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This
month’s jump up in precious metals, resources and oil reinforces that
the lows in February were likely the lows for the downward correction.
For now, the
second quarter is off to a good start. The fact that gold’s decline was
mild (down 13½%) is saying that the underlying bull market is strong
and solid. You should now have your positions bought and in place, waiting
for the bull market to further unfold.
Platinum and
palladium have been strong, reaching new highs and they seem to be leading
gold, silver and the metals shares in another leg up in the bull market. In
fact, the new highs in many commodities reinforces this.
BIG PICTURE
INVESTING BEST
Many of you know
the importance we place on the big picture. The big picture is most
important, and knowing where the mega and major trends lie is a key to good
investing.
Our main goal has
always been to invest in the major trends and to stay with them. We
can’t stress this enough because over the years we have found that more
money can be made this way, rather than trading the intermediate moves.
Sometimes trading
works well and when it does, it’s great. But unless you’re
prepared to devote a lot of time to trading, or follow the advice of a good,
professional trader, then it’s easy to make mistakes. This usually
happens when an investor becomes too emotionally involved.
Most frustrating
is that a major move can be missed because you’re too busy trading a
correction. And remember, the major moves are where your focus should be.
They’re the most profitable.
The latest
downward correction in the gold price provides a good example of what we
mean. We called this a ‘D’ decline and they tend to be steep.
 Since 2001, these
recurring D declines have ranged from a loss of about 7% to nearly 30%. The
November to February correction lost 13½%. This was moderate compared
to the last two D declines in 2006 and 2008, which were down 22.16% and
29.80%, respectively, and were the steepest so far (see Chart 1A).
We always receive
many letters regarding our leading indicators and this is one of our
favorites (Chart 1B). We know that gold’s major trend is up,
meaning it’s headed higher. But within this uptrend there are intermediate
ups and downs, and this indicator works well in identifying these ebbs and
flows within gold’s bull market.
Currently, for
instance, the gold price and the leading indicators are starting to rise.
This tells us that a renewed rise is beginning. But if you were waiting for
further gold weakness before buying more, then the market is slipping away
and you’re already missing out on part of the renewed strength.
This is why
it’s best to buy during weakness when possible, but not to try and get the
low. Averaging in during weakness is the ideal way to buy, and a big
picture approach makes it easier to just jump in and buy at any time.
For now, gold
looks ready to spring forward. Considering that just six months ago, the
$1000 level was a super break out point and today it’s a major support
level illustrates how gold’s slow and steady rise has been gaining
momentum.
The gold price
has broken above all resistance and the last remaining one is the November
closing high at $1218. Once $1218 is surpassed, gold could jump up to the
$1300 level before this intermediate rise is over.
GOLD’S
POTENTIAL
This means that
the bull market remains very strong, even though gold’s already been
rising for nine years. Chart 2 shows gold’s big picture since
1967 when it began to move in the free market.
 
Here you can see
an interesting pattern that’s been going on since 1969. Note that each
major eight year low was followed by a major peak 11 years later. The only
exception was the 1993 low, but in that case the low was mild within an
essentially quiet market (see asterisk).
If this 11 year
pattern continues, we could see gold shoot up to the $2000-$3000 level within
the next two years. But since today’s economic situation is
historically extreme, we could see much higher prices for a longer period of
time… well beyond 2012, and more like 2017-2018.
This is precisely
what we mean by staying with the major trend. It’s powerful right now
and we’ll stay with it for as long as it lasts.
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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