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Gold is amazing. It’s been very strong, hitting
record highs last week. Its bullish price action means investors and
governments know it’s time to be in safe assets. The result is, gold
continues to benefit as the world’s #1 safe haven.
GOLD IS MONEY
We’re also seeing first hand
gold’s role in the monetary system. Few people understand gold’s
importance over other forms of wealth but if there was ever a doubt,
it’s been erased by gold’s reaction to ongoing financial
developments.
Gold is money. Most governments regard gold as
a monetary instrument, and it has been the international currency for
thousands of years.
BIG PICTURE: Gold is best
Considering the big picture, there’s no
doubt gold is the best investment. The mega trend changed when the new
century began. A clear shift away from paper assets (like stocks) and into
tangibles (like gold) took place and a new era began. It wasn’t obvious
to the average investor because mega trends take lots of time for
investor’s mentality to gradually change.
Even though gold’s current rise is already
in its tenth bullish year, the trends are still solidly in gold’s
favor. These mega trends say… stay the course… stay with gold and
gold related investments.
Mega bull markets also take time to run their
course and this time will unlikely be an exception. Bull markets tend to end
in euphoria, when everyone’s invested and they can’t get enough
of it. Gold is far from this.
Comparing the current 10 year gold run to the
12 years leading up to the 2000 tech explosion in the stock market, and
gold’s bull market in the 1970s, you can see that gold’s rise is
still tame (see Chart 1). A bubble is still well into the future.
DEMAND GROWING AROUND THE WORLD
Demand for gold and silver grew even more last
month. Gold sales to Europe from the Perth Mint, for instance, soared as the
Greek debt crisis triggered a flight to gold. The U.S. Mint also had a busy
month, selling record amounts of gold and silver.
The Chinese and Indians were also buyers.
China’s gold bar sales doubled, while India’s gold demand soared
almost 700% in the first quarter. According to the World Gold Council, the
outlook for gold remains strong for the rest of 2010, both from investment
and jewelry demand.
BEST CERTAINTY
We’ve been watching the markets and
observing their behavior every day for 34 years. It has given us a good idea
as to how they interact, what moves them and when it’s the best time to
buy and sell. We’ve made mistakes, but overall our record has been
pretty good.
During this time, we’ve of course seen
that things change and the markets change in reaction. There are many
examples we could provide, but one that comes to mind was gold in the 1970s.
It soared due to rising inflation, rising
interest rates and a falling dollar. Also in the mix was economic and
political uncertainty like Watergate, the oil embargo, geopolitical problems
with Russia invading Afghanistan and the start of the Iraq-Iran war. That 10
year period was packed full of uncertainty.
And uncertainty is again at the forefront. The
current global environment is more intense and serious, which is keeping gold
up. Gold is the best certainty during times of uncertainty. And the way the
world is going, uncertainty will be with us for a long time.
TIMING THE BULL MARKET
Gold hasn’t given us much of a chance to
buy on weakness (see Chart 2). When you see that gold gained nearly
25% in 2009, and it’s up 12½% so far this year, it’s a
good reason why buying new positions gradually by averaging in is a good
strategy.
For now, gold has been in an intermediate rise
we call “C” for about 13 months. It’s lasted longer than
normal but by reaching a record high gold is telling us that the bull market
is very strong and it’s headed higher.
KEEP AN EYE ON…
We’ll see how far gold takes us this
time around, probably to near $1300 or higher. Summer months, however, tend
to be seasonally slow months for gold. On the downside, watch $1170 as gold
will remain in a strong 2010 rise above this level.
Mary Anne and
Pamela Aden
Editors, The Aden Forecast
Aden Forecast.com
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 and the other major markets.
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