Aden Sisters: Gold’s Correction Healthy, Market Volatility Will Continue

October 11, 2011

Aden Forecast founders keep an eye on the big picture and major trends to guide their investment advice.


For nearly 30 years, the Costa Rica-based Aden Sisters, Mary Anne and Pamela, have built a following through their investment newsletter, the Aden Forecast. MarketWatch has described the newsletter as having “shown remarkable tactical versatility … over the longer run, the Aden Forecast’s superiority is striking.” Hard Assets Investor Managing Editor Drew Voros recently caught up with the pair to discuss their strategies and where they think markets are heading.


Hard Assets Investor: Have you formed an opinion as to whether gold is poised to fall or climb or to stay in this $1,600 range for a while?

Mary Anne Aden: Anything is possible. It’s a situation where gold has been rising almost without a break. This is something that has occurred throughout the 10-year bull market. It’s very normal. Most of the corrections have been about 12-20 percent. I think the worst one was 27 percent. This one hasn’t been that terrible, compared to the pattern of corrections in the past. We’re watching some support level and there are some important ones; $1,600 is an important one, especially psychologically. But should it break clearly and stay below there, the bull market would still be intact, even if gold were to fall to near the $1,450 level.

Pamela Aden: We certainly do have a love/hate relationship with gold right now. Some people love it, like the emerging world, and all their accumulation in central banks, which seems to be keeping the price firm. But on the other hand, it’s volatile, depending on the crisis of the moment, and how intense it is or not. Bottom line is that gold is due, technically, for a downward correction, and has been for a while. So far, we consider the decline to be mild, even though it’s been around 16 percent from the peak. We could see a 20-25 percent decline and that would be actually pretty healthy.

HAI: What are some of the biggest influences on gold right now?

Mary Anne Aden: The fundamentals are extremely bullish for gold. Supply is limited and the demand is far outpacing. That’s coming from all over the world. Also, situations are intensifying over the vulnerability of the global economic system. One day it looks like it’s going to crack, the next day they save the day. It’s very touchy, it’s very iffy. It’s making investors nervous and jittery and uncertain. That’s leading to a lot of this flight. Recently, like in 2008, gold got thrown out with everything else. But normally it’s the traditional inflation hedge. In the end, that’s what will drive it higher.

HAI: What are some of the typical mistakes you see investors make when it comes to gold?

Pamela Aden: It’s finally dawning on people in the general investment scene that gold is truly in the bull market. People have become more aware of it in the last, say, three years — probably since the financial crisis. Up until 2005, people just thought it was a dollar move, not a gold move, and rightly so at the time, but we didn’t think so. It could have been interpreted that way. But then, starting 2005, gold started rising. It just busted through all currencies. At that moment, the gold bull market was truly on its own.

In September 2009, gold really broke out at the $1,000 level. Then it went into a stronger phase that coincided with more awareness that a bull market was under way. But we can see why the bull market wasn’t real clear for a lot of people, because there were other things to invest in. We feel that there are many more years on the upside for gold.

HAI: What other commodities do you watch closely?

Pamela Aden: Copper is a barometer for world growth. We use copper a lot in seeing how the global economy is faring. In general commodities work together, but they also can go their own ways, such as base metals taking the sidestep this year, where gold kept rising.

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