-->

Week of December 22, 2004

Gold's D decline is underway. Although gold is holding firm, the decline has further to run. Gold is vulnerable to a further decline by staying below $445. A close below $434 means it could decline to $425 and still be firm. Major support is at $405 and in a worst case this level could be tested. Silver remains weak below $7.10 and it could still decline further to possibly test its major support at $6.38. Gold shares are weaker than gold and they have room to decline further in this downward correction. The XAU and HUI indices have been holding near the lows for two weeks now, which shows stability but they remain vulnerable to a further decline by staying below 227 on the HUI index. A close below 213 would show renewed weakness. Platinum is neutral between $850 and $820 and a break out of this will tell the next direction. Copper reached another high this week and it's strong above $1.38. Palladium is bearish. As we said last week, sell palladium and PAL. Oil continues to bounce around, but the eight week downward correction is underway below $48.50. It could still decline further, and it'll likely stay volatile (see Webextra). The energy stocks have been holding up pretty well, but they are still under pressure.

The stock market is having a great year-end rally. The Dow Jones Industrials closed at a three year high today and it looks like it will end the year up. The Dow Utilities also jumped up to a new high today. The eight week rise is coinciding with the eight week decline in oil and the market will remain very strong above: 10555 on the Dow, 2115 on Nasdaq, 3670 on Transportations, 318 on Utilities and 1190 on S&P 500. If you have DIA, QQQQ and SPY keep close stops and sell if broken.

Of the world equity markets, Mexico and Australia are at new highs while others are firm. They continue to move with the U.S. market.

The U.S. dollar has been bottoming for 2½ weeks now. It's oversold and still poised to move up in a rebound rise (see Webextra). If the U.S. dollar index now holds above 81, and closes and stays above 82.50, the rebound rise will be underway. But even if the dollar index then rises to as high as 88, the major trend will remain down. This means the currencies are headed lower and if you want to take some profits, this is the time to do it. Long-term investors should ride through weakness because the major currency trends are bullish. For now, the following currencies are already correcting downward and that'll continue below:.8325 Canadian,.7740 Australian and.7150 New Zealand dollars. The same is true of the yen and Swiss franc below.9670 and.8700, respectively. The euro and British pound will soon likely follow the others, which would happen if they close and stay below 1.3250 and 1.91, respectively.

Bond yields continue to bottom like they've been doing for the past few months. But the 10 year yield is again approaching a key level and we're watching it closely. If the 10 year yield rises and stays above 4.25%, it'll mean the major trend is turning up for long-term rates (down for bond prices). That would be confirmed if the 30 year yield also stays above 5.04%. Below those levels, the yields will still be bottoming even if the 10 year yield declines to 3.97%.

Please remember, we will not have a weekly update next week but we'll be back on schedule Jan 5. Until then, we wish you a wonderful holiday season and a great New Year. Warm wishes, Pamela and Mary Anne

Pamela and Mary Anne