Energy and Gold

03/11/2005 12:00 am EST


Mary Anne & Pamela Aden

Co-Editors, The Aden Forecast

"The commodity sector is hot, especially the metals and energy sectors," say Pamela and Mary Anne Aden. "We believe that their major bull markets are on track, this upmove still has years of further advances." here, they discuss their favorite energy and metals plays.

"The CRB commodity index recently hit a 24-year high while oil, gold, and silver have started a renewed rise in the ongoing bull market. By the same token, the US dollar has reinforced its major downtrend, indicating it’s going lower as the bear market continues. This tells us we should still keep a high percentage of our portfolio in metals and energy related investments. Very simply, these are the strongest markets with the best profit potential for the months and probably year ahead.

"China has been one key factor in pushing up oil and natural resource shares as their growing demand has been heating up these sectors. So far, Chinese demand remains high and if their economy indeed slows down as some suspect, it’ll probably be temporary because China is the world’s growing giant. This alone is going to keep upward pressure on commodities. "The oil price is now near its all time highs. Most impressive, the leading indicator is rising from a low area and it has room to rise further before it’s too high. If it rose to the top of its trading channel like it did in 2000, the oil price could get as high as $70-$75.

"Our favorites energy plays encompass oil and gas, oil well services, and equipment companies. Even though we place more emphasis on technical strength, we also check the fundamentals for companies we recommend. Most of our recommended energy stocks are very strong and at new highs. We continue to recommend Diamond Offshore Drilling (DO NYSE), Transocean (RIG NYSE), Noble (NE NYSE), Devon Energy (DVN NYSE), Peabody Energy (BTU NYSE), Massey Energy (MEE NYSE), New Field Exploration (NFX NYSE), ChevronTexaco (CVX NYSE). We also like the exchange traded funds that are invested in the energy sector and recommend the iShares Dow US Energy (IYE ASE), the Energy SPDR (XLE ASE), and the iShares S&P Global Energy (IXC ASE)."

"Meanwhile, gold’s recent downward correction appears to have ended. The decline was normal in time and price action. Don’t be surprised if gold moves within a sideways band for several months. However, this action in a bull market tends to be the springboard for the next rise, which is the best rise in a bull market. Meanwhile, silver is the strongest precious metal. Its major trend is up above $6.60, it’s strong above $7.00 and once it closes and stays above the 2004 highs at $8.20, another leg up in the bull market will be underway.

"Gold and silver shares are starting a renewed rise along with gold and silver in a rise and we continue to recommend buying and keeping a 50% position divided between the actual metals, the StreetTRACKS Gold Trust (GLD NYSE), as well as our other fund recommendations such as US Global World Minerals (UNWPX), Tocqueville Gold (TGLDX), and Scudder Gold (SGDBX & SGLDX). We also suggest holding various mining shares. The strongest gold shares currently are Barrick Gold (ABX NYSE) and Wheaton River (WHT ASE). In addition, some silver-related shares that are rising with good potential include Silver Standard (SSRI NASDAQ), Pan American Silver (PAAS NASDAQ), and Apex Silver Mines (SIL ASE)."

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