March 13, 2007

Courtesy of www.adenforecast.com

When gold turned technically bullish in August 2001, we decided to take this bull market in steps. At the time, we felt that if the steps develop in a positive way, we’ll know that this bull market is real and strong.

Chart 1 shows the steps. They are simple. Basically, when gold rose higher than a prior peak, which it did as the years went by, it then moved into a higher step.

Gold rose into the fourth and final step a year ago December when it broke clearly above the $500 level. That was a big deal and it still is because that was a resistance level going all the way back to 1983 and gold has held above this level since then, even in spite of last year’s decline.

Gold is now rising in a renewed rise, solidly above $606, its major 65-week moving average.  And time will tell when gold eventually breaks out of the fourth step, reaching record highs. Once this happens, gold will be in new territory and it could soar. At that point, a new era will start and the steps will be complete.

So when could this take place? It seems to us that during one of gold’s C rises, a new record high could be reached.

During a bull market, C rises are the best, strongest intermediate rises and they tend to reach new bull market highs. In fact, this in itself shows that a strong bull market is underway. The last C rise, for example, was spectacular, taking gold to a 26 year high last May.

RENEWED RISE STILL UNDERWAY

And now, essentially since the new year began on January 5, gold’s been rising in the first C rise since May, despite its recent volatility. Gold is strong above $643 (basis April) and it’s now open to test the May high near $722. 

If the May high can be surpassed, then this C rise will be very bullish because it will have met the criteria of reaching a new bull market high. Gold could then test the 1980 highs near $850.

It’s still to be seen if gold can start a new era by exceeding $850 during the current C rise. But there’s really no rush, testing the old highs would be a great accomplishment.

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Mary Anne & Pamela Aden are well known analysts and editors of The Aden Forecast, a market newsletter providing specific forecasts and recommendations on gold, stocks, interest rates and the other major markets. For more information, go to www.adenforecast.com