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Gold and silver have been falling this
month.
The correction has so far been moderate,
but don’t be surprised if gold moves within a consolidation area for a
few months. Upcoming weakness will be the time to add to your positions.
The markets are sensitive and volatile.
This is why keeping focused on the major
trends is important. Staying focused on demand is also vital because a demand
based rise is the best and strongest rise in any market.
STRONG GLOBAL DEMAND
It’s not surprising that global
gold demand was impressive again last year. Investment demand was the main
driver, according to the World Gold Council.
Central banks made up a good part of
this demand as their gold reserves have increased by more than 500 tonnes over the past two years... And the central banks
are buying for the same reasons this year.
They want to diversify their reserves
and protect themselves against relying on one or two foreign currencies. They
want to continue restoring a balance and capitalize on gold’s rise as a
means of preserving national wealth and financial market stability.
Plus, China and India will continue to
play important roles in consumer demand, in spite of the recent global slowdown.
And with the average Chinese citizen being encouraged to buy gold, it nearly
guarantees that gold will continue rising.
FOCUS ON BIG PICTURE
Chart 1 shows
gold’s big picture, which is always a good picture to keep focused on.
When you see the over 40 year old mega upchannel
develop as it has, you can see how close gold is to reaching the $2,500
level, the top of this channel.
We think gold is poised to rise much
further than this in the years to come, but for now this is our next target
area, once gold breaks above the $1900 record high level.
The bull market has completed several
milestones with the first one being a rise above $500, then $1000, and now it’s $2500.
But first consolidation
Before any further record highs can be
attained, it looks like gold needs to take a several month breather. This
will be our next great buying area. Chart 2 shows this.
Gold tends to move in an A-D pattern on
an intermediate basis, as our subscribers know. The 16% rise from December to
late February was ideal for an “A” rise. They tend to be moderate
and they tend to recuperate a good part of the prior decline, which was from
September to December (D decline).
More important, the ‘A’ rise
and the ‘B’ decline together form a consolidation time, which is
probably where we are today. If gold now stays below $1,795, we could see it
decline further to possibly the $1,600 level in a normal B decline.
Even if the December lows are tested, it
would be fine within the bull market, and this would provide a great buying
time.
On the upside, gold would look good
again above $1795. It could then test the record highs. A break out into new
high territory would mark the next bullish C rise. Keep in mind,
as long as C rises continue to reach record highs, the bull market is strong
and healthy.
Mary Anne and
Pamela Aden
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