GOLD NEARS UPSIDE BREAKOUT -- NEWMONT MINING LEADS GