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Peter Brimelow: Gold gearing up?

Section: Daily Dispatches

By Peter Brimelow
Thursday, August 19, 2010

NEW YORK -- Is gold gearing up for new highs? Rapturous radical bugs say yes.

Wednesday may prove to have been a very important day in gold. Gold broke early in the day, but then metal reversed, closing higher than Tuesday's high. For technicians, this amounts to an outside reversal.

The Wednesday close put gold back to the level of June 30 and some $73 higher than the July 27 low.

Back then, almost the only cheerful group was what I have call the "radical gold bugs" mustered around Bill Murphy's banner at LeMetropole Cafe.

... Dispatch continues below ...


Prophecy to Become Coal Producer This Year
with 1.5 Billion Tonnes of Resource

Prophecy Resource Corp. (TSX.V: PCY) announced on May 11 that it has entered into a mine services agreement with Leighton Asia Ltd. to begin coal production this year. Production will begin with a 250,000-tonne starter pit as planned in August, with production advancing to 2 million tonnes per year in 2011. Prophecy is fully funded to production and its management team includes John Morganti, Arnold Armstrong, and Rob McEwen.

For Prophecy's complete press release about its production plans, please visit:

I quoted Murphy saying: "As long as the physical market holds up, it is only a matter of time before gold and silver go back up and make new highs."

Murphy's prediction seems to be happening.

On Wednesday night, Richard Russell commented:

"Strange, the clearest pattern I see in any item is in gold. ... Below, gold is a picture-perfect head-and-shoulders bottoming formation. Over the last few days gold has broken out to the upside. The breakout is capable of taking gold to the previous record highs."

What is particularly interesting is that, for once, the gold shares agree.

Two weeks ago the Chartist Martin Pring stipulated in his weekly Infomovie Report that although recent gold action "hints at a possible rally ... until SPDR Gold Trust ETF (GLD) and the Market Vectors Gold Miners ETF (GDX) can take out previous minor highs at $120 and $52 I am remaining cautious."

But on Wednesday both instruments achieved these levels. This is an important matter for Pring, who has traditionally laid great weight on the forecasting capabilities of gold shares.

Gold bugs are also taking heart from other factors. They have learned to rely on a powerful upswing in physical demand for gold starting in late August and running through the end of the year.

This is because of the wedding season in India, by far the world's largest gold importer. The research department of Canada's CIBC has recently pointed out that gold has risen in September in 16 of the last 20 years. Holding for the whole of the last four months of the year has provided double the returns of September alone.

LeMetropole Cafe, which pays close attention to regional gold markets, has indeed been reporting signs of stronger buying out of India, Turkey, and even Iran. This is expected to more than offset weaker bids from the Far East -- Vietnam, China, and Japan.

This evening's weekly update from the Aden Report is on board for the ride:

"With each passing day, gold is reinforcing that a renewed rise is under way. This is incredibly bullish because it's saying that the six week 8% decline from June 18 to July 26 is all we are going to get. ...

"If gold, basis December, now stays above $1,213, the D decline will be over and the rise could then easily test the June highs. But if gold closes at a new record high above $1,258.30, it will show super strength due to several reasons. A mild D decline, followed by a record 'A' rise high, at a time when a second phase of the bull market is under way, essentially means an explosive rise could be at hand. Gold shares are backing this up as the HUI gold share index closed at a seven week high today."

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Sona Resources Expects Positive Cash Flow from Blackdome,
Plans Aggressive Exploration of Elizabeth Gold Property

On May 18, 2010, Sona Resources Corp. (TSXV: SYS, Frankfurt: QS7) announced the release of a preliminary economic assessment for gold production at its flagship Blackdome and Elizabeth properties in British Columbia.

Sona Executive Chairman Nick Ferris says: "We view this as a baseline scenario for gold production. The project is highly sensitive to the price of gold. A conservative valuation of gold at $1,093 per ounce would result in a pre-tax cash flow of $54 million. The assessment indicates that underground mining at the two sites would recover 183,600 ounces of gold and 62,500 ounces of silver. Permitting and infrastructure are already in place for processing ore at the Blackdome mill, with a 200-tonne per day throughput over an eight-year mine life. Our near-term goal is to continue aggressive exploration at Elizabeth and develop a million-plus-ounce gold resource, commencing production in 2013."

For complete information on Sona Resources Corp. please visit:

A Canadian gold opportunity ready for growth