Silver ETF could trigger price correction, analysts say

Section:

By Peter Brimelow
CBSMarketWatch
Tuesday, April 4, 2006

http://www.marketwatch.com/News/Story/Story.aspx?
column=Peter+Brimelow&siteid=mktw&dist=

NEW YORK -- These are great days for gold -- and the gold bugs
remain calmly confident.

One of the features of the gold rally that's been under way for most
of this millennium is that the investment letters most identified
with the precious metal haven't succumbed to hysterical
enthusiasm ... yet.

That still seems the case. The HGNSI, alphabet soup for the Hulbert
Gold Newsletter Sentiment Index, reflects the average market
exposure to gold among a group of short-term gold-timing
newsletters.

On Monday night, it stood at 58.9% -- a sharp jump but still
considerably below the 80%-plus extreme upper end of the range.

Also late Monday, Dow Theory Letters' veteran editor Richard Russell
was actually slightly cautious, although only in the short run:

"Gold and silver both at new highs but precious metal stocks mixed.
Are the stocks indicating a correction? Possibly, but I wouldn't bet
on it. Stay with the program." (See the chart below tracking the one-
year moves in three benchmarks for gold stocks.)
Russell laid out his long-run "program" thusly:

"Everyone with any brains is aware of the 'unsustainable' arguments.
The U.S. current account deficits are 'unsustainable.' The U.S.
budget deficits are 'unsustainable.' The U.S. trade balance deficits
are 'unsustainable.' Yeah, but we've been hearing those warnings for
years. And here is the stock market moving merrily along, and here
are Americans spending their heads off as usual. Sure trouble will
hit some day, but just tell me when."

His conclusion:

"As I see it, there are four places to monitor. Gold, bonds, the
dollar and stocks. So far, only gold is clearly saying
that 'something is wrong.' Bonds may -- just may -- be starting to
say that something is wrong. So far, the dollar is holding up well,
and stocks are acting as if they haven't even heard about the so-
called 'unsustainables.' We'll keep watching."

While watching, Russell's still in gold and cash. He also noted last
night that his favorite point-and-figure charts suggest gold's
next "target" will be up from its current $580-an-ounce range to
$690.

Privateer, the Australian newsletter, agrees:

"Gold sustained its $540-to-$570 trading range for just under two
months. This week, it was decisively broken through to the upside,
thereby signaling the next leg of the bull market."

Privateer is particularly interested in gold's improving technical
picture as measured by moving averages. Commenting on the weekly
gold chart, the service says happily:

"The gold price regained its shorter-term (20-week) moving average
last week and has soared back above it and to new bull-market highs
this week. Once again, we have a perfect picture of a bull market on
this chart with the shorter-term moving average well above its
longer-term counterpart and price well above both AND at new highs."

Privateer's also a point-and-figure fan, saying:

"You can see the abruptness of gold's recovery from its mid-December
and mid-February corrections on the strategic $5 x 3 point-and-
figure gold chart. But the most recent retreat from the $570 level
gave us a correction with a difference. That downturn gave us a
double top on the chart.

"Now, gold has broken above that $570 double top. More, it has
broken 3 clear 'Xs' above the double top with its $586.70 close on
March 30. That decisively breaks above the recent trading range and
also signals two things.

"The first is a new upleg on the bull market. The second is a likely
acceleration in the pace with which the U.S. dollar gold price
rises. This is signaled by the break above a double top, usually a
sign of weakness on a point-and-figure chart."

Privateer makes this chart available to the public at:

http://www.the-privateer.com/chart/gold-pf.html

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