The Never Ending Surge...
by Mary Anne & Pamela Aden
Gold nearing $1500, silver at $37, oil well above $100! What a month… what a year!
We’re seeing record highs in the gold price on a daily basis, silver soaring to 31 year highs day after day, while crude oil takes off, reaching 2½ year highs.
LOTS OF FUEL IN THE RISE
Escalating violence in Libya and spreading unrest in the Middle East is adding fuel to the already strong bull markets (see Chart 1).
The threat of possible supply disruptions is providing the real fire under oil, while demand continues to grow. Gold and silver in turn are the safe havens as inflation concerns and uncertainty prevail.
This turmoil will continue to keep upward pressure on these markets, but there’s more to this bull market... Rising consumer prices are becoming more evident, worldwide. That is, we’re now seeing the effects from a cause that’s been in place for quite a while.
FOOD & FIGHTS
As we’ve previously mentioned, the cause is a sea of liquidity that has pushed all of the markets higher.
This time around, soaring agricultural prices have been the most dangerous. Global food prices rose to a record. Rising food and oil are a deadly match because higher oil prices push food prices even higher.
Just since last June, 44 million people were pushed into extreme poverty according to the World Bank. This alone explains why governments are being toppled. With food costs taking up a much larger portion of a families’ income in the emerging world, it’s understandable that surging prices helped spur the outbreak in the Middle East and North Africa. The United Nations says other countries at risk of food riots are Bolivia and Mozambique.
Some say food is in a bubble, and possibly that’s true, but when you consider climate change, political change and geopolitical tension, together with price inflation, we don’t think a bubble is here… not yet.
VOLATILE TIMES AHEAD
We have an environment today that ensures volatile times ahead… times when protecting yourselves and your assets is most important.
One thing is certain… Demand is growing… no question about it. As each month passes, more people, sectors, and countries around the globe are buying and holding gold and silver. Most important, central banks are still buying and holding gold for the first time in 21 years. They made a structural shift in policy last year when they become net buyers.
REFLECTIONS
Now that gold is within a stone’s throw from the $1500 milestone, it’s time for some reflection. With the gold price on a 10 year journey with the best still to come, let’s take a walk through this bull market...
Gold was waking up from the dead in 2001, but it started to rise quietly thereafter (see Chart 2A). For four years its rise wasn’t taken seriously, even when silver and copper joined the upmove in 2003. The main argument was that it was dollar weakness, not a gold rise, that was moving the market.
But this changed in 2005. The first milestone occurred when gold broke clearly above $500. Gold soared in its first major surge in the bull market. This was the rise when it broke clearly away from the dollar and started soaring in all currencies.
This was a major feat! Gold became the strongest currency, and it went on to break up to record highs, reaching a peak in 2008 near $1000. Silver and copper also continued soaring as the housing boom and world economic growth heated up.
2009 was the next milestone when gold broke clearly above $1000. This started a stronger phase of the bull market and since then, gold hasn’t looked back soaring to its recent record closing high.
We’d say this rise has certainly lived up to a stronger phase, rising 66% since its April 2009 low, which is when the current rise first started.
The rule of thumb is, when gold’s rise reaches a new high for the bull market, it’s a super strong market. And as we’ve just seen, when it’s combined with the stronger phase of the bull market, it makes for an explosive rise.
And explosive it has been! With gold now approaching $1500, it’s near our first important target level for this stronger phase. Gold will most likely resist near $1500 before moving clearly above this level into the next phase of the bull market.
In the big picture and on the upside, once $1500 is well surpassed, the $2000 area will then be the next target. Will $5000 - $6000 or more end up being the final target? Time will tell. It looks like this is a possibility but more important is that we will stay with the trend for as long as it lasts.
As good as it’s been, gold is far from being in a bubble. And you must admit, it’s been the quietest bull market in history. Just ask the average person.
Aden Article
March 28, 2011,
by Mary Anne & Pamela Aden
Courtesy of www.adenforecast.com
