ADEN THE FORECAST

1Copyright Aden Research October 22, 2021

Rising inflation: the effect

October 22, 2021 Volume 40 Number 10

40th yearOCTOBER 2021

INSIDE

U.S. & World Stock Markets .... 3A liquidity infused bull market

U.S. Interest Rates & Bonds ... 5 Long rates rebounding

Currencies ...................................6 U.S. dollar: In a sideways band

Metals & Natural Resources .... 8Inflation giving a boost to gold

There’s something very unique going on that we haven’t discussed before, and it’s important. It’s also intensifying.SUPPLY CHAIN WOES

We’re sure you’ve heard about the supply short-ages, and perhaps you’ve already experienced some. We know we have. But when you take the whole big picture of what’s happening and what it means, it’s unprecedented and it’s going to affect us all, as well as the markets.

As you probably know, there are over 100 ships backed up at the Port of Los Angeles/Long Beach. This port receives most of the exports out of Asia and this log jam is getting worse. Why?

It’s basically one of the covid repercussions and the bottom line is, it’s going to slow the economy and help fuel inflation. Here’s what’s happening…LOCKDOWN REPERCUSSIONS

When the pandemic arrived on the scene last year, many countries went into lockdown. As a result, many Asian factories shut down and production ground to a halt.

This resulted in many shortages, like chips, car parts, imported food products, clothes, toys and more. But since demand was relatively low during the covid months last year, it wasn’t such a big thing. Now, however, this has changed.

Demand for goods picked up strongly this year, but supply couldn’t keep up.

The reason was due to factory shutdowns, especially in Viet Nam, which provides the U.S. with 40% of their imports. Plus, busy ports in China partially shut down too, all because of covid. This led to a backlog of products and congestion at the ports as containers stacked up, which is still the case.

SHIPPING COSTS SOARINGThe vast majority of these products are sent by

ships, 90% to be exact, and that’s currently the prob-lem. There just aren’t enough ships to transport all the containers and goods everyone is waiting for.

So as you’d expect, the cost of shipping is skyrocket-ing. Chart 1 shows the cost of renting a giant container ship and it has literally soared this year.

Nevertheless, companies need the goods and they’re paying whatever it costs to get their goods to the con-sumers. So ships are lining up at Los Angeles and other U.S. harbors. This is happening internation-ally too.

These delays and unprecedented traffic are also add-ing to other additional import costs, like more trucking costs, for warehouses and so on.

These costs are all going to be passed on to the consumer, leading to higher priced goods.

Plus, shipping experts say it’s complicated and not only going to continue, but it’s going to get worse. This in turn will result in fewer products, as well as higher prices, likely in the months and year ahead.INFLATION, INFLATION

Inflation is already surging at the highest rate in 30 years (see Chart 2). That’s primarily thanks to the Fed’s

money creation, which is the cause of inflation. Basically, two much money equals higher prices.

And in recent years, much more money has been created than ever before, and even more is coming down the pipeline due to infrastructure spending and other items that’re also included in the bill (see Chart 3).

This means inflation is not going away. It’s going to be with us for a good while and it’ll likely head higher. And the ongoing import situation will only add fuel to the fire.

FORECASTMONEY • METALS • MARKETS

ADENTHE

2 Copyright Aden ResearchOctober 22, 2021

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GOLD SHINES WITH INFLATION

This is going to be good for gold. As you know, it’s been stubbornly biding its time, and for a while it seemed like nothing was going to push it higher.

But it finally reacted to the inflation numbers and it’s now embarking on a renewed rise… This is the rise we’ve been waiting for, and it’ll take

silver, and the gold and silver shares up along with it.So you’ll want to keep your metals related positions, and your bonds too.

Several of you have written about our bond position, wondering if we should keep them. Here’s our bottom line…A BOND BULL MARKET... REALLY?

Even though bonds have recently been declining, this is a downward correction within a major up move. That is, once this period of weakness is over, bonds are still set to head much higher.

But isn’t inflation bad for bonds?Generally, yes. But that is not the case when bonds are used as a safe

haven. That’s when they move with gold, which has been ongoing since 2000. In other words, bonds and gold have been the safe havens of choice for a

long time. And when push comes to shove and inflation keeps heating up, they will emerge as everyone’s favorite place to be for protection and profit.

Plus, bonds still have a lot going for them. As you’ll see in this month’s Interest Rate section, all things considered, there are many valid reasons why interest rates are set to stay low, at least in the year ahead and prob-ably longer.

Despite inflation, this will drive bond prices higher and we still believe they’ll prove to be a good investment. In fact, likely one of the best. As you’ve seen, bonds are still poised to outperform stocks in the years ahead. So you want to keep your bonds.

