Courtesy of www.adenforecast.com
The major trends are solidly up for the metals and resource shares. Some of the resource sector, like oil, copper and oil stocks have risen far too fast and they may be due for a breather in the weeks ahead, but gold, silver and their shares are just starting a renewed rise.
A good example of this is comparing gold to oil, as you can see on Chart 1. This shows that the gold to oil ratio has been in a steep downchannel since the 1990s and it’s fallen to a new low near the bottom of the major downchannel. This means oil has clearly been the strongest and it’s reached an extreme, which could change at any time. So we could see gold outperform oil in the coming months and that would tie in with a strong rise in gold.
Oil is currently hitting $65 and Chart 2 shows the surging rise in oil as it approaches the top side of a steep channel since the 1990s. The two leading indicators are also rising and they have room to move higher before they’re overbought (see Charts 2B and C). This means oil will likely rise further, but it’ll reach strong resistance at $75. The oil stocks also remain strong at the highs but they may lead oil in a downward correction.
For now, oil is strong above $56.50 and the major trend, the 65-week moving average, will remain up above $49.50. Plus, the leading (long-term) indicator (C) will continue to point upward as long as it stays above its 3 ½ year uptrend.
Mary Anne & Pamela Aden are well known analysts and editors of The Aden Forecast, a market newsletter providing specific forecasts and recommendations on gold, gold shares and the other major markets. For more information, go to www.adenforecast.com.