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Friday, July 07, 2006

Gold/Commodities Update

I've had a couple of requests lately to give an updated commentary about what has been happening in the commodities world and more specifically with the gold market. Keep those emails coming. Alrighty here it goes.

The short answer about gold is that I think it is poised to go a lot higher in the next few months and years. Here's why. First a little about markets and the psychology behind them. Markets are all about fear and greed. When traders and investors smell blood in the water..i.e Iran's nuke situation, North Korea's sabre rattling, war in the Middle East, big inflation numbers....it's all a recipe for a great run up in the price of gold, hence the latest spike up to $740. I didn't even mention how our government is printing money like it's going out of style or our huge trade & budget deficits. It's fun to watch a market rise like gold has, especially when I have been writing about this happening for the last year. Some people actually took me up on my advice and made some nice coinage. Technically speaking, we saw gold breakout from its base of around $580/ounce and rocket to the $740/ounce area. It has since come back down and tested its breakout level of $580 and closed at $645 today basis the December futures contract. What does this mean? It means that we have just started the third Elliott Wave going higher(IMO) and look for this market to go a lot higher as I said earlier in the next few months and years.

The best way to position yourself to benefit from a continued move higher in gold is to figure out how much risk & leverage you want to use and can afford. You get the most bang for buck in the futures markets, but that vehicle also carries the biggest risk. You can buy the physical bullion or coins if you can't stomach the ups and downs of the market and don't want to worry about margin calls. You can also buy some of the good mining company stocks like Newmont, Goldcorp, and Coeur D Alene Mines. It just depends on how aggressive you want to be. I'm biased on the futures markets because I believe this market is going a lot higher and you get the huge leverage that will allow you to make a mint when this thing goes to $1000/ounce later this year or early next year. That's my latest gold commentary. I'm out


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