What’s the Upside for Gold and Silver?

02/25/2014 9:00 am EST

Focus: COMMODITIES

Mary Anne & Pamela Aden

Co-Editors, The Aden Forecast

Gold broke out to a 3+ month high and gold shares are rising even more than gold. As such, we recommend buying both gold and gold mining shares, suggests Mary Anne and Pamela Aden, editors of The Aden Forecast.

The gold market has been the weakest and most hated market over the last several years. But gold has found support. If these levels hold, we could see gold continue to outperform stocks, and possibly bonds later this year.

Gold's breakout, above $1,265 shows that an intermediate rise has started. Gold is now clearly above its 15-week moving average and gold shares are as well.

If gold now stays above $1,265, it could rise to the $1,420 level. If the $1,420 level is surpassed, we could see gold jump up to the $1,536 level, which was the old support of a year ago, before gold fell last April.

Keep in mind, this type of rise, as good as it would be, would merely be erasing the worst part of the 2013 decline. The market won't begin to look like it's really bullish until it surpasses the $1,536 level. These are the stepping stones we could see going forward.

Meanwhile, on the downside, gold below $1,265 means it could test the December lows once again. Then the $1,180 level would be the key support to watch.

When comparing gold shares to gold, you can see gold shares are set to continue outperforming gold. The ratio is breaking out of an over one year downtrend, within a clearly bombed out area. This means gold shares could outperform gold this year, and possibly next.

Silver has been quietly bottoming, and it's ready to take off and follow gold. It broke above $20.50 and we could now see it jump up to its August high near $25.

This level is also the top side of an almost three year down channel, as well as its 65-week moving average. A clear break above $25 would begin to show real promise of a turn around.

It's not too late to buy gold, silver, and their shares, if you don't have all of your 20% positions in place. The shares have been stronger. We continue to recommend buying Silver Wheaton(SLW) and Agnico Eagle (AEM).

Central Fund of Canada (CEF) has been on our list for many years. We continue to like it because it has both gold and silver. We continue to recommend the ETFs, such as SPDR Gold Trust (GLD), as it's also still best to keep more physical than paper gold and silver.

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