJOR TREND

Gold fell sharply this month. This has disappointed many investors. In fact, many are saying the bull market is over and the days of booming price rises has ended, but the facts indicate otherwise.

Gold’s bull market remains in force and that’ll continue as long as gold stays above $545. What we’ve seen so far is a strong downward correction within the bull market, which is not unusual considering gold rose 72% from July, 2005 to May, 2006 (see Chart 1). This recent action, however, is providing a good opportunity to stand back and review some important investment fundamentals.

THE DOW REPORT
Focus on the 4-Year Cycle

I have heard it said that the June/July lows were the 4-year cycle low and that the market is now moving up in a new 4-year cycle advance. I have also heard it said that the 4-year cycle low will come in October with what has become the expected fall decline. With the most recent rally, this idea seems to be giving way to the idea that the June/July lows were the 4-year cycle lows. Because of the data surrounding the 4-year cycle, I’m personally not in agreement with either point of view. I have said all along that I thought we would see the gain in the first part of this year and the pain in the latter part of the year. What has been happening since the May high has been the setup for the pain that statistically should still lie ahead. As a rule, the analysis in my newsletter is not made available to non-subscribers. But, in regard to the 4-year cycle I have decided to share some of the statistical data surrounding the 4-year cycle.

Gaming HUI Corrections 2

September has been a brutal month for commodities investors. While the oil and natural gas routs have garnered most of the financial media attention, the bloodshed is much more widespread. Since September 5th gold has fallen 9.6% which has spawned a sympathetic 20.5% plunge in the HUI gold-stock index.

A freefall approaching 21% in only 11 trading days would drive phenomenal pain in any index, but the psychological damage just wrought in the HUI has been exceptional. After all, on the very eve of this carnage-laden plunge the HUI surged to 365, its highest level since its latest May interim top. But just two weeks after this bright ray of hope, this flagship gold-stock index is suddenly wallowing in the mud near 290. Riches to rags.

Iran, Venezuela and Cuba: A Covert Triange Emerges

U.N. Antics: A Cover For Darker Events?

Venezuela's President Hugo Chavez made world headlines this week by calling President Bush "the devil" during a speech at the United Nations.

DAILY US METALS COMMENTARY 09/22/06

METALS: OVERNIGHT CHANGES THROUGH 4:30 AM: GOLD +6.70, SILVER +18.50

London Gold Fix $592.00 +11.50 LME COPPER STKS 121,275 ml tns
-2,050 tons
GOLD stks 8.024 ml oz., -78 oz COMEX SILVER stks 102.8 ml oz
-2.25 mil oz

OVERNIGHT ACTION: Impressive Japanese gold gains overnight off higher oil and a lower Dollar.

OUTSIDE MARKET DEVELOPMENTS: With another decline in the Dollar putting that measure below a critical technical level on the charts and the Dollar in the process reaching the lowest level since September 5th, some might come to the conclusion that the Dollar is indeed poised to trend lower and the could give the metals markets a badly needed fundamental assist. In other favorable outside market developments, oil prices are higher again and that in some ways tempers the recent deflationary psychology. It is also helpful that the early action this morning is showing all the metals market making gains (including the industrial metals) and that could create a bit of favorable momentum for the bull camp. With strong gains in Japanese gold overnight, it would seem like the majority of the overnight boost is indeed coming from the currency sector. However, recent US economic information has kept the fears of too much slowing alive and those fears might have been enhanced a bit by the weakness in the equity markets over the last 24 hours.

DAILY US METALS COMMENTARY 09/21/06

METALS: OVERNIGHT CHANGES THROUGH 4:00 AM: GOLD +0.00, SILVER -0.50

London Gold Fix $580.50 +4.25 LME COPPER STKS 123,325 ml tns
-600 tons
GOLD stks 8.024 ml oz., +36,893 oz COMEX SILVER stks 105.1 ml oz
-447,180 oz

OVERNIGHT ACTION: Chinese spot gold minimally higher, European gold minimally lower.

OUTSIDE MARKET DEVELOPMENTS: While the copper market is moderately higher this morning and that might be seen as a positive to the metals, the precious metals are mostly trading lower in the early action today and that would seem to leave a cloud hanging over the market. On the other hand, the Dollar is marginally lower and international equity prices are positive and even oil prices are higher and that means several outside market forces are supportive and that is in contrast to the prior session. With the FOMC meeting past and the results not particularly surprising, it is possible that the precious metals markets get back to their own internal fundamentals. However, the markets will probably have a passing interest in the US Leading Indicator report that is due out this morning and the trade generally expects that report to confirm more slowing and that could present the metals with some fresh negative macro economic sentiment.

Commodities Bust Straight Ahead?

Seems Like Old Dot.com Times

Investors with an active memory are feeling as if they've seen something similar to what's happening to the commodity markets before.

In December of 1999, the Dot.com boom imploded, and the commodity boom was seeded, although it took two years for the big bull run in oil and other commodities to become apparent. The 9/11 attacks were the catalyst for a boom that led to a doubling of the CRB index, until it topped out in May of 2006.

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DAILY US METALS COMMENTARY 09/20/06

METALS: OVERNIGHT CHANGES THROUGH 4:00 AM: GOLD -2.60, SILVER -6.50

London Gold Fix $576.25 -6.25 LME COPPER STKS 123,925 ml tns
+2,100 tons
GOLD stks 7.789 ml oz., -64 oz COMEX SILVER stks 105.5 ml oz
-126,199 oz

OVERNIGHT ACTION: Despite more reports of Asian physical buying interest, the European and US gold markets look to start today's session out softer.

OUTSIDE MARKET DEVELOPMENTS: With the metals market confronted with partially deflationary conditions yesterday and the numbers probably conducive to an oh-hold Fed decision later today, the generally bearish tone toward commodities was given a shelf life. However, while it is possible that the metals will get temporary boost from a Fed Pause, many in the market think that potential impact has already been factored into prices. With the oil market down aggressively yesterday and down rather hard again this morning, it is clear that massive amounts of capital is moving out of oil related investments but so far little of that money seems to be interested in the precious metals. However, the equity market does seem to be benefiting from the sharp slide in oil prices and persistent gains in equities might eventually serve to dampen the negative view toward physical commodities. The US Dollar overnight is slightly lower but remains within striking distance of its recent highs and that is also generally keeping the pressure on metals. It would be a little surprising to see the Dollar manage to rise through the Fed decision today and for that reason some metals traders might expect to see the currency impact actually lend some support to prices later today.

DJIA: Weekly support at 11280 and 11000. Resistance at 11670 and 11850.

DJTI: Weekly support at 4000. Resistance at 4600.

SP500: Weekly support at 1290 and 1260. Resistance at 1326 and 1350.

NASDAQ: Weekly resistance at 2240 and 2360. Support at 2120 and 2020.