A Picture is Worth a Thousand Words
This time we've decided to take an interesting look at more charts, focusing on the big picture for the metals. A picture is worth a thousand words and we think these pictures tell a good story.
Gold rising in all currencies
To begin, Chart 1 tells a great story because it shows gold's been rising around the world since 1999. Gold shot up in euro terms early on and even though the euro and yen have been strong this past year, gold in euro, yen or dollar terms has risen about the same compared to where it started in 1999.
This is important because this is the basis for a sustained rise in gold. Gold is the ultimate currency and we believe it's just a matter of time before gold clearly breaks to new highs in all of the major currencies. When that happens, gold will begin attracting a lot of attention internationally, which will help fuel gold's bull market and drive the price even higher.
Gold's Big Picture
Moving along, you can see gold since 1967 on Chart 2. Ever since gold's been trading in the free market, it's formed an important bottom about every eight years. And each low was followed by a rise lasting 3 to 5 years. The last major low occurred in February 2001, and gold's been rising since then, breaking clearly above a 22 year downtrend, which was very bullish.
This rise has proven to have more power than the rises in the 1980s and 1990s, as it's broken above two previous peaks, which is something gold hasn't done since the surging 1970s. Granted, the rise to date has risen about the same distance as the 1985-87 rise. But the power behind the rise, the complex world we live in today, together with growing demand far surpass even the inflationary 1970s.
This means the current bull market is poised to last longer, closer to the five year mark and 2006 could be the likely year we see a peak similar to the peak in 1974. Then a decline could occur, like the one in 1976, in say 2008-09, which would coincide with the eight year cyclical bottom pattern. And after that, a renewed super bull market could take place.
Silver Better than Gold
Silver has the characteristic of being a sleeper, but when it wakes up, it quickly makes up for lost time. This has again proven to be the case.
Silver has been quietly bottoming since 2001. It popped up last November, gaining 34% in about two months. Chart 3A shows silver, as well as silver compared to gold below since 1982. Silver's been moving in a gradually rising upchannel since 1990, breaking fanlines along the way. Fanline 3 was broken in recent months as silver shot up to near the top of the channel. This is very bullish action...
More impressive, silver is now outperforming gold for the first time since 1997, as the ratio surged above its moving average (see Chart 3B). This is important because the ratio has now confirmed a massive upchannel since 1987. This tell us silver is poised to outperform gold this year and the percentage gains will likely be greater in silver. Once the ratio rises into the "silver surge zone," silver could explode upward since it would also be breaking out of a bigger trend.
Platinum & Palladium: Changing places
Platinum and palladium have been moving in opposite directions for the last three years, but that's no longer the case.
Palladium is now turning bullish for the first time since 2001 (see Chart 4A). Its leading (long-term) indicator is also bottoming in an extreme low area, last seen in 1982 (see Chart 4B). This strongly suggests palladium is at a major bottom, which precedes strong price rises. The bottom line is, palladium is a unique "screaming buy" opportunity. It'll now stay bullish above $210 and it could rise to its first target level at the $300 to $400 level.
Palladium is very rare and industrial demand is expected to increase, especially considering the extreme price difference compared to platinum. Palladium was nearly double the price of platinum in 2000 while it's only about one fourth of platinum's price today.
What To Do
We recommend buying all of these metals, as well as gold and silver shares. So far, the downward corrections in these markets have been mild and they're again showing renewed strength, or at least holding firm, which is a good sign.
The U.S. dollar is hitting new lows and this alone should continue to give these markets a boost.
Plus, the industrialization of China is having an enormous impact on gold, oil and many commodities. We believe this mega global trend will continue and it'll keep upward pressure on these markets.
As the charts show, these are major trends currently underway and it looks like they have much further to go on the upside. So stay with your positions and enjoy the ride for as long as it lasts.