But what about the Fed’s repo situation, some of you have asked. Won’t that be bearish for bonds? The answer is no. Here’s why…

REPO MARKET: Banks want incomeThe repo market is a $2.2 trillion re-

purchase agreement market, which is part of the inner workings of the financial system. It sounds compli-cated but basically, it’s a two-way street with cash on one side and Treasuries on the other.

For example, one bank sells secu-rities to a second bank and agrees to buy back those assets, usually the next day. The contract is the repo and the interest rate paid on the short-term loan is the repo rate.

On the other side of the street,

when the Fed sells a security (Treasury bonds) to a bank in ex-change for cash and then agrees to buy it back, it’s a reverse repo.

Lately, reverse repos have soared with financial firms put-ting more than $1 trillion in cash at the Fed every night since August (see Chart 4).

This is the opposite of what happened in September 2019 when repo rates surged and the Fed jumped in to settle the markets with emergency cash, and again at the start of the pan-demic to the tune of $1.5 trillion.

This is a simplified explana-tion but the point is, banks currently have lots of cash and they prefer buying bonds than holding the cash. That is, demand for bonds is high and that’s good for bonds, now and looking out to the road ahead.

Published monthly by Aden Research. Also includes access to a weekly update $250 per year (U.S. dollars only). Send all customer service or market related questions to Aden Research, Dept. SJO 874, P.O. Box 025331, Miami, Florida 33102-5331 or E-mail [email protected] Questions will be answered in future issues. Copyright Aden Research 2021. All rights reserved. The Editors may have a position in the securities recommended and may change such positions without notice. This publication’s sole intended purpose is to provide investment-related information and opinions to subscribers. FREE WEEKLY UPDATE, Thursdays at 8 P.M. (Eastern time). You can access it through our website, http://www.adenforecast.com. To receive the market update by fax every week $160 per year for U.S. subscribers and $260 for subscribers outside the U.S. Make checks payable to Aden Research, S.A., and send to The Aden Forecast, P.O. Box 790260, St. Louis, MO 63179-9927.

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from the U.S. dial 011 first, otherwise dial 00

Editors:Pamela Aden Mary Anne Aden

The Aden Forecast1-305-395-6141

www.adenforecast.com [email protected]

HOWE ROBINSON CONTAINERSHIP CHARTER INDEX

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1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021

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COURTESY: Howe Robinson

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U.s. & WoRlD stocK MaRKets a liquidity infused bull market

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15 WEEK MOVING AVERAGE (MA) IS MEDIUM TERM TREND

TOPPING

DAILY PRICES N 20 2021 N 20 2021 N 20 2021 N 20 2021 N 20 2021

S&P 500 NASDAQ DJ INDUSTRIAL RUSSELL 2000 DJ TRANSPORT Composite AVG. AVG

S&P 500MAYMAR

A BIT OF CHUGGING

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S&P VALUATION 200%

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-50%

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the mean

The stock market has only been more expensive once, in the late ‘90s

1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020

Source: AdvisorPerspectives.comCourtesy: ROGUE ECONOMICS

2000

The stock market is bullish. It’s been holding up firm near the highs, but it’s still mixed.A STRONG, BUT CAUTIOUS BULL

Basically, our outlook has not changed. We continue to feel the market is forming a major top and a bear market decline is going to follow (see Chart 7). That’s why we remain cautious and if you’re still heavily in-vested in stocks, be careful.

Even though this low interest rate environment is very good for stocks, many other warning signs persist. Will these be enough to overpower the positive inter-est rate reality? We think they will, at least that’s the message we keep receiving.

This month, let’s take a chart walk through some of the points we feel are most important and you’ll see what we mean... THE TELLTALE SIGNS OF TOP

We’ll start with a valuation chart that goes back to 1900 (see Chart 5). You can see that based on this barometer, stocks are now at the highest levels in more than a century. They’re now more expensive than they were in the 1920s, prior to the great crash, and they’re approaching the all-time high in 2000, which coincided with the dot.com crash.

This alone tells us that stocks are historically expensive and it’s best to get out of the way because these levels have preceded big stock market drops.

Reinforcing this is Chart 6. Here you’ll see the current bull market compared to the last two bull markets. In both cases, the

current bull market has now lasted about as long as the prior bulls, and it’s risen about the same percent-age wise.

This means the bull market is mature and, if it con-tinues to follow these patterns, it’ll be coming to an end soon.TRANSPORTATIONS LEADING

Our technical indicators are telling us the same thing (see Chart 8). This chart shows the Dow Jones Transportation Aver-age and its two leading indicators as the example, but all of the other stock indices are similar.

