A PICTURE IS WORTH A
THOUSAND WORDS
This time we’ve decided to take an interesting look
at more charts, focusing on the big picture for the metals.
A picture is worth a thousand words and we think these pictures
tell a good story.
Gold rising in all currencies
To begin, Chart 1 tells a great
story because it shows gold’s been rising around the
world since 1999. Gold shot up in euro terms early on and
even though the euro and yen have been strong this past year,
gold in euro, yen or dollar terms has risen about the same
compared to where it started in 1999.
This is important because this is the basis
for a sustained rise in gold. Gold is the ultimate currency
and we believe it’s just a matter of time before gold
clearly breaks to new highs in all of the major currencies.
When that happens, gold will begin attracting a lot of attention
internationally, which will help fuel gold’s bull market
and drive the price even higher.
Gold’s Big Picture
Moving along, you can see gold since 1967 on Chart
2. Ever since gold’s been trading in the free
market, it’s formed an important bottom about every
eight years. And each low was followed by a rise lasting 3
to 5 years. The last major low occurred in February 2001,
and gold’s been rising since then, breaking clearly
above a 22 year downtrend, which was very bullish.
This rise has proven to have more power than
the rises in the 1980s and 1990s, as it’s broken above
two previous peaks, which is something gold hasn’t done
since the surging 1970s. Granted, the rise to date has risen
about the same distance as the 1985-87 rise. But the power
behind the rise, the complex world we live in today, together
with growing demand far surpass even the inflationary 1970s.
This means the current bull market is poised
to last longer, closer to the five year mark and 2006 could
be the likely year we see a peak similar to the peak in 1974.
Then a decline could occur, like the one in 1976, in say 2008-09,
which would coincide with the eight year cyclical bottom pattern.
And after that, a renewed super bull market could take place.
SILVER BETTER THAN GOLD
Silver has the characteristic of being a sleeper, but when
it wakes up, it quickly makes up for lost time. This has again
proven to be the case.
Silver has been quietly bottoming since 2001.
It popped up last November, gaining 34% in about two months.
Chart 3A shows silver, as well
as silver compared to gold below since 1982. Silver’s
been moving in a gradually rising upchannel since 1990, breaking
fanlines along the way. Fanline 3 was broken in recent months
as silver shot up to near the top of the channel. This is
very bullish action…
More impressive, silver is now outperforming gold for the
first time since 1997, as the ratio surged above its moving
average (see Chart 3B). This
is important because the ratio has now confirmed a massive
upchannel since 1987. This tell us silver is poised to outperform
gold this year and the percentage gains will likely be greater
in silver. Once the ratio rises into the “silver surge
zone,” silver could explode upward since it would also
be breaking out of a bigger trend.
PLATINUM & PALLADIUM: Changing places
Platinum and palladium have been moving in opposite directions
for the last three years, but that’s no longer the case.
Palladium is now turning bullish for the first
time since 2001 (see Chart 4A).
Its leading (long-term) indicator is also bottoming in an
extreme low area, last seen in 1982 (see Chart
4B). This strongly suggests palladium is at a major
bottom, which precedes strong price rises. The bottom line
is, palladium is a unique “screaming buy” opportunity.
It’ll now stay bullish above $210 and it could rise
to its first target level at the $300 to $400 level.
Palladium is very rare and industrial demand
is expected to increase, especially considering the extreme
price difference compared to platinum. Palladium was nearly
double the price of platinum in 2000 while it’s only
about one fourth of platinum’s price today.
WHAT TO DO
We recommend buying all of these metals, as well as gold and
silver shares. So far, the downward corrections in these markets
have been mild and they’re again showing renewed strength,
or at least holding firm, which is a good sign.
The U.S. dollar is hitting new lows and this
alone should continue to give these markets a boost.
Plus, the industrialization of China is having
an enormous impact on gold, oil and many commodities. We believe
this mega global trend will continue and it’ll keep
upward pressure on these markets.
As the charts show, these are major trends
currently underway and it looks like they have much further
to go on the upside. So stay with your positions and enjoy
the ride for as long as it lasts.
*******
Mary Anne and Pamela
Aden are internationally known investment analysts and editors
of The Aden Forecast, a market newsletter providing specific
forecasts on gold, gold shares and other major markets. Click
here to visit their website at http://www.adenforecast.com
|
