As we enter 2008, gold is hitting a new
record high. That’s a great way to kick off the new year and it looks
like there’s a lot more to come. Why?
This commodity upmove
is over six years old, yet it’s still young and it’ll likely last
another decade before it’s over. The falling dollar has certainly given
the commodities a boost and there’s really no reason why the dollar
will strengthen next year, which is a positive sign for the commodities.
But it’s important to keep in mind that
this is not just a reflection of the weak dollar. Most telling is to see the
commodities in a strong currency, like the euro. Chart 1 shows this clearly. Be it
oil, gold or the commodity index, they are all rising in a strong currency.
This is most impressive because it shows that a true commodity upmove is underway.
GOLD RISE IS SOLID
Gold is now at a new high in U.S. dollar
terms. It’s also at record highs in other currencies.
This reflects a strong rise, yet most people
don’t realize that gold’s at a record high within an almost seven
year old bull market! Gold’s been up every year since 2001, and 2007
was not an exception. Gold gained 31% in 2007, yet most investors do not own
gold. That’s going to change. As higher gold prices begin to attract
attention, investors will notice and they’ll jump in too. That’s
when gold will start soaring. That’s not happening yet, but it will and
probably sooner rather than later.
If gold stays above $850 it will have
completed its fourth step of the bull market. Chart 2 shows that gold entered the fourth step in
December 2005, when it broke above $500. That in itself was a milestone and
gold started to break away from the dollar. Gold has been rising steadily
since then. By staying above $850, the steps will be complete and gold will
be entering a new stronger phase of the bull market.
stronger than many markets
Gold has a lot going for it. It’s
strong compared to several currencies, and it’s stronger than the stock
and bond markets.
Chart 3A shows that gold
has been stronger than the Dow Industrials since 2000. This was a major
change and the trend in the ratio clearly favors
gold on a mega trend basis. The ratio reached an intermediate low last July
while the indicator (B) was at a gold too low area. Both have been rising
since then showing that gold has been outperforming stocks and it’s
poised to stay stronger.
There are many reasons why gold’s bull
market has further to run, and the ongoing political and financial
uncertainty in the world are just two important reasons why. Recent events in
have further reinforced this.
Gold is a safe haven, which is why demand is
rising. Even though gold’s bull market turns seven years old in
February, it’s strong and solid, and a buy and hold strategy is the
best way to make the most profits… ride the mega-major wave to
completion and keep in mind that the long-term trend has a lot further to
Anne and Pamela Aden
Editors, The 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 and the other