Aden sisters: Hyper-inflation or deflation?

“There’s no question these are dangerous times and the financial world is in uncharted waters,” caution resource experts Mary Anne and Pamela Aden.

In The Aden Forecast, the sisters offer an exceptional in-depth discussion on inflationary vs. deflationary foreces, their outlook for precious metals, and their top gold and silver positions for long-term investors.

“The global financial system is on very thin ice, teetering on collapse.  Global central banks clearly are literally pulling out all the stops to revive lending and the world economy.

“Will these efforts work? Will they be enough? Those are the most important unanswered questions of the day and only time will tell, but we should know much more in the critical month or so ahead. Why?

“The Fed is spending money at an astronomical rate. It’s creating this money out of thin air by monetizing bad debts and whatever else it has to. Remember, this is on top of all the other ongoing government expenses and it’s extremely inflationary.

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“Normally, there is a lag of about a year or so between money creation and inflation but eventually, what’s recently happened will result in massive inflation, a much lower U.S. dollar and a soaring gold price.

“The bottom line is this, if the banks start to lend again, then the economy will be on the road to recovery and inflation. But we know the banks are scared and they’re being extremely cautious, for good reason.

“So if the banks decide not to lend and instead just sit on their cash, then the inflation process will freeze. In other words, the risk of defltion has greatly increased.

“Inflation is not a given and much will depend on what the banks do, or don’t do in the period just ahead. The Fed is providing the ammunition but the banks have to use it. If they don’t, the outcome could be much different than what most analysts feel is a done deal.

“At this point, it’s best to be prepared for either outcome. That means gold for inflation and cash for deflation, at least until we see how things unfold. The best investments right now are gold, the U.S. dollar and bonds, which reflect this economic see-saw.

“Currently, we have 35% of our total recommended portfolio in U.S. dollars and 30% in metals, which we advised raising to buy more gold. That gives us a 65% position in these markets.

“On a bright note, the stock market had six 90% down days in September-October and it’s had nine since April. These tend to come in clusters and they usually precede the final stock market bottom. If we look at the big picture of the Dow Industrials, you’ll see that this may be in the process of happening now.

“For now, bonds are looking good. The major trend for interest rates will remain down with the yields below 4.05% and 4.58% on the 10 and 30 year yields. As long as that’s the case, bond investors will do fine.

“In the gold market, he worst may finally be over. Even though it's premature and the markets are still not out of the woods, they started looking better this week, for the first time in quite a while.

"Gold reached an over one year low a week ago and it's now stabilizing near the lows by staying above $715 (basis December). Gold will start to look good above the $790-$800 level. 

“Investors should hold 10% of their portfolios in physical gold or the gold exchange-traded fund, SPDR Gold Trust (NYSE: GLD). We also recommend that investors maintain a 20% position in gold, silver and gold shares.

“Among our recommended positions are Goldcorp (NYSE: GG), Agnico Eagle (NYSE: AEM), the iShares Silver Trust (ASE: SLV) and the Market Vectors Gold Miners ETF (NYSE: GDX).”