Gold's Big Picture:
Second Phase of Bull Market
By Mary Anne and Pamela Aden
The Aden Forecast
We'd like to show you the big picture of gold on Chart 1 since 1967. Gold tends to be a cyclical market and while it can be very volatile, it's also orderly. Note, for example, how gold reaches an important low about every eight years.
The last one occurred in November 2008, at the heat of the worst financial meltdown since the Great Depression.
 Most interesting and we want to emphasize this, gold reached a record high eight months before this November low. It then rose back up to a record high, ten months after the meltdown low, in September 2009.
That is, it only took gold 11/2 years to reach another record high, in spite of the collapse. This shows underlying strength and resilience.
The record high in September was a very important time for gold's bull market. This record high was the first real solid breakout above the 1980 and 2008 highs and it, therefore, confirmed the onset of a stronger phase of the bull market.
Plus, it was coming from an eight year low that tends to precede a good sized rise in gold. It was the perfect storm coming together in a stormy economic environment.
So far gold is acting out this scenario. It hasn't had a decent downward correction since November 2008. The biggest decline so far was an almost 14% decline in January of this year.
In other words, it's getting close to two years since gold has had a full downward correction. Plus, next month will make a year since gold broke out into this stronger phase and it's only been two months since the last record high was set.
Gold Timing:
'D' decline... how long?
 So here we are, in August, a seasonally low time for gold where many of the previous lows have occurred. A downward correction we call "D" has been in process since mid-June and this decline tends to be the worst decline in gold's intermediate cyclical movements. During the last one in November 2008 gold lost almost 30%, yet so far gold has only lost 8% during this Summer's weakness.
This weakness, however, is not over yet. But Chart 2 will help guide us along.
Here you can see the gold price with its key 65- week moving average (A). This average has been ideal in identifying the bull market trend since the 1970s.
This time around gold has stayed consistently above it since 2001. The only exception was in 2008 during the crisis.
"D" declines tend to be the correction that tests the bull trend. If it's now tested again, near $1090, we would buy with both hands. It would be an excellent buying time. And this level would only take the gold price down 10% from the June highs.
Chart 2B shows gold's leading indicator is starting to break its up- trend. This means if it stays clearly below it, the 2010 gold price lows could be tested.
One important reason why gold has not had a full downward correction is investment demand. It looks like the dips this Summer have been met with buying, but it's still to be seen how this weakness plays out.
If a full decline does not materialize during this second phase of the bull market, then gold could be nearing a dynamite move... yes even during its ninth year.
There are many skeptics who believe the end of the rise is near. We don't think so, but all we have to do is follow the trend, and stay on the right side of it, in order to ride the full bull market to maturity.
In the August 13th Weekly Update, the Aden sisters write, "It's starting to look like the Summer decline they call 'D' may be over, but it's too soon to tell. If gold (basis December) now stays clearly above $1210, the renewed rise will be gaining strength. This would be incredibly bullish for the whole nine year bull market because gold has not had a steep, 'normal' D decline since Nov 2008. The stronger phase of the bull market would be underway above $1258. The downside is still open though and we could see more weakness if gold declines below $1200."
Editor's Note: Pamela and Mary Anne Aden are co-editors of The Aden Forecast, P.O. Box 790260, St. Louis, MO 63179. 1 year, 12 issues, E-mail Weekly Updates included. $250. The Aden Forecast specializes in all major markets with special emphasis on the precious metals, currencies, and natural resource markets. www.adenforecast.com.
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