Gold stocks setting up. I am taking them in now.

At $680-$700 when I sold the rest of my gold and gold stock positions, I felt a little naked, but felt it was prudent. This morning Gold is back below $660, playing a little catch-up to the 30 plus percent declines in the gold stocks.

Then (Than?) I went and sold my Montreal Olympic coins and gold teeth and I was actually putting myself on the line. My dentist is a sucker. He has a thing for the gas – I have seen him. Rap artists around the globe were appalled.

Yesterday, Degraaf discusssed the gold vs. housing dilemma facing the Fed. It was a sweet train of thought that has helped me put together a likely scenario.

Here is my take of how it will play out. (please, I am not fully acting on this move, nor am I advising you to trade off my analysis. I am just thinking out loud).

Bush is really just a wimp and a coward. He is not interested in any real pain for his portfolio or close friends. He will flinch and try to force rates down again and help housing as much as he can. It is his best short-term shot at keeping the White House from being attacked from within during his remaining, horrifying term. It will be sooner, rather than later. Shit, the Chinese still have much to do before their 2008 Olympics and as our largest creditor should be able to force things to happen their way for a while still.

Gold – which this morning is down $20 to $660 will further fall to between $570-$630 depending on the rhetoric before fundamentals take over again.

I will schedule a dentist appointment and negotiate back my Olympic coins and refill my teeth. That will be the easiest part!

Gold Stocks – I look early having nibbled yesterday, will bottom before the metal – better be soon as the rate of decline has them at zero in 2 weeks. The bull market will reassert itself.

It’s very plausible – until it isn’t.

PS – Copper is limit down. My links to Bill Cara who I thought just nailed the call are looking perfect so far. I have no real opinions on copper right now as that has much different characteristics than Gold in the current environment.