First, you can see that both leading indicators are declining from extremely overbought lev-els. This is bearish, indicating the stock market itself will soon


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follow. For now, this too is reinforcing a major top is near in the market, the upside is limited and it’s headed lower.

In other words, it’s high risk and it’s best to step aside. At least maintain caution and be quick to lighten up on your stock positions at the first signs of weakness. We know we’ve been saying that for quite a while, but it still holds true, it takes time.

It’s also interesting to note that hedge funds have been experiencing big demand, so much that many are not accepting new money. This too is something that happened prior to the bursting of the dot.com bubble and it’s another sign of caution.DOW VS GOLD

Moving along, our next Chart 11 shows the Dow Industrials compared to gold. This ratio tells us which is strongest, stocks

or gold and when to move from one to another.Stocks have been stronger than gold, especially since the pandemic

started, but the ratio is now at overbought levels. This means that stocks are too expensive compared to gold. That is, gold is cheap and it’s poised to outperform stocks.

Last month we showed you that stocks are also expensive com-pared to bonds. So bonds will soon be outperforming stocks too.

Again, these are further signs that stocks are too expensive com-pared to other markets and they’re due for a tumble.

One indicator that continues to buck these bearish warnings is Richard Russell’s famous Primary Trend Index (PTI).

As Chart 9 shows, it c on t i nues moving up, signaling the major trend is up. The Dow Theory re in fo rces this as well.

Look ing at the global stock mar-k e t s y o u see a mixed global mar-ket. Some

are bullish and some are weak (see Chart 10).

So overall, they do not reinforce the bullish or the bearish case. It’s saying to be selective here.SUMMING UP

Most of the indicators are at extremes but the stock mar-ket itself is still bullish. And it could take a while. That’s why we recommend a small stock position is best for now. But we’ll be quick to sell at the first signs of trouble.

It’s to be seen when that’ll happen. But with each passing month we’re get-ting closer, and we can only hope that the decline will not be severe because if it is, it’ll be a bad sign for the overall global economy.

If stagflation is coming, and we believe it is, then the economy will slow, but it could still plug along, which would likely include a soft landing for stocks.

Time will soon tell.

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THE STRONG AND NOT SO STRONG

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U.s. inteRest Rates anD BonDslong rates rebounding

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CHART 14BIG DIFFERENCE IN

MOVES

100 = AUG 2020

Like always, it was all about the Fed. But this month, more so than usual.

It was actually kind of ridicu-lous. That didn’t seem to matter, however, and the markets were all affected.FED SAVED THE YEAR...

So what happened? As you’ll remember the Fed’s been buying U.S. government bonds, spending $120 billion each month since the pandemic. This was done to help stimulate the economy, especially once the pandemic intensified. That’s when the economy plunged, increasing the pressure for the Fed to do something.

So they kept their easy money policies going, which included keep-ing short-term interest rates at 0%, as well as bond buying (Chart 13). This in turn did help the economy recover from the initial pandemic lockdown effects and it’s been an important factor keeping the economy buzzing along since then.

But all the deficit spending and money creation has also fueled inflation, which is now intensifying....AND IT FUELED INFLATION

Last month, for instance, producer prices surged in the biggest gain in 11 years. The point is, inflation is not going to be transitory like the Fed has been saying. It’s already been on the rise for several months and expectations show that it’s set to rise further.

Inflation is here to stay (Remember, easy money is the direct cause of inflation.)

This is being reinforced by the backed-up supply chain dilemma, which is affecting businesses and consumers. Due to shortages in all sorts of products, this too is driving up prices.

This in turn is putting pressure on the Fed to buy less bonds (taper their bond buy-

ing), thereby tightening their easy money policies somewhat, which would also ease inflation pressures. RELUCTANT TO TAPER

But so far, the Fed has been re-luctant to do so. They don’t want to rock the boat and possibly slow the economy. And they certainly don’t want another “taper tan-trum,” like in 2013.

You’ll recall back then, follow-ing their easy money QE program, the Fed decided to taper their bond buying. This triggered a panic in the markets and the economy so the Fed quickly had to reverse their tapering plan.

Could this happen again? It could. And our guess is that this is one of the Fed’s concerns weighing on their decision to taper or not. Just talking about it moves the market. So this brings us back to where we are now…FED SENSITIVE

Last month for the first time in years, the Fed hinted they may ta-per soon. This created quite a stir,

driving nearly all of the markets down. Why?Because, reading between the lines, the markets

interpreted this as a key sign the Fed is indeed going to taper, probably in November.

As a result, long-term interest rates surged (see the 10 year yield on Chart 12 as an example). That was basically because if the Fed starts buying fewer bonds, interest rates would have to go up to attract outside buyers.

