Gold & Silver: Ready to Shine?
10/29/2004 12:00 am EST
"A renewed bull market in metals is underway," says Pamela and Mary Anne Aden . "Investors should buy positions in the strongest gold and silver shares." Here, the sisters discuss the outlook for metals and the best stocks in this market.
"Gold moves in what we call steps. These major moves determine the strength, or lack of strength, in a bull market. The steps were down for over 20 years from gold’s major peak in 1980 to 2001. But this changed in 2001, when gold didn’t fall to a new low. This was the first change in the over 20-year pattern. Gold then rose above its 65-week moving average where it has stayed since then. From there, gold soared above its prior peak in December 2002, again a first in over 20 years.
"This was a milestone because gold rose into the second step of the bull market and the 1996 high became the next target level, which gold reached this year. Since April, gold has stayed near the upper side of the bullish second step, showing strength. And now that gold is starting a renewed rise, if it closes and stays above the April high near $430, gold will be moving into the third bullish step. This would be a major feat because gold would then be hitting a 16-year high. If gold exceeds this milestone, the $500 level would then be the next target, which is near the 1983 and 1987 highs.
"Gold shares are jumping ahead of gold in a renewed rise. They’ve actually been basing quietly since May but the latest jump confirmed a renewed rise because it broke above the downtrend since December. Gold shares are now outperforming gold for the first time since December. Our leading indicator has been saying that a gold-share rise is coming. Now’s the time to have your gold shares purchased to ride this leg up. The best shares in the gold sector are Anglo Gold-Ashanti (AU NYSE), Bema Gold (BGO ASE), El Dorado Gold (EGO ASE), Glamis Gold (GLG NYSE), Newmont Mining (NEM NYSE), and Placer Dome (PDG NYSE).
"Silver is technically strong and it has great potential. This year’s run up in silver broke clearly above a downtrend since 1982. It now looks like silver is in the process of forming a powerful upchannel. If the April highs are clearly broken near $8.20, silver will be entering the upper side of the emerging upchannel and it could then rise to possibly $10-$12 next year. This emerging upchannel has support at $5.00. Now is the time to have your silver shares purchased to ride this leg up. In fact, while we recommend both silver and gold in your portfolio, we suggest that a heavier weight should be in silver. The best shares in the silver sector are Apex Silver Mines (SIL ASE), Coeur d’Alene (CDE NYSE), Hecla Mining (HL NYSE), Pan American Silver (PAAS NASDAQ), and Silver Standard (SSRI NASDAQ)."