Gold to reach $450 shortly

by John Lee

03/14/2005

US Dollar

We wrote two weeks ago

"While we expect some traders to take profits from their dollar short position, there are a lot more dollar-long people looking for exit. We expect the dollar to consolidate in the low 80's. We don't see a strong dollar rebound in the near term."

The dollar plummeted on the news of $58 billion trade deficit number. The number will only worsen with now record crude. Should dollar rebound from all time low of 81, the most upside we see is 200 DMA of 86.

Swiss Francs:

Swiss Francs shot up in the last two weeks, Sfrancs commercials barely changed position, remains 4k contracts net short. In our view Sfrancs is unlikely to test 200 DMA support of 82.5. A blow off move to new high is quite possible.

US bonds:

Bonds have corrected back to 200 DMA. The past has shown that if 200 DMA is breached, additional 5% downfall is in the cards. Fundamentals of bonds remain horrible. What keeps bonds (and the dollar) up at this juncture is global central bank diluting their own currencies to support the dollar and bonds.

Gold:

We said two weeks ago

"We see gold to grind up to $450 in the next 2-3 weeks."

Our view remains that gold will reach $450 target possibly this week. $430 acts as solid support, should dollar stages a decent rebound. Gold is unlikely to test 200 DMA of $420.

Silver

We wrote two weeks ago

"Silver declined a little. $7 acts as strong support."

We want to show a long-term chart of silver

Reader should also read silver's relationship to Uranium
http://goldinsider.com/uranium.htm
Commercial data strongly indicates a silver breakout of $8 with in next 30 days. Our next target is $12. The risk now is not being in silver.

Palladium

We wrote two weeks ago

"The following chart paints a bullish picture. We have a hard time believing palladium to break down amid a rising CRB."

Palladium surged and subsequently corrected. It presents a wonderful entry point. We are active buyers.

XAU

We wrote two weeks ago

"100 may present some resistance but we don't see XAU fall below 200 DMA of 90. XAU should easily take out 100 should gold continue to rise this week."

XAU broke through 100 with minimal trouble. A quick retest to 100 will enable XAU to test 110. 110 can be overcome on the first try should gold takes out $450 with conviction.

Summary:

We wrote two weeks ago

"The dollar is truly in a precarious position as there are easily over 1 dozen countries with the power to bring down the dollar for good."

In the last two weeks, Japan and India have joined South Korea in voicing concern of the bloating dollar reserves. While deficits matter, the dollar and gold are strictly central bank plays at this juncture. With dollar index near all time low, we view a dollar index rebound and dollar breakdown with equal possibility. As such we don't advise clients to be overly leveraged to gold at this time. However, once gold takes out $450 we should see $480 shortly after. Subscribers can access our March newsletter on what to buy to ride palladium and an assortment of other relatively low risk investments.