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D Decline Getting Closer

The gold universe remains strong but it's also overbought and it looks poised to decline in an upcoming D decline. Gold and the dollar have been moving opposite since March when the pandemic started heating up. Gold soared and the dollar index fell, and it was after a time when they had been moving together, notes Pamela and Mary Anne Aden, co-editors of the Aden Forecast newsletter (see chart).

The key now is to watch the moving averages (MA) closely. This is the time when MAs work best. After a big rise or fall, they tell us when the intermediate trend is changing. The next chart shows gold, the HUI index and silver with their 5 week moving averages since March. This is a short term average and it's saying that once it's clearly broken, and stays there, a correction will be underway. That is, a D decline will be starting, and it's still to be seen how steep it'll be. Keep in mind, D declines tend to be the sharpest decline in the ABCD moves and they tend to last several months. So don't get discouraged if this happens. It also means the dollar will then most likely rise in a rebound rise.

Keep an eye on $1940 for gold, 320 for the HUI index and $24.50 for silver. Once these levels are clearly broken, the weakness will be underway. The next stop could then be $1800 for gold, 300 for HUI and $20.50 for silver. But even if they decline to these levels, the market will still be firm. Like we've been saying, we're keeping our positions throughout the weakness, and we suggest you do the same. But if you feel better taking profits and buying later, if this situation works for you, then go ahead and take some profits. Copper and crude oil remain firm. Copper shot up to another high this week, reaching $3, while oil is holding above $41, showing firmness.

The U.S. dollar index hit another over 2+ year low this week. It's clearly bearish and it's set to fall much further. That is, our recommended currencies are bullish and they're poised to head higher. Continue to buy and/or hold the euro (FXE), Swiss franc (FXF), Australian dollar (FXA) and the Canadian dollar (FXC). We also like the U.S. Dollar Bearish ETF (UDN). For now though, the dollar has room to take a breather, and if it closes and stays above 94, we could see a rebound rise develop.

Long-term interest rates are inching up. And even though we expect rates to stay low in the months ahead, this is putting some downward pressure on bond prices while they continue to form a wide top. Basically, bonds are still vulnerable, high risk and it's best to avoid them for now.

Editor’s Note: The Aden Forecast, co-edited by Mary Anne and Pamela Aden, 1 year, $250, is considered one of the most influential investment publications in the world today. The Aden Forecast, now in its 39th year, specializes in the U.S. stock market, mutual funds, U.S. interest rates and bonds, the international stock and bond markets, the foreign exchange and precious metals markets. For more information visit www.adenforecast.com.

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