Murphy nears North Pole as Gold Rush 21 gold bar bids keep coming

Section:

By Peter Brimelow
CBSMarketWatch.com
Thursday, August 4, 2005

http://www.marketwatch.com/news/story.asp?
column=Peter+Brimelow&siteid=mktw&dist=

NEW YORK -- Is gold on the move again? Some letters think so.

Gold-mining stocks leaped to life Wednesday, after several weeks of
unusually sluggish action in comparison to the gold price. The Amex
Gold Bugs Index roared 5.4% higher, adding 10.83 points to 210.32,
while gold for December delivery closed up $5, a five-week high.

This wasn't just any 10.83 points. Last week, Martin Pring, recently
bearish on gold, observed gloomily in his Weekly Market Update:

"The gold share index often provides a leading indication of which
direction prices may move. ... If this series breaks ... we would
expect to see the gold price violate the support. On the other hand,
a rally above the nine-month down trendline would probably signal a
test of the $443-$445 area for gold. The two levels to monitor then
are 204 and 194.5, both basis daily close."

So as the index smashed through to Wednesday's upside breakout, even
LeMetropole Caf's perpetually irascible Bill Murphy allowed
himself a smile: "How about them gold shares? They went bonkers."

Of particular note, the Gold Bugs Index "blew through all sorts of
resistance," which Murphy said was technically bullish in three
ways: soaring above "the congestion area" at the 200 level, closing
above key resistance at 205, and taking out a "significant downtrend
line" formed at last November's highs. Not only that, gold
moved "decisively" past this downtrend line.

As for the Philadelphia Gold/Silver Index, James Turk laid down a
threshold in his latest Freemarket Gold & Money Report:

"Once the XAU breaks above its 200-day moving average (currently at
94.64), the XAU will head toward the top of its trading range around
112, before eventually climbing higher still."

This, of course was also achieved on Wednesday.

Other of gold's friends got a jolt from Wednesday's move as well.
Brien Lundin's Gold Newsletter put out an alert entitled, "Welcome
Back, Mr. Bull."

"A sharp spike in bullion and the equities caps an impressive early-
week run, ushering in our much-anticipated late-summer rally," he
said.

But more common is the caution expressed by Richard Russell:

"Gold has formed what I call an imperfect symmetrical triangle. ...
An upside breakout would mean gold moving above 440. ... Let's see
what happens. I still don't get the feeling that gold is even close
to the ultimate huge rise that I foresee."

In the more esoteric corners of the gold world, muttering is to be
heard about the huge volumes of futures trading needed to engineer
an objectively modest recovery in the gold price. Someone's still
selling.

An oddity of the current situation is that two of gold's firmest
newsletter supporters are newcomers to the field. For the first time
in many years, Joe Granville's latest faxes have continued to
advocate gold shares.

And over at The Gartman Letter, self-proclaimed gold-bug despiser
Dennis Gartman held on to five of his six gold "units" (actually
long gold/short euros). The upshot: More than half his model
portfolio's comprised of gold plays.

As Gartman put it Wednesday morning: "The trend clearly is toward
higher gold prices in EUR terms. ... New highs lie just ahead."

Gold bugs must hope he can carry his rumored powerful hedge-fund
friends with him.

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