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COMMODITIES, GOLD & OIL: They're
all hot
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The CRB commodity index jumped up to its 1980 highs, copper
hit its 1995 highs and the oil price is at a record high.
Meanwhile gold, silver and their shares are in a renewed rise
in the ongoing bull market.
The commodity sector is hot, especially the natural resource
and energy sector. We believe this primary upmove in commodities
still has years of further advances. Why?
AGAIN, IT'S CHINA
China has been one key factor in pushing up oil and natural
resource shares as their growing demand has been heating up
these sectors. So far, Chinese demand remains high and if
their economy indeed slows down as some suspect, it'll probably
be temporary because China is the world's growing giant.
This alone is going to keep upward pressure on commodities
and we feel it's important to understand this and invest accordingly.
It's also going to keep upward pressure on inflation, especially
combined with the Fed's ongoing easy monetary policies. This
has been one important reason why the U.S. dollar has been
weak and these factors will all continue to be bullish for
gold and the other metals.
GOLD: Renewed rise
Gold's 10 week downward correction we call D
ended on February 8, and an 'A' rise then began as Chart 1A
shows. The D decline was normal in time and price action since
it ended within the average time period and gold fell to its
65-week moving average. The leading indicator also dropped
to the extreme low area, which is typical for a D decline
(see Chart 1B).
'A' rises tend to be moderate, which means if gold doesn't
reach a new high and simply consolidates, say staying between
$413 (major support) and $455, this would be normal. In fact,
since the upcoming B decline also tends to be moderate, don't
be surprised if gold moves within a sideways band for several
months. Time wise, the current A rise could end toward the
end of this month or in April.
This action in a bull market tends to be the springboard
for the next C rise, which is the best rise in a bull market.
But 'A' rises can occasionally reach new highs and if it does,
then the bull market would be very strong.
The point is, some consolidation in the months just ahead
would be normal before a stronger rise occurs in the second
half of the year. Most important, the bull market in gold
that began in 2001 will remain on track as long as gold stays
above $413, meaning new bull market highs are coming.
SILVER: Stronger than gold
Silver is the strongest precious metal as you can see on
Charts 2B & C. Silver's major trend is up above $6.60,
it's strong above $7.00 and once it closes and stays above
the 2004 highs at $8.20, another leg up in the bull market
will be underway (see Chart 2A).
Copper is stronger than silver as the ratio
is declining (see Chart 2D). Copper is heavily used in construction
and Chinese demand has been keeping copper strong. It recently
reached its 1995 highs and the major trend is up above $1.30.
COMMODITIES: On the rise
The CRB commodity index has been soaring (see Chart 3). This
index is made up of 17 commodities encompassing energy, soft
commodities and metals. Driven in large part by the renewed
oil price rise, the CRB hit a 24 year high this month and
over the past three years it's risen over 60%.
Last time we showed you that a major upmove is just beginning
in the big 200 year picture of commodity prices. This will
likely coincide with China's growth and ongoing demand.
For now, these markets are where the action is. And as long
as that's the case, we strongly recommend you stay focused
on gold and the other metals, their shares and commodities.
*******
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
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