No Lost Decade for Gold, Commodities
12/15/2009 1:00 pm EST
Pamela and Mary Anne Aden, editors of The Aden Forecast, say the trends of the last decade will continue, which is good news for stocks and gold but bad news for the dollar.
The year 2000 marked the beginning of a new era. Starting in 2000, stocks fell sharply as the tech boom came to an abrupt end. Gold started to rise. This shift marked the beginning of a lost decade for stocks. The stock market has lost 10% since then, while gold has quintupled.
At the same time, the US dollar has steadily declined, and for the most part, so have interest rates. These have been the primary mega trends this decade, and as 2009 comes to an end, these trends were in full swing.
Gold, the other metals, and commodities (represented by silver and oil), US stocks, the global emerging stock markets, and the major currencies were the outstanding winners this year. The US dollar was the loser.
All of this year’s big winners were markets that fell last year as a result of the financial crisis, which hit just about everything. This year, they made up for lost time by rebounding strongly, with some markets wiping away last year’s losses.
Will these up moves continue [in] 2010? We believe that they will. But since these markets have all had significant gains, we’ll likely see corrections first before they resume their rises. These corrections could get started at any time.
Remember, no market goes straight up or straight down. Corrections along the way are normal and they’re healthy. The major trends are always the most important. That’s where the greatest profits are made. If you’re in for the long haul, then stay with the major trends and use corrections as an opportunity to buy more, but at a good price.
Wealth is shifting from West to East. Asia is booming, along with some of the other emerging markets, while the West is struggling and barely pulling itself out of recession. China has trillions in its reserves, the US is broke and it’s borrowing like there’s no tomorrow.
The bottom line is that the US has few options. Its debt is soaring to levels that were unthinkable just a couple of years ago, but it keeps on spending money that it does not have, so it has to keep borrowing more and more, and it won’t be able to pay these massive amounts back.
The only way out of this situation will be ongoing weakness in the dollar and the inflation option, which is historically the old, tried and true, least painful method of keeping it all together for as long as possible.
So, we can assume that the dollar will head lower in the years ahead. And at the same time, gold and commodities will move sharply higher.
As for stocks, they’ll likely continue rising as long as interest rates remain low. But the big moves are going to be in gold, the other precious metals, commodities and, to a lesser degree, the currency markets.