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Monday, March 05, 2007

Monday Is Chart Day -- Hammer of the Golds Edition

The unwinding of the carry trade is hammering gold even as the US dollar goes down. Why? Apparently a lot of people in Japan were borrowing money to speculate in gold. They need the money to meet margin calls in other areas, so those funds are rushing the other way now.

This is giving us the sharp (and hopefully short) downdraft we're experiencing. But we're finally starting to hear some doom and gloom on CNBC. We need enough doom and gloom for a sentiment extreme, then we can start buying again. I'll keep you posted.

Now, let's look at silver ...

Silver looks very similar to gold. The real test for both is, “will investors pour money into gold and silver ETFs on the downturn?” They have in the past. If they do so this time, this downturn could end quickly. If not, selling from the silver and gold ETFs could actually worsen this downturn. I'm betting on buying, but we'll see how it turns out.

Now, the CCI Index, which tracks 17 equally weighted commodities ...

The CCI Index is what the CRB Index before they heavily weighted it to energy. You can see it looks very bullish, and has two levels of support.

Here are some news stories of interest this morning ...

Gold Drops to 5-Week Low as Investors Cut Fund Holdings Amid Stock Slide Gold fell to a five-week low on selling by investors holding the precious metal in exchange-traded funds after a slump in Asian and European stocks.

Yen Climbs to Three-Month High as Investors Reduce Higher-Yielding Trades The yen surged to the highest in almost three months against the dollar as Asian and European stocks extended a slump, prompting investors to unwind riskier investments funded by borrowing in Japan.

China to Consider `Gradually' Widening Yuan Daily Trading Band, Zhou Says Yuan flexibility is ``desirable'' and China can consider ``gradually'' widening the yuan's trading band, central bank Governor Zhou Xiaochuan said.

Oil Falls a Second Day on Concern Global Growth May Slow, Cutting Demand Crude oil declined for a second day on concern global economic growth will slow, reducing fuel demand.

Mexican leader acts to increase dwindling oil production In a bid to offset plummeting yields from Mexico's largest oil field, President Felipe Calderon unveiled plans Friday to boost production from a cluster of oil fields known as Ku-Maloob-Zaap.

Last year it initially estimated that production from Cantarell would drop by 150,000 barrels a day, but it later confirmed the actual decline was more than 400,000 barrels — from 2 million to 1.57 million barrels a day since January 2006.

XX My Monday morning take -- I'm expecting to see wash-out selling this week. But will it be early in the week or later? We need a good washout to find our new support. If we don't get it this week, I'll start swearing a lot. But try not to stress too much over this -- leave that to me, LOL. And have a great Monday.


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