The prospect of higher rates drove stocks and metals related invest-ments down. And look-ing at the leading (me-dium-term) indicator, it has room to rise further before it’s too high, telling us that rates could still head higher in the weeks ahead. This would drive

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cURRenciesU.s. dollar: in a sideways band

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bond prices lower in the near term.TO TAPER NOW... OR LATER, MUCH LATER

But not to worry… All signs suggest the Fed will not be tapering sooner rather than later. Since the hint of tapering affected the markets so strongly, the Fed is going to think twice. More likely, they’ll postpone their decision.

Again, the last thing they want is a taper tantrum repeat. And last month’s market ac-tion showed that’s what they’d likely get if they taper too soon, driving interest rates higher.

Sure, they’re concerned about inflation. But historically speaking, the Fed has always opted for inflation over a possible recession. Plus, our leading indicators are reinforcing this.

Take a look at the bond price on Chart

15 and you’ll see what we mean… CORRECTING BOND PRICE

Bonds remain bullish and once the current interest rate rise runs its course (bond prices lower), interest rates will resume their decline and bond prices will head much higher.

Note, the leading (long-term) indicator is still down at a totally bombed out level. This means the downside is limited and the upside is wide open, and bonds will continue to be a good investment in the months ahead.

In other words, the huge downtrend in in-terest rates that’s been in force since 1981 is going to continue (see Chart 16).DIFFICULT TO RAISE RATES

Does this mean the Fed’s in a position where it simply can’t raise interest rates due to ongoing economic conditions? It could be.

As we’ve often mentioned, that is what happened in Japan, and the U.S. has been following in their footsteps. So be prepared. Rates could stay low for years to come.

If so, bond prices will keep doing well. So despite the bond price decline this month, which we think will be temporary, continue to buy and hold long-term U.S. government bonds and the bond funds we’ve been recommending. The ones we like best are TIP, TLT and SPTL.

Everyone knows the U.S. dollar is going down. And it’s been going down for decades. But with so much going on, it’s not a big deal and most people don’t really care.

That’s understandable… It’s been a slow and steady decline, and it doesn’t directly affect people on a daily basis, or does it?GOVERNMENT & FED: CLOSE ENCOUNTER BUDDIES

Yes, it sure does but the reasons why and the con-nections between one and the other are not broadcast publicly and they’re not really understood.

The bottom line is, the government is responsible for inflation, via the Fed. Yes, the Fed is technically

independent but in reality, it’s not. Now more than ever the Fed bows to the government’s wishes, needs or demands.

The money the Fed creates is the direct cause of inflation. And inflation erodes the value and purchas-ing power of the U.S. dollar. And again, it does affect everyone. Here are a couple of examples…

In the 1970s, for instance, a pretty four bedroom home in Southern California cost $25,000. A good salary was $30,000 a year. Minimum wage was $2.25 an hour and a nice car cost $5,000.

Now that same house is over $1 million. A good sal-ary is $80,000. Minimum wage is about $11 (average) and a nice car costs about $35,000.

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Apr 2020 2021 Apr 2020 2021 Apr 2020 2021 Apr 2020 2021 Apr 2020 2021

EUROSWISS FRANC

AUSTRALIAN DOLLAR

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65 WEEK MOVING AVERAGE

JAPANESE YEN

CLEARLY MIXED STRENGTH

So what happened? Basically, inflation and a much weaker dollar. That is, it takes many more dollars to buy the same things because not only is the dollar weaker but there are a lot more of them around.

We know this may seem like an ex-treme example, but it’s to make the point. The yearly changes are more subtle but they’re ongoing and they’re happening to this day, and they’ll continue.INFLATE OR DIE

Here’s another example… In 1980, gold hit a peak price of $850 an ounce, which was out of sight at the time. It left inves-tors with their mouth’s open at how high the price had skyrocketed.

Today, however, adjusted for inflation, the gold price would have to reach $3000 to equal the $850 level in real terms.

Our late friend Richard Russell used to always say that the government had to inflate or die, and that’s absolutely true. That’s what it’s been doing for a long time.

Many people think this is normal. Things cost more because they always do over time. That’s just the way it is. If any-thing, they complain because wages aren’t

keeping up with rising prices and t h e y ’ r e right about that. Real wages, af-ter inflation, have not gone up in decades!RECORD TRADE DEFICIT

Then there’s the mas-sive trade deficit, which is at a new record high. Thanks to the big in-crease in demand for foreign goods, this deficit

keeps growing. This too is putting

pressure on authorities to weaken the dollar, which will make these goods more affordable. For now, the stronger dol-lar this year makes these goods more expensive, also adding fuel to the in-flation fire. But this may be simmering down soon. U.S. DOLLAR: What’s next?

