While bulls were looking forward to a dovish Fed statement, they seem to forget that it is based on ...
Most Investors Shrug Off Gold
11/19/2007 12:00 am EST
Pamela and Mary Anne Aden, editors of The Aden Forecast, say despite gold's rise it hasn't yet captured the public's imagination, and that's a good sign.
Huge moves have been taking place [in commodities]. It's a big deal but, with the exception of oil, not many people are paying attention. In fact, it seems like most people don't really care, and that's good for us.
This nonchalance tells us that gold's bull market still has a lot further to go. In other words, the normal psychological steps, which happen in any bull market, have barely gotten started.
Normally, for instance, you'll see the so-called smart money go into a developing bull market first. This includes investors who understand the markets and the big picture, some professionals and so on. As prices rise, more gold bugs will move in, usually followed by some early-bird Wall Street types.
This is basically where we are now, in the second phase. But this bull market rise is still lacking investor and Wall Street enthusiasm. We think that'll probably happen once gold hits a new record high above $850.
During the third phase of a bull market, the public jumps in. The public is usually late to the party and in their collective excitement, they'll drive prices up to extreme levels. The most recent example of this happened in the late 1990s, when tech stocks were all the rage.
The public is barely aware of gold's ongoing rise and they're not in the market. That's good, because the longer gold goes without attracting much attention, the higher it will ultimately go once the public starts moving in. This suggests that the gold price could literally skyrocket at some point to levels far higher than most people are expecting. And with world tensions increasing on several fronts, it's providing plenty of fuel for the markets.
These tensions are far from over, and they'll likely continue to keep a solid foundation under both [oil and gold]. As you know, international tensions are good for gold because it's historically a safe haven and gold rises as tensions increase. That's what's happening now.
Aside from the international scene, the US dollar has been falling more steeply. This, too, has been very bullish for gold and it drove the currency markets sharply higher, too. And the Fed lowering interest rates is going to push the dollar even lower as rates decline.
The bottom line is that all of these factors, combined with China's growth and demand, surging money and world liquidity, out-of-control spending and inflation pressures, means that this bull market in gold and other commodities is not only going to be a big one, but a long-lasting one as well. All of the evidence suggests that it's going to be a once-in-a-generation move and a very profitable one.
So despite gold's ups and downs, gold is near its $850 record high and once it reaches a
new high it'll mark a huge milestone. We're well-positioned in the strongest markets, and we strongly recommend staying with these positions and riding this bull market through to its conclusion. Enjoy the ride for as long as it lasts.
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