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Market Bulletin 8th April 2010

Gold is back in play

The Macro Trader’s view:
Our views on Gold have been well aired over the months, if not years. We are long-term bulls.
But the market has suffered several steep and often protracted corrections that have on
occasion endured for months.

We judge the market is currently in such a phase, but shows signs that it is now coming to an
end. Naturally we expect price action to resolve into a fresh leg of the long Bull Run. But what
have been the dynamics behind the market over recent months and why now is it beginning to
retest the upside?

The relationship between the Dollar and Gold has been well-established throughout the current
financial crisis/recession. A weak Dollar translated into strong Gold. The Dollar was weak due
to a steep economic downturn which led the US monetary authorities and Administration to
pump in unprecedented amounts of stimulus, which led China and others to criticize, as they
feared a debasement of their own massive foreign currency reserves, primarily Dollar-
denominated. So far, so good.

But the Dollar began a strong recovery late last year as several key data releases, principally
December 2009 Non-Farm Payroll, came in much stronger than expected. This coincided with
the Dubai debt crisis, which led to a sharp rise in risk aversion, benefitting the Dollar as traders
heavily bought into safe haven trades.

The Dubai crisis morphed into the Greek debt crisis, more safe-haven buying, all of which
worked against Gold.

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accuracy of any statements or forecasts contained herein and no responsibility or liability is accepted for losses arising from transactions undertaken or investments purchased, sold or
held on its recommendation. Consequently, any persons acting on information contained herein do so entirely at their own risk. Although the opinions contained herein were
considered valid at the time of release, financial markets are subject to rapid and unexpected movements. Seven Days Ahead, its associated companies, their directors, employees,
other customers or connected persons may from time to time undertake transactions or deal in investments mentioned in this information memorandum or have a material interest,
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Now the Dubai crisis is off the radar and the Greek drama, while still rumbling on, now has a
safety net, albeit of untested efficacy. As a result traders have largely turned their attention to
economic fundamentals, which have improved throughout this year.

Indeed the US economy looks to be slipping into a familiar recovery pattern as both ISM
surveys continue to strengthen and non-farm payroll last week reported a healthy 162,000 new
jobs.

Why then should this benefit Gold? Surely, stronger US data will benefit the Dollar? Yes to a
degree, and the last few days have seen the Dollar bounce on lingering Greek debt fears. |But
Gold too has been a major beneficiary. As the US recovery deepens and risk aversion
subsides, the Dollar loses its safe haven protection and becomes victim to the Feds low
interest rate policy which Bernanke has reiterated will remain in place for an extended period,
(several months). But, more important for the Dollar, is the US fiscal stance. The budget deficit
under Obama has exploded and so too the debt to GDP ratio and recent health reforms
compound the problem.

The Obama administration offers no credible plan to shrink the deficit, so while strong growth
supports the Dollar, heightened concern about US public finances undermine it thus the Gold
play can reassert itself.

If the US recovery runs true to past form, the current fiscal stance together with current
monetary policy could easily resolve in higher inflation. Other countries run similar policy mixes,
so the only asset class truly independent from national economic policies is Gold. It is the
original form of money and store of wealth.

The Fed’s stance is understandable: they don’t want to act too soon, but will when they are
convinced of a self-sustaining recovery. The Obama administration’s stance isn’t
understandable. Short-term fiscal stimulus was not only good but very necessary, but as the
economy recovers, the Government needs to wind down its spending and repair its finances.
Their inability to address traders’ fears on this matter is why we see Gold as a long-term bull
market.

SEVEN DAYS AHEAD Professional trading guides and recommendations for the World's markets

Authorised and Regulated by the FSA 124 REGENTS PARK ROADLONDON NW18XL TEL +44 (0) 7849 933573
E-MAIL MSTURDY@SEVENDAYSAHEAD.COM WWW.SEVENDAYSAHEAD.COM
This information memorandum has been prepared solely for informational purposes for customers of Seven Days Ahead and is based on publicly available information from sources
believed to be reliable. It is not an offer, recommendation or solicitation to buy or sell, nor is it an official confirmation of terms. No representation is made as to the completeness or
accuracy of any statements or forecasts contained herein and no responsibility or liability is accepted for losses arising from transactions undertaken or investments purchased, sold or
held on its recommendation. Consequently, any persons acting on information contained herein do so entirely at their own risk. Although the opinions contained herein were
considered valid at the time of release, financial markets are subject to rapid and unexpected movements. Seven Days Ahead, its associated companies, their directors, employees,
other customers or connected persons may from time to time undertake transactions or deal in investments mentioned in this information memorandum or have a material interest,
relationship or arrangement in relation to them.
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The Technical Trader’s view:

Gold 100 Troy Oz. COMEX Continuous

1250
WEEKLY CHART
1200

1150
The power and potential of the
1033.90 High 1100
continuation chart from mid
1050
2008 resides in the completed
1000
Head and Shoulders
950 continuation pattern set to drive
$873 Prior High in 1980 900
the market up to1350 as a
minimum.
850

800
Note too, the completed bull
Prior High support $732
falling wedge…
750

700

650

J A S O N D 2008 M A M J J A S O N D 2009 M A M J J A S O N D 2010 M A M J

Gold 100 Troy oz Globex COMEX Jun 10 1250

1245
1240
DAILY CHART
But the force of the weekly
1235
1230
1225
1220
1215
1210
1205
chart becomes all the more
1200
1195
1190
1185
clear when taken in conjunction
1180

High 1146.60
1175
1170
1165
with this additional Head and
1160
1155
1150 Shoulders pattern in the day
1145
1140
1135
1130
chart.
1125
1120
1115
1110
The pattern completed
1105
1100
1095
1090
yesterday.
1085
1080
1075 A confirmed close above the
1070
1075 High Prior 1065
Support October 1060
1055
neckline at 1134 today would
2009 1050
1045
1040
1035
sustain the bulls’ hopes.
1030
1025
1020
1015
The minimum measured move
1010
1005
1000
995
implied by the pattern? As far
990
985
980
as 1245.
975
970
150000 The bulls are in charge short,
100000
medium and long term.
50000

28 5 12 19 27 3 10 17 24 1 8 15 22 29 5 12 19 26 2 9 16 23 2 9 16 23 29 5 12 19
October November December 2010 February March April

Mark Sturdy, John Lewis

Seven Days Ahead
SEVEN DAYS AHEAD Professional trading guides and recommendations for the World's markets

Authorised and Regulated by the FSA 124 REGENTS PARK ROADLONDON NW18XL TEL +44 (0) 7849 933573
E-MAIL MSTURDY@SEVENDAYSAHEAD.COM WWW.SEVENDAYSAHEAD.COM
This information memorandum has been prepared solely for informational purposes for customers of Seven Days Ahead and is based on publicly available information from sources
believed to be reliable. It is not an offer, recommendation or solicitation to buy or sell, nor is it an official confirmation of terms. No representation is made as to the completeness or
accuracy of any statements or forecasts contained herein and no responsibility or liability is accepted for losses arising from transactions undertaken or investments purchased, sold or
held on its recommendation. Consequently, any persons acting on information contained herein do so entirely at their own risk. Although the opinions contained herein were
considered valid at the time of release, financial markets are subject to rapid and unexpected movements. Seven Days Ahead, its associated companies, their directors, employees,
other customers or connected persons may from time to time undertake transactions or deal in investments mentioned in this information memorandum or have a material interest,
relationship or arrangement in relation to them.