This U.S. dollar in-dex rose firmly this past month, hitting a one year high (see Chart 18). It is still trading within a sideways band and, as you can see on the chart, it resisted below 95, which is the top of the band, and turned down.

So far, so good and it’ll now be important to see what happens next… To refresh your memory, the lines in the sand are 95 on the upside and 89 on the lower side. Those are the band borders

and whichever way the dollar index breaks will deter-mine the next trend direction.

If rates stay low, for instance, we believe the dol-lar will stay under downward pressure. But if the Fed decides to taper, it could push the dollar up further be-cause it would suggest interest rates could head higher.

Bond guru Jeffrey Gundlach says, “We’re running our economy in a way that is almost like we’re not in-terested in maintaining global reserve currency status.” And if that proves to be the case, then the dollar could do whatever it wants.

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Metals, natURal ResoURce & eneRgYInflation giving a boost to gold and commodities

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We don’t think so. We think the Fed is still trying to keep things under control in a very difficult situation. And a weaker dollar would be to the economy’s benefit. But we’ll soon see the final outcome.CHINA’S EVERGRANDE

Meanwhile, another situation we’re watching is the Evergrande debt dilemma. Even though Fed head Powell says it’s a China problem, if it blows up, the final fallout will be far reaching and global.

This could drive the dollar up if inves-tors start running for safe havens.

But even if this happens, keep in mind that the dollar and gold sometimes rise together, along with bonds, as safe havens. We showed this last month on Chart 1. It’s been happening this year and it could continue.

In other words, a stronger dollar is not

always a negative for the gold price. In any event, most of the major curren-

cies have been slugglish (see Chart 19). But it looks like they’re trying to bottom and if the U.S. dollar does head lower, they will likely head higher. The yen being the exception.CANADIAN DOLLAR: Strong

The big exception here is the Canadian dollar, which is totally doing its own thing (see Chart 20).

The high price of oil has been driv-ing the petro currencies higher and this is a perfect example of the relationship between the two. That is, as oil prices keep rising, the petro currencies will too.

For now, however, continue to keep your cash in a basket of currencies, in-cluding the U.S. dollar.

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Is it just us, or do you feel we’re hav-ing a dejavu, similar to what happened in the seventies? Inflation is growing and the Fed, with its transitory talk and 2% inflation target, has been com-placent. And combined with the excess in the asset markets, it feels similar to the seventies.

Our careers started during the infla-tionary seventies and that was the com-mon environment during that decade. This is where we learned how easy rising inflation can turn into unwanted high inflation.

It started then with the dollar going off the gold standard, followed by a spike in oil prices. And while it didn’t turn into hyperinflation in those days, it did a lot of damage with double digit interest rates and inflation.OUT OF CONTROL FISCAL POLICY

But it’s important to understand what breeds hyperinflation is the very fiscal and political environment

we have in the U.S. today. It’s under-mining stability and with today’s energy shortage and soaring energy prices in our interconnected world, it’s heading toward an energy crunch. And this in turn is seeing crude oil and other energy sources soar, and rising inflation (see Chart 21).

It’s a global problem today and it’s much more serious than the seventies. In fact, today’s fiscal program makes the Financial Crisis in 2008 seem tame in comparison.

It’s no wonder we see commodities overall rising sharply this year. Be it en-ergy, re-

sources, basic materi-als and agricultural, they are all up (see Charts 22 and 23). CALM BEFORE STORM

Now, your next question is ... why has gold been quiet and seemingly drag-ging? It surprises us somewhat but more importantly it’s not a bearish sign. And today’s jump is giving


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some life to the gold price. Some reasons have kept the

price down, one being price ma-nipulators, and squeezing the market at key moments this year.

Plus, the crypto world has had an impact with more money mov-ing there. But crypto is its own asset class... be it another com-modity/currency and with other positive and negative factors. Think of it as gold and bitcoin, and not gold versus bitcoin.LET’S LOOK BACK ON GOLD

The gold price was rip roaring up to its peak a year ago. All was well. Gold didn’t decline much during the pandemic plunge in March 2020, and it gained 63% in 1¼ years, which was the best rise in nine years, from May 2019 to the record high reached in Au-gust 2020.

The decline that followed this peak lasted seven months. While the decline was the longest in seven years, it only declined 19%, which fit into a normal decline we call D compared to the last few years (see Chart 25).

This low was in March 2021 at $1678, and it’s a key number for the bull market today. All was good up to this low, and as long as gold stays above the $1678 low, all is fine in the bull market.

