• 288 days Will The ECB Continue To Hike Rates?
  • 288 days Forbes: Aramco Remains Largest Company In The Middle East
  • 290 days Caltech Scientists Succesfully Beam Back Solar Power From Space
  • 690 days Could Crypto Overtake Traditional Investment?
  • 694 days Americans Still Quitting Jobs At Record Pace
  • 696 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 699 days Is The Dollar Too Strong?
  • 700 days Big Tech Disappoints Investors on Earnings Calls
  • 701 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 702 days China Is Quietly Trying To Distance Itself From Russia
  • 703 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 707 days Crypto Investors Won Big In 2021
  • 707 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 708 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 710 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 710 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 714 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 714 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 715 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 717 days Are NFTs About To Take Over Gaming?
Billionaires Are Pushing Art To New Limits

Billionaires Are Pushing Art To New Limits

Welcome to Art Basel: The…

What's Behind The Global EV Sales Slowdown?

What's Behind The Global EV Sales Slowdown?

An economic slowdown in many…

Trade In Counterfeit Goods Hits Half A Trillion Dollars

Trade In Counterfeit Goods Hits Half A Trillion Dollars

The counterfeit market has breached…

Mary Anne & Pamela Aden

Mary Anne & Pamela Aden

Mary Anne and Pamela Aden are internationally known analysts and editors of The Aden Forecast, a market newsletter providing specific forecasts on gold, gold shares…

Contact Author

  1. Home
  2. Markets
  3. Other

Off to a Good Start in 2007

A renewed rise in gold, silver, and the other precious metals has started. They've been rising from their January 5 lows in a rise that is poised to become a great leg up in the ongoing bull market.

In fact, so far in 2007 the metals have been stronger than stocks. The gains in silver, for instance, have been five times that of the Dow Industrials, in spite of its record highs, and gold has risen more than three times the Industrials' rise. Furthermore, the Dow Industrials has declined 56% in gold terms since 1999. So gold continues to be the better investment by far.

A DIFFERENT WORLD

If gold is considered an alternative investment, then why has it been rising while the stock market reaches record highs? Granted, this is unusual but the world is unusual and it has been since the new century started... massive liquidity, globalization, China, India, emerging countries, more demand, rising markets, economic imbalances, debt, deficits and war. There are many items on the plate that have changed the world's landscape and one thing seems certain, these changes will continue to change the world and they'll keep upward pressure on gold.

GOLD IS SOLID

Gold is showing strength, in spite of a firm U.S. dollar as it has stayed above $600. The $600 level has been a solid support. Plus, demand remains strong from India and the oil producing countries, and China has become the world's third biggest consumer of gold after India and the U.S. Momentum has also picked up due to the drop in copper.

In addition, inflation continues to brew. The difficult war in Iraq and Iran's growing tensions in the region will unfortunately continue to give gold a boost as well.

Chart 1 shows gold adjusted for inflation. The point here is that gold is still underpriced and it could eventually reach $2200 in the years ahead, the 1980 high adjusted for inflation. This alone is impressive because it shows that gold at $2200 today would be the same as gold at $850 in 1980.

GOLD: Renewed rise has begun

For now, gold's current rise has the potential to surpass the May highs and possibly test the 1980 highs. You'll remember that gold reached a 25 year high last May at $722. It's essentially been consolidating that great rise since then, but now for the first time since May, gold has the potential to rise to a new high for the move.

Chart 2A shows you gold's cyclical A through D pattern. The C rises represent the best rise in a bull market, when gold hits a new bull market high. And when this happens, you know the bull market is solid.

As you can see, each C rise since 2001 has reached a new high. This means that if the current C rise fails to surpass the May peak, it would be a warning sign of a possible change.

So let's now see how far this C rise takes gold. If gold closes and stays above $668 basis April, it would then have a good chance of running up to the May high and surpassing it. But as long as April gold stays above $630, the current C rise will remain in force, indicating that these targets will continue to be within reach.

SILVER: The best precious metal

Silver also looks great. It's strong, solid and even though it weakened more than gold recently, it's still stronger than gold on a major trend basis (see Chart 3C). Silver shares have been the best of all, better than gold and silver, and much better than gold shares.

Silver is also poised to rise further. Chart 3A shows its solid rise above its rising 65-week moving average now at $11.30. With the leading indicator poised to move higher, silver now has the potential of reaching its May high near $14.88, and possibly surpassing it before the indicator reaches overbought (see Chart 3B).

Both gold and silver will be in a new ballgame above the May highs. Looking at silver's big picture on Chart 4, you can see that once silver breaks above the May high it will also be clearly breaking above its 1983 high, and it will be starting to enter the top side of its mega upchannel. Silver's next upside target would then be $22 before it eventually goes on to test the 1980 highs near $50.

For now, it's best to keep a larger portion of your metals portfolio in the physical metals or their ETFs, and keep more silver shares than gold shares.

 

Back to homepage

Leave a comment

Leave a comment