 The
Election & The Metals Markets
Mary Anne & Pamela Aden
The Aden Sisters
Oct 11, 2004
Courtesy
of www.adenforecast.com
The metals markets are bubbling
and many are hitting impressive highs. But there's also a presidential
election coming up, which could go either way and many investors
are wondering how this will affect the metals markets. Let's
now take a look at what a Bush or Kerry win could mean for these
markets.
IF BUSH WINS
Bush will likely continue the
war on terror at the present rate since that's his top priority.
The war in Iraq will continue and it'll probably intensify. In
either case, that's going to mean ongoing spending and huge unprecedented
deficits.
These factors will keep upward
pressure on oil and inflation. It'll also keep the dollar weak,
especially since Bush has not been opposed to a weak dollar because
it's helped boost the economy.
This in turn would be very
bullish for gold, the other precious metals and gold shares since
gold is the ultimate inflation hedge and it also rises as the
dollar falls.
The major trends are currently
up for gold, the other metals, gold shares, oil and commodities.
The major trend is down for the U.S. dollar. Are these markets
forecasting a Bush win? Interestingly, if these major trends
stay intact, and there's every reason to believe they will, the
markets appear to be signaling a Bush winbut not necessarily.
IF KERRY WINS
A Kerry win would probably
fuel market uncertainty since he's a relative newcomer on the
world stage, resulting in volatile market action.
But since Kerry would also
stay the course in Iraq, spending and deficits would continue,
despite his plans to lower the deficit. So the results would
essentially be the same as under a Bush win.
In fact, if you combine the
war on terror expenses with more domestic spending for health
care and other benefits Kerry's proposing, the deficits could
soar even more than they did under Bush.
Some argue that Kerry would
lower U.S. expenses by getting other countries to help shoulder
the Iraq expenses. And while that's certainly a possibility,
if the savings end up being shifted to more domestic spending,
the end result would still be huge deficits.
The bottom line is that there
isn't much difference between the two candidates as far as how
it would affect the metals markets. Of course we obviously don't
know what the future holds, but for now it looks like little
would really change based on the election.
If that proves to be true,
the major market trends are likely to continue regardless of
who wins. As investors, this means you want to continue buying
and holding gold, silver, and gold and silver shares. These markets
should continue to do well, outperforming other markets in the
period ahead, and the action is currently very good.
GOLD'S STEPS: On solid track
Gold is now rising in what
we call a C rise. You'll remember, C rises are the best intermediate
rise in gold's bull market. All the C rises since the bull market
began in 2001 ended at a new high and if the bull market stays
on course, this C rise should do the same. This means gold will
likely rise above the prior peak at $430. And if it does, the
bull market will not only be on course but it'll be entering
a stronger phase, which is doubly exciting.
Chart 1 shows why since it helps put the overall
gold action in perspective. Gold moves in what we call steps,
which are not to be confused with the intermediate moves which
we'll get to in a minute. These major moves are identified on
the chart as 1 through 4 and they determine the strength, or
lack of strength in a bull market. The #1 rises are the best
bull market rises, whereas the #4 declines are the worst bear
market declines.
The steps were down for over
20 years from gold's major peak in 1980 to 2001. But this changed
in 2001. Gold didn't fall to a new low when it formed its #4
low as it had before. 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, which is bullish.
From there, the #1 rise began
and gold soared above its prior #3 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 in 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 breaking above the prior # 1 and #3 peaks, hitting a
16 year high.
So you can see why breaking
above $430 will be the next milestone for gold. The $500 level
would then be the next target, which is near the 1983 and 1987
highs, and the top side of the third step.
GOLD: C rise underway!
And it looks like gold above
$430 could happen soon. Chart 2B is our favorite gold
timing tool because it works well in identifying the intermediate
moves in the gold price. The As and Cs coincide with the intermediate
gold rises, while the Bs and Ds with gold declines. In a bull
market, the Cs are the best rises and the D declines are the
steepest downward corrections (see Chart 2A). Both the
A rises and B declines tend to be moderate.
Gold's been rising in a C rise
since September. Gold is now heating up and if it stays clearly
above the August high at $414, it'll have a straight shot at
reaching $430 quickly. Meanwhile, the major trend is up as long
as gold stays above its 65-week moving average at $392.
Oct 8, 2004
Mary Anne & Pamela Aden
The Aden Forecast
Mary
Anne & Pamela Aden are internationally known analysts and
editors of The Aden Forecast, a market newsletter providing specific
forecasts on gold, gold shares and the other major markets.
For more
information, go to http://www.adenforecast.com/
321gold Inc Miami
USA
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