A rise then began from the March low, lasting three months and ris-ing 14% when it reached $1909 in June. This rise we call A also fit into a normal A rise of the past seven years. Again, it was just fine. Then a decline we call B followed lasting 3½ months, ending on September 29th at $1722.90, which was higher than the March low. This brings us to today

While the B decline fit into a nor-mal decline, it felt like a drag causing many to question the bull market. But keep in mind, the full gold decline from the August 2020 peak to March 2021, was down only 19%. This wasn’t bad at all considering the 63% rise from the 2019 low to the peak.

We’re reviewing gold’s moves in detail to show you gold is fine and it’s coming along in a bull market that

is surely to explode in the years ahead. ANOTHER LOOK AT GOLD

Chart 24 shows the gold price since 2007. Most interesting here are the similarities in 2009 and in 2019. In both cases, gold broke above a key resistance level at $1000 and $1380 causing gold to soar to its record peaks at the time.

With gold under pressure, some of you asked if gold today looks similar to the 2011-12 peaks back then. There are some similarities, but the 2008 rise until 2011 was the second half of a bull market. Whereas today, it’s the first leg in the bull market. The best is still ahead

The four mega supports are the red lines on the gold chart showing the growth in gold over the years.

A strong up channel has formed since the lows in 2015 and the upside is wide open with

gold staying above the 2018 channel above $1600.

The upper red line support is the $1536 level, the 2011-12 bull market


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BALTIC DRY INDEX 5500

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top area. Today’s bear market low in 2015 was well above the

$1000 level highs in 2009 (lower red line). This alone was a great sign.

Looking at the downside supports is also looking at the building blocks gold has achieved in 14 years.

The first bottom level to keep an eye on is the 2018 up trend, which is similar to the March 2021 lows. SO WHAT’S NEXT FOR GOLD & SILVER

There are a lot of good things in the gold market today. From strong production, to places like Moscow and Shanghai who are planning to further boost gold trading. Russia is creating closer ties to the key Lon-don market to make trading easier for all. Shanghai is right behind them.

China has been the world’s largest gold producer since 2007. It has produced about 15% of all gold mined in the world. Last year it produced 20% more than the world’s second largest producer, Australia. The state owns half of that and it doesn’t allow gold to leave the country. As if that’s not enough, China also is the biggest gold importer, along with other metals and natural resources. SILVER IS READY TO POP UP

It’s been weaker than gold since the sell off. Silver fell more than gold by having the most short positions.

But with this week’s sharp rise, it means a continued jump could wipe them out and silver would then be on a tear.

The big pic-t u r e s h o w s silver has the edge over gold, percentage wise and we’ll keep both of them. In fact, with copper

on a renewed rise and with gold now rising we could see silver really take off!

The next two charts show us what to look for in gold and silver going forward. They both have specific movements.

Taking gold first on Chart 25, you’ll see gold is forming a basing bottom and it has been since March. It’s indicator (B) is also bas-ing above the lows. This chart is suggesting the lows are near and a good rise is about ready to blossom.

Most of you know our A, B, C and D moves. Gold has been declining since June, and it’s been try-

ing to hold near and above its 23 month moving average. The low on September 29th is the support at $1723.

Once gold closes and stays back above the 65 week average at $1835, the B decline will clearly be over, and a C rise will be it’s poised for a good rise. It’ll be key to see how strong the upcoming C rise becomes. If gold reaches its old highs and hits a new high it would be very bullish!

Silver also looks great and it’s poised for a solid upside, as you can see on Chart 26. With silver break-ing clearly above $24, it’s a great start to a solid rise.

It’s been holding within its Step 1 in the bull market and once it breaks above its 65 week average, it’s next move is to jump above the $29-$30 level, moving into Step 2.

This would be very bullish for silver and it could then reach the top of the step near $35. Note the long term indicator has reached its zero line and up trend, which is a key support for the indicator, and its bouncing off of this just as its medium term indicator rises from a clear oversold area (shown last month). GOLD SHARES: Bouncing up!

Gold shares are coming alive and jumping up from the lows. They’ve been the most bombed out this year but it’s now their time to shine with gold and silver.

Chart 27 shows the HUI gold bugs index rising from the lows. It’s now strong above 250 and it’s looking at the 300-350 level, and beyond.

It’s been a great Q2-2021 quarter for gold production! Ca-nadian gold produc-tion alone is estimat-

CHART 27

AdenOriginalChart

PALLADIUMPrice

2020 2021 2020 2021 2020 2021

HUI GOLDBUGS INDEX

65 WEEK MOVING AVERAGE

PLATINUMPrice

GOLD SHARESREBOUNDING FROM LOWS


CHART 31

AdenOriginalChart

B

a

ed to have increased 34% compared to a year ago.

