Our proprietary Aden Metals Index now shows precious metals are a good buy compared to base metals, explains Mary Anne and Pamela Aden, editors of the industry-leading advisory The Aden Forecast — and participants in MoneyShow's Metals & Mining Virtual Event on April 20-22. Register for free here.
Our index shows a ratio of several precious metals as a group compared to a group of base metals. When the ratio rises, industrials are better than precious metals. And on the flip side, precious metals are better than industrial metals when the ratio declines.
Note in Chart 19 below that the ratio fell to a multi year low a year ago. It was saying it’s time to buy base materials more so than precious metals. It was time for them to shine. And this is what we got over the last six months, a strong resource sector.
But now it’s flashing to buy precious metals over base metals. In other words, it’s time for gold to shine over copper, using this example as the basis for the sectors.
Plus, comparing gold to the Dow Jones Industrials you can see how their strength compares on a big picture basis. Chart 20 below shows this ratio with its mega 80-month moving average.
Note, when the ratio declines, like it did in 1967-1980 and 2000-2011, gold was stronger than the stock market. Conversely, when it rose, like in 1980-2000 and 2011-2018, the stock market was stronger than gold.
We’ve been seeing a change since 2018 when gold broke out into a stronger bull market. The ratio declined below its moving average for the first time since 2001. It’s now at a critical juncture.
A mega triangle has formed. This past six months has caused the ratio to rise favoring stocks but it’s coming up to this 2000 downtrend.
The bottom line is that if the ratio breaks above it, the stock market trend will be stronger. But if the ratio declines back below the moving average and heads lower, we’ll see gold outperform stocks like it’s been doing since 2018.
It’s getting close. But actually, we think the stock market, like the gold market, has more upside in its favor. So this could mean that gold rises more while the stock market takes a breather decline.
The gold universe is starting the second quarter with a bang. It’s one of the best value investments around. Gold reached the "D decline low" in March and the others followed suit.
If you don’t have all your positions set in the precious metals, we think that now is a good time to buy new positions.