Gold remains a premiere investment and will end the year above $1,600 per ounce to mark the 12th consecutive year of increases for the metal, gold expert Pamela Aden of Aden Forecast said in a presentation at this week’s Hard Assets Conference in New York.
Investor’s need to see big picture for gold, Aden said, presenting data that show the metal in a “mega-uptrend” with a steadily rising pricing channel since 1967, including a narrower and much-accelerated price channel that has been evident since 2001.
“Gold has been our number one investment for many years,” Aden said. “Granted, it has been down for eight months now, and today’s price is near the December lows.” She noted the metal had started the week on a down note, but said, “That doesn’t mean that the bull market’s over, it just means we’re in a correction.”
Equities also present some investment allure right now, but gold has outperformed stocks and bonds to rise 660% in the course of an 11-year bull run through 2011, Aden said, adding that she doesn’t think gold a bubble. The current correction is temporary and relatively mild compared with gold’s overall rise.
Seen in a longer term perspective, the gold price is down only 19% since September but still has a 170% gain from the 2008 crisis low, Aden said.
“Gold is the alternate currency. Although you wouldn’t know it this year, just as you didn’t know it in 2008,” Aden continued. “It’s just that, for the moment, when the panic sets in, [the market focus] goes to the dollar. The dollar has been stable. It hasn’t really been rising. It’s still lower than January’s high. But gold has been the ultimate currency for the past 1,000 years. No paper currency has survived.”
Since 1971, when the US dollar went off the gold standard, there has been little discipline in the financial system, Aden explained. The total of US debt and liabilities now amounts to $1 million per taxpayer, she said.
“The question is: how to protect yourself under those circumstances,” Aden continued. “The bottom line is that this debt will not go away.”
Meanwhile, the world’s central banks are moving out of dollars. China, for example, is cutting back sharply on US bonds, Aden said, and attributed gold’s strength in recent years primarily to central bank accumulation of the metal.
Silver likewise has been in and uptrend and has exhibited a steadily rising price channel since 1971, with the channel having narrowed but accelerated upward beginning in 2003.
“Silver does have these erratic moves. You can sit on it for a couple of years (and) it doesn’t do anything. Then all of a sudden it triples in price,” Aden said.
If the December lows are broken, however, gold could go lower in the short term, Aden warned. A gold price below $1,600 per ounce and a silver price below $30 per ounce represent excellent buying opportunities, she added. The summer months, notably June and August, are typically the low pricing months for gold, she said, and predicted that the metal will be back above $1,600 per ounce by year’s end.
Chris Munford researches and writes about commodities, with an emphasis on steel raw materials and energy. He is based in the New York area.