Our gold mines, Kirkland (KL) and Agnico Eagle (AEM) both had top pro-duction in several of their mines, and they are a match made in heaven.

They recently announced a merger which means two of our favorite gold mines will have combined results in be-coming Canada’s highest quality senior gold producer with the most favorable risk profile.

We own both of these mines, and the way it’ll merge is the shareholders of Kirkland Lake will receive shares of Agni-co Eagle, and it’ll become the new Agnico Eagle, pending shareholder’s approval. It’s expected to happen in December, or in the first quarter of 2022. Keep your positions in both of these mines, and we’ll keep you updated.

Platinum and palladium are also bouncing up at the same time, which is another good sign that this move could well be a great C rise. RESOURCE & ENERGY

Energy was the big mover this month. Be it crude oil, uranium, natural gas or coal, they all had a great month when energy got squeezed.

Resources were limited too with the supply constraint, which helped to push copper up to test its record highs.

The Baltic Dry Index has been on a tear since last Summer (see Chart 29) showing that freight transportation in the waters has been busy.

Crude oil jumped up to a new seven year high, above $80 (see Chart 28), and while it’s overextended, it has room to rise further. The International Energy Agency (IEA) said 81% of the world’s energy supply still comes from fossil fuels, coal and carbon. We’ll be adding select energy shares to our port-folio on weakness. Keep an eye on our weekly update.

With the greening of the economy, it too is inflationary. Call it Greenflation. One example is Rio Tinto. It recently announced a bold $7.5 billion plan to reduce carbon emissions by 50% by 2030. This is three times more than their previous target. This caused RIO to decline but in the end this big powerful company will be fine and we’re staying invested in it.

Plus, it pays an 11% dividend. BHP also pays a high dividend at 13%.

Chart 30 shows the copper price since 2015. It started rising since the pandemic low last year, and it espe-cially took off in November up to a record peak. That was the best rise so far, and it had been moderately con-solidating the sharp rise since May.

Only now this month, copper shot up testing its record high Copper is strong above its rising 65 week mov-ing average at $3.90.

Meanwhile, copper’s indicators are rising from the lows in the medium term and it has room for copper to rise further, see (B).

In the long-term (C) it tells another story. Note it’s holding and at the highs, and while it could stay that way awhile longer, it’s saying if the red moving average is broken, we could see copper decline further before an-other leg up gets underay on a bigger picture basis.

We’ll continue to keep our resource shares for now. Bitcoin: On the run

Bitcoin jumped up to a record high this week, overtaking its April record high. The rise since its July lows is now resisting near this April high. But as Chart 31 shows, Bitcoin is in a roaring bull market and the indica-tor (B) has room to rise further before this three month rise reaches a “too high” area.

Interestingly, we’ve observed Bitcoin’s movements are similar to copper.

A new Bitcoin ETF was launched on the NYSE which coincided with the record high this past week. The name of the ETF is ProShares Bitcoin Strategy (BITO). It received a warm welcome and BITO was the second most highly traded ETF debut ever. This new ETF holds Bitcoin futures and not the cryptocurrency.

There are a couple of crypto currencies backed by gold. Tether Gold (XAUt) on CoinMarketCap has one token being one ounce of gold. Digix Global (DGX) is part of Ethe-reum and it’s backed by gold bars, selling per gram. Another one is Gold Coin (GLC).

We are not officially recommending these crypto-tokens but they should do well as the gold price rises, and some of you may want to check these out.

CHART 30

AdenOriginalChart

B

c


PRECIOUS METALS, ENERGY, RESOURCES The gold, silver and their shares jumped up and they’re looking good. They’ve been basing and look poised to start the C rise. Once gold closes above $1835, it will clearly be underway. Silver looks great above $24. Gold shares are all bouncing up from their lows with some stronger than others. Kirkland Lake, the Junior gold mine ETF and Franco Nevada are having a sharper rise but they all look good. Platinum and palladium are also rising which is a good sign for the gold universe. Keep your positions and buy new ones if you don’t have all your positions set.The energy sector stole the show this month with crude, uranium, natural gas shooting up. We’ll be buying new selective positions on weakness. The base metals remained strong and some rose further this month. Copper shot up testing its record high. It’s taking a breather at the highs. Our positions have been relatively quiet. Nucor and Cleveland Cliffs have performed the best this month. BHP and RIO have remained under pressure. They are great companies and pay high dividends. Keep your positions. We’ll ride through weakness.

U.S. & GLOBAL STOCK MARKETS The stock market is bullish, but it’s still mixed. We continue to believe a major top is forming in the market, and a bear market decline is going to follow. This is what our leading indi-cators are reinforcing and it’s why we advise remaining cautious. For now, the market is very expensive and overbought, indicating the bull market is near maturity and it’s high risk. That’s why we only recommend keeping a small 10% stock position and be quick to sell at the first signs of trouble.

