GOLD
Bull Market Gains Momemtum
By Mary Anne Aden and Pamela Aden
The Aden Forecast
Gold is a special market in more ways than one. Gold and gold shares are starting a renewed rise right on schedule. Gold is a cyclical market, which makes it easier to follow compared to other markets. That's why we've been taking this bull market one step at a time and so far the steps are in place.
Gold: A Step By Step Bull Market
Going
back a moment to tell you what we mean... gold reached an eight
year cycle low in February, 2001. That step is complete and so
far gold's been following the path it normally takes after a
cycle low. Gold, for instance, tends to rise for three to five
years afterward and gold turned bullish a year ago when it rose
above its 65-week moving average.
This average has also
worked best over the years in identifying the major trend. Gold
has stayed above this average for over a year now, which means
the major trend is up and gold is going higher as long as it
stays above the average now at $293 (see Chart 1A).
Within the major trend,
however, gold has an intermediate cycle that identifies medium-term
highs and lows. These are equally important to watch because
it tells us the ideal times to buy more and it helps to identify
the strength of the market (or the lack of strength).
It told us the downward
correction since June 4 was a normal correction in the bull market.
In fact, it was the first correction this year. It also told
us to start buying gold shares again last month because we were
near an intermediate low.
Gold $325: Next Step
So
far, so good. The steps are in place and the next important hurdle
for gold is breaking clearly above $325. Once that happens, a
more bullish phase of the bull market will begin. This level
is very important because it's the 1999 high. Since 1980 the
only decent gold rises, in 1985-87 and 1993-96, failed to rise
above the previous peak. This means if $325 is clearly broken,
it'll be the first time since 1980 that gold has risen higher
than the previous peak. This is the next important step and as
we write, gold is close to this level.
Chart 1B shows
gold's intermediate cycles. The As and Cs identify gold peaks
and the Bs and Ds show the bottoms. This is one of our favorites
because it's worked so well in identifying intermediate moves.
The gold decline since
June 4th was a D decline. It declined from a high of $327.90
to a low of $302.50 on July 29, while the indicator fell to a
low area. The gold decline was moderate compared to the strong
rise this year. And the fact that gold held above $300 during
weakness shows great strength.
An A rise is now getting
started and as long as gold stays above $315, it's strong within
the A rise. Gold essentially resisted at its 1999 high last June,
which makes it even more important to see if gold rises clearly
above this high. For a clean breakout, let's see if December
gold closes above $330.
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Gold will gain bullish momentum above this level, and it could then easily jump to $340 as the next target before the current A rise is over. If the A rise accomplishes this, then the bull market will be strong and well on its way as the steps continue to fall into place. On a timing basis, the A rise could last until November, which is the average time of previous A rises. Gold Better Than Stocks We
don't think this gold rise is casual. It's the start of a fundamental
change from financial assets to tangibles. The best place to
see this clearly is comparing gold to stocks. Gold Shares: Gold
shares are more volatile than gold. They fell much more than
gold in the D decline and they're now rising more than gold in
the renewed rise with several shares already reaching new highs
for the year. Gold shares are a great investment to just buy
and hold for the entire ride. Some people prefer selling at intermediate
peaks and buying near the lows, which is fine if you're prepared
to stay on top of the market. Not Just Platinum,
oil, soft commodities and to a lesser extent, silver are also
strong in major uptrends. The precious metals and commodities
tend to move together on a major trend basis. One may lead the
other, and at times for months, but once a solid trend is established,
they will move together. Metals And Gold Share Gold,
gold shares and platinum are starting to rise in a renewed rise
and they continue to be the best investment this year. |
