The Fed continues it’s liquidity program, interest rates are low and real rates are negative; these factors will give gold a boost, observes Mary Anne and Pamela Aden, co-editors of The Aden Forecast — and participants in Money, Metals & Mining Virtual Expo on August 24-26. Register here for free.
The unknown economic and political future is also driving safe haven markets. And safe haven demand has certainly been a force in the gold and Treasury bond markets. They’ve been moving together since 2000.
Many think they’re an odd couple because traditionally they were known as the inflation-deflation barometers. But safe haven demand has been a driving force for both markets for many years now. Chart 16 shows a closer up view of the past year.
Note how both began to decline from a peak a year ago, and they steadily declined to finally reach their lows in March 2021. Interestingly, bonds bottomed while gold rose in an A rise, but bonds then followed gold by rising sharply from the lows. Most interesting, both are poised to rise in major bull markets going forward, meaning safe havens will continue to shine.
What’s interesting is how undervalued gold is based on several measures. It’s cheap compared to the stock market, versus silver, and versus the resource sector, namely copper.
On the surface, it doesn’t seem like it with resources being all the rage, especially considering the recent infrastructure plan. Plus, technology, green energy and construction overall are all positive for the resource sector.
Chart 19 shows an interesting look at the bull market. There are several key items. First, that gold has been in a major uptrend since late 2008, the end of the financial crisis low.
Second, that the 2015 bull market low was indeed a major forming bottom until 2019 when it clearly broke its key resistence at $1380. Note this resistance was similar to the $1000 resistance in 2008-09 and gold broke clearly above it.
Granted, the $1000 break was the start of a second leg up in an already strong bull market rise, whereas today’s leg up since 2019 is the first leg in a strong bull market. Looking at the 2019 gold breakout, you can see that it was truly the first leg up in the current bull mar ket as it turned into a sharper rise and upchannel.
This was a great start to stronger growth and a further leg up. And it gives gold leeway on the downside within this stronger bull market parameter. So with this in mind, let’s take a closer look at the gold price today.
Chart 20A shows the 2019 break out rise up close. This rise was essentially a straight line up, well above both moving averages. This rise we call a C rise peaked a year ago, and gold’s been declining ever since. It’s now testing its 23 month moving average at $1750, but it’s bouncing up above it, and stabilizing at this low area.
That is, this B decline is within the norms of a normal B decline. Plus, the leading indicator has fallen to gold’s low area (20B). This suggests gold’s weakness is in the final stretch. We’ll be keeping a close eye on this.
Once gold rises back above $1800, the B decline will be over. Keep in mind, the next intermediate C rise tends to be the best intermediate rise in this A, B, C, D cycle. Gold could then rise back up to the highs and beyond in a strong bull market C rise.
A ‘C’ rise will be underway once gold rises above $1835. But if it fails to be a strong rise, for instance, it’ll be a bad sign for the bull market. These coming months will be very telling. For now, keep your positions and if you don’t have a full position, buy more during this weak time.
We all know silver is a special metal for today’s world of growth and technology. It was extremely undervalued until last summer when it shot up for the first time. It strongly outperformed gold, making up for lost time. The long term trend still favors a stronger silver price than gold.
When looking at silver’s big picture since 1968, you can see the mega bull market since 1971 (see Chart 22A). This mega bull moved in a stronger trend in 2020, marking the start of a stronger mega upchannel since 2001!
Meanwhile, the leading indicator bottomed in 2014 and it’s been on the rise since then, moving well above the zero line in 2020 (22B). This indicator has plenty of room to rise further before it reaches a high area.
Silver has been rising steadily from those 2020 lows. And according to silver’s steps, once silver rises clearly above $30, it’ll be moving smoothly into step 2, and a stronger phase in the bull market. We could then see $35 tested.
Eventually, silver will reach its peak area of 1980 and 2011 near $50. Those levels seem easy to surpass once the heat of the bull takes over, where silver could then rise to the top of the channel. Keep your silver and silver shares, including Pan American Silver (PAAS) and iShares Silver Trust (SLV). The upcoming rise looks exciting.
