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A Healthly, Normal Correction
by Lisa Duryea

Newsletter writers Pamela and Mary Anne Aden are well-
known for their monthly publication, The Aden Forecast.
Pamela Aden shares her thoughts with us on what she sees
as a healthy, normal correction. - The Gold Report

TGR: In your March update, you mention that the gold
has been declining since January 9th in what you call
a "D" decline. Today the gold price is about $404. So I
wanted to ask you to define the term for us, and then ask
where you think we are with this D decline.

PA: Declines tend to be the worst declines in the
cycle. But in a bull market its low will be higher than
the prior "B" low, which was last July's low near $343.
The 65-week moving average is the key trend, which means
the current decline should hold above $370. D declines
tend to last 9 to 12 weeks, so we could see a low at any
time. The decline will be over when gold closes and stays
above $405. Overall, the D decline has been mild. It's
just correcting the sharp rise, when gold rose almost
nonstop from last July to January, with silver doing even
better. Silver is currently hitting new highs and it may
be leading gold out of the decline.

TGR: You think this is still a long-term bull market,
and what we're experiencing is just a healthy, normal

PA: Definitely.

TGR: So are you advising investors today to wait until
we know whether there will be a further decline, or to buy
gold and silver stocks now?

PA: I think the safest and best way is to average in.
If we had a full downward correction, of course, it would
be ideal to buy near the low, but we may not get one. And
for that reason, it's healthy to average in. My advice is
to take advantage of weakness, or just average in on a
regular basis during this weak period.

TGR: Have you read Ian McAvity's latest report where he
says that he sees prices going lower in 2004, that we will
have a bigger correction? And that we're probably not
going to resume the upside until 2005?

PA: I suppose that's a possibility. What's interesting
is that the coming months are going to be the moment of
truth for gold. If the pricing trends mirror the movements
of the '80s and '90s, then what we've had so far fits
right in. If we see something more in line with the '70s
surging bull market, then we have several years to go ~
say five or six years for the bull market. So it's very
important to see if the bull market is going to stay
intact, and everything points to the fact that it will.
When you just look at the fundamental factors around the
world, and you look at the reality of the situation in the
U.S., everything just seems to be pointing to the fact
that we're going to have an upside. What is clear is that
we're not living in ordinary times.
What Ian seems to be saying is that we could see a
sideways, but not necessarily a bear market this year,
before we start getting into the full bull market. This
could be a decade-long bull market, which started three
years ago.

But we have our indicators and we are watching
them closely. The 65-week moving averages works very well
in identifying the major trends, so that's one indicator
that we place importance on. Right now it is at $370, and
it's moving up. As long as gold stays above that, the
major trend is up. The intermediate move are also
important, because many times they will tell us if the
market, on a major trend basis, is getting tired or not.
So far, the steps are in place. The bull market is
underway and we're seeing a consolidation secondary trend
that looks like it's nearing an end.

TGR: You have also pointed out how the trends over
these next few months will help us see whether we are in a
market similar to that of the '80s and '90s ~ which means
the gold price would top out at some point ~ or if this
current market is more like the '70s market, which ended
in 1979 or 1980, with gold hitting $800.

PA: Yes, in fact I just created a chart that overlaid
the current bull market so far, compared to the bull
market of the '70s ~ indexed to 100 ~ to compare the
percentage growth of this bull market to the '70s. You see
gold moving very similarly to how it did in the
early '70s. [INSERT CHART]

At this point in the bull market in
the '70s, gold was a bit higher than it is now. But really
the movements are very similar, and it's interesting and
exciting to see whether that's the type of upside
potential we can look forward to over the next five to
seven years. And yes, I think we're in a bull market. We
could have some months of boredom, months of
consolidation, but that's all part of it. As long as the
major trend is up, and the intermediate trends are
bullish, we're staying with it, and we think it has a lot
further to go.

TGR: What about silver? You've said that it's better
than gold ~ you actually even wrote that as a
subhead, "Silver Better than Gold." Can you talk a little
bit about the factors that you think have gone into
silver's activity?

PA: Silver rose 45% just from October to March. Silver
tends to be a sleeper but once it wakes up, it soars. This
means if silver now stays above its recent March 2nd high
at $6.91, it'll be in a position to soar. Then if it
closes above its 1998 high near $7.30, it could rise to
the 1987 high near $9.50. These are the numbers we're
watching on the upside. The fundamentals have been very
favorable for silver for many years. And they are perhaps
even more favorable now than they were a couple of years
ago, when you consider the industrial side of silver.

Silver is stronger than gold. So we're
recommending more silver than gold. We like silver coins
and silver shares such as Silver Standard, Coeur d'Alene
and Pan American. These are our favorites.

TGR: Do you see gold and silver moving in tandem, with
the potential for a correction, or just sideways movement,
in both? Or do you see silver having more strength?

PA: Well, so far, we haven't really had a correction
in silver. It's overbought but it could stay overbought
while silver keeps rising. It hasn't even wanted to break
a five-week moving average, which means silver is very
strong above $6.50.

TGR: Could you talk now about some of the gold shares
you recommend? Among the larger companies, I see that you
like Newmont, Anglo Gold, Barrick, Glamis, Golden Star,
and Placer Dome, just to name a few. Which ones do you
especially like right now?

PA: I always like Newmont for a core position and
knowing that probably when mainstream investors start
buying more, they're going to buy that one.

TGR: Now, when you say, "mainstream" I assume you mean
the average investor?

PA: Yes, the average investor hasn't even really
started coming in at all. When gold becomes more popular,
when it starts gaining more attention, Newmont is going to
benefit from that.

TGR: What are some of the other gold stocks that you

PA: Cambior has been doing well. We also like Glamis
Gold and Placer. Two funds that have been doing well are:
the US Global Gold Share Fund and the Global Resource Fund
and of course, we like gold coins.

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