Safe havens? Bonds, metals, dollars
The Aden sisters, resource specialists for 30 years, look at the prospects for stocks, bonds, gold & silver.
Caution remains the watchword, as stocks are not yet out of the woods. We recommended selling stocks on August 4 and we’ve been out of the stock market since and continue to feel that it’s best to stay on the sidelines to see how things evolve.
Meanwhile, gold, bonds and the U.S. dollar continue to be the main safe havens, so stay with them.
The leading indicator for the Dow Jones Transportation average is still on the decline. It has not reached a major low area, like it usually does after hitting major highs. This is also a sign of caution.
The US dollar is currently at a five week high and it has room to rise further. The U.S. dollar index is now strong above 77. So keep your cash in dollars and/or buy the U.S. Dollar Bullish Index (UUP).
On the other hand, all of the major currencies are bearish and they’ll stay under pressure as long as the euro remains below 1.38.
Bond prices have headed higher and the 30 year yield fell to a six week low, below 3%. It looks like this will likely continue in the weeks ahead, as long as concerns persist.
Keep your bonds. In our portfolio, we continue to hold SDPR Barclays Capital Long Term Treasury (TLO).
Since gold recently resisted at the $1800 level, it's now forming a wide consolidation band, between $1800 and $1600. Whichever way it breaks will determine the next intermediate trend direction.
Silver is similar and its band is between $35.25 and $30. Keep an eye on these levels.
Our strategy for precious metals continues ... buy coins, bars and ETFs gradually to take advantage of any weakness.
The bull market is solid and it really has everything going for it. Keep your positions such as our core holdings in SPDR Gold Shares (GLD) and iShares Comex Gold (IAU).
Compared to gold, silver’s current bull market has been mild. Silver has risen 1000% since 2003, whereas in the 1970s it rose about 3600%.
The bottom line in our view, is that the explosion in silver prices is still to come. We continue to recommend a core position in iShares Silver Trust (SLV).
We also remind investors that stocks in general look ahead by about six months. So even though the news may be bad, stocks appear to be seeing brighter signs ahead. That’s why bull markets begin during dark periods.
And if a bull market is indeed getting underway, then it likely means the economy is going to
improve in the upcoming months.
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