INTEREST RATES & BONDS Bonds remain bullish. And once the current interest rate rise runs its course (bond prices lower), interest rates will resume their decline and bond prices will head much higher. Bonds are bombed out and the downside is limited. They’ll continue to be a good investment and they’re still poised to outperform stocks. That is, the current decline will be temporary. So continue to buy and hold long-term U.S. government bonds and the bond funds we’ve been recommending. Our favorites are TIP, TLT and SPTL.

CURRENCIES The U.S. dollar is still trading in a sideways band. But it’s been under some downward pressure and the major trend remains down. This means the dollar will likely soon resume its downward path. If so, then the currencies will head higher. For now, however, we advise holding a small cash position in a basket of cur-rencies, including the U.S. dollar.

OVERALL PORTFOLIO RECOMMENDATION

PRICE AT % GAIN/LOSS

DATE PRICE ISSUE DATE SINCE BOT

Jr Gold Miners ETF GDXJ Feb-17 42.12 44.44 5.51Kirkland Lake Gold KL Jul-21 40.20 45.54 13.28Franco Nevada FNV Jun-20 128.24 143.45 11.86Platinum PPLT Apr-19 83.81 97.10 15.86Silver Trust SLV Jun-18 16.17 22.54 39.39Silver (physical) Aug-03 4.93 24.45 395.94Gold Miners ETF GDX Feb-17 25.20 32.99 30.91Wheaton Pre Mtls WPM Jun-20 39.23 41.37 5.46Agnico Eagle AEM Feb-17 47.10 57.13 21.30Pan American Silver PAAS Aug-19 16.95 26.03 53.57Yamana Gold AUY Jun-20 4.82 4.31 -10.58SPDR Gold GLD Mar-17 117.51 167.77 42.77Gold (physical) Oct-01 277.25 1796.3 547.90Barrick Gold Corp GOLD Oct-20 26.00 19.48 -25.08Newmont NEM Jun-20 55.53 57.61 3.75Royal Gold RGLD Sep-17 90.19 99.15 9.93Hecla Mining HL Dec-20 6.22 5.84 -6.11

Vulcan Materials VMC Aug-21 184.00 185.16 0.63Cleveland Cliffs CLF Jul-21 24.10 23.85 -1.04BHP Billiton BHP Dec-20 65.58 56.72 -13.51Commodity Ind GCC Dec-20 18.89 21.33 12.92Nucor Corp NUE Aug-21 115.00 102.33 -11.02Global Nat Res FTRI Dec-20 11.23 13.32 18.61Rio Tinto RIO Dec-20 76.28 65.88 -13.63

Wal-Mart Stores WMT Nov-20 151.60 148.34 -2.15Dow Indust SPDR DIA Nov-20 299.24 356.74 19.22

TIPS Bond iShares TIP Aug-21 129.43 128.76 -0.5220 Yr Treas Bond TLT Jul-21 146.53 144.13 -1.64SPDR LT Treasury SPTL Aug-21 42.58 41.17 -3.31

Cand dollar ETF FXC Jun-20 72.64 79.26 9.11New Zealand Dollar Dec-20 0.7137 0.7155 0.25Aust dollar ETF FXA Jun-20 68.37 74.12 8.41Swiss franc ETF FXF Jul-20 97.61 98.56 0.97Euro ETF FXE Jun-20 106.08 108.47 2.25

Buy/HoldBuy/HoldBuy/Hold

BONDS

Hold

Hold

Buy/Hold

Buy/Hold

Buy/Hold

Hold

Buy/Hold

Buy/Hold

Buy/Hold

Buy/Hold

STOCKSHold

Buy/Hold

Buy/Hold

RESOURCES

PRECIOUS METALS, ENERGY, RESOURCES

Buy/Hold

SYMBOLNAME

OUR OPEN POSITIONS in order of strength per section

Buy/Hold

Buy/Hold

Hold

CURRENCIES

Hold

PURCHASE CURRENT

RECOMM

Buy/Hold

Buy/Hold

Buy/HoldBuy/Hold

Buy/Hold

Hold

Hold

Buy/Hold

Buy/Hold

Hold

Buy/Hold

Buy/HoldBuy/Hold

Note: Shares, funds & ETFs are listed in the box in order of strength per each section. Keep the ones you have on the list.

70% Gold & silver, gold shares, energy & resources

5% Total Cash in basket of currencies & US$

10% Stocks

15% Bonds LT US Govt

ADEN THE FORECAST

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