With gold turning down from its recent highs, some have questioned whether the 6-year bull market in metals may be ending. According to Mary Anne and Pamela Aden, the evidence points to the opposite conclusion. Indeed, they note, "Gold and silver have everything going for them and their rises have a lot further to go."
Here, the resource experts and co-editors of The Aden Forecast explain the six key factors they see that are pointing to higher metals prices.
The first two reasons are spending and money. They explain, "The world is swimming in money and that's the fuel that's been driving money assets and commodity prices up. But the magnitude of what's currently happening has never been seen before in world history."
The Adens points out that the U.S. is the world's largest debtor nation and "the government keeps spending money it doesn't have."
Since the government doesn't want to cut spending or raise taxes to reduce its debt, they note, "It simply produces money to cover its expenses, which is what governments throughout history have always done, and this amount is also huge."
In fact, in just over the past year, they observe, the amount of paper dollars that've been created is equal to half the value of all the gold that's ever been produced worldwide over the past 2,000 years, which is about $2 trillion. And it's not just the U.S. "Other countries are pumping out money like mad too. In Europe, for instance, money has been growing at the fastest rate in 17 years."
This creation of money, they note, is the direct cause of inflation, which is their third reason to buy gold. Gold, they note, thrives in an inflationary environment.
Further, those new dollars "cheapen the U.S. currency," which they claim is why it's falling. The Adens say, "That's our fourth positive for gold since gold and the dollar generally move in opposite directions. The U.S. owes piles of money to the rest of the world, and dozens of countries are cutting back on their dollar reserves, adding to the decline in the dollar's value."
The fifth reason for the bull market in metals to continue, they note, is China's growth, which they says will play an important role driving gold and commodities higher in the years ahead. They explain, "Over the past 20 years, China has become one of the largest, fastest growing economies in the world and this is expected to continue for the next 20 years or more."
They point out that demand is also growing in India and the former Soviet countries. "That's a lot of new demand and it'll continue driving commodities higher, providing an ideal backdrop for gold in the coming years because gold and the commodity markets generally move together."
Their sixth reason for a continued bull market in metals is international tension. They explain, "Unfortunately, war is good for gold. We obviously don't know what's going to happen on the geopolitical front in the years ahead. But looking at the world's current hot spots, tensions will likely continue and any trigger event could send both gold soaring."
As for silver, they note that in addition to the bullish reasoning for gold, silver also has an additional boost of being in a supply shortage. Their conclusion: "Gold and silver are going much higher in the years to come."
For investors, they recommend the gold and silver exchange traded funds – iShares Silver Trust (ASE: SLV) and streetTracks Gold Trust (NYSE: GLD).
Among individual stocks, their favorite silver shares are PanAmerican Silver (MASDAQ: PAAS), Hecla Mining (NYSE: HL) and Standard Silver Resources (NASDAQ: SSRI). Among gold shares, their favorites are El Dorado (ASE: EGO) and Gammon Lake (ASE: GRS).
Steven Halpern's TheStockAdvisors.com provides a free, daily overview of the latest stock ideas from the nation's leading financial newsletters.
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Reader Comments (Page 1 of 1)
3-02-2007 @ 12:03PM
Brad Kirkland said...
Hats off to you! FInally somone who "gets it" LOL.Just dont forget copper,paladium and uranium in the mix.Excellent blog and right on the pulse.