THE JACKSON HOLE EFFECT

During his much expected speech in Jackson Hole, the Fed Chairman, Bernanke, did not rule out another wave of stimulus actions by the Federal Reserve Bank. These news were enough to push stock markets upward and the Dollar downward. Stimulus means flooding the market with additional liquidity. QE3 seems to be a definite option following the speech of the Fed Chairman.

While gold has run up to $1,900 at the beginning of last week, a calmer and more relaxed financial environment has led to a correction of about $200.00. This significant market reaction could well be a first hint that investors are not ready to unconditionally support the recent rise of precious metals much longer. An extended period of consolidation or a significant correction could follow during the next few weeks and months. Although Gold closed the week again above $1,800 we consider a third price wave down the more likely scenario until the previous high is taken out. The psychological $2,000 mark may still be the market's main objective, however a new long position at these price levels could realistically not be supported.

Last week also brought an unwinding of typcial risk aversion trades primarily in the Euro/Swissie cross. A significant Swiss Franc high versus the Euro could have be established. A continuation of this corrective movement may finally push the Euro back towards or above 1,5 versus the Dollar. Few weeks ago we already mentioned that the technical chart set-up definitely supports a Euro move up.

Next Monday, Labor Day will mark the end of summer vacation time. We wish you all a few more relaxed sun and vacation days!

Enjoy an important last August trading week and don't forget September 2 will bring the important Nonfarm payrolls numbers.

Yours sincerely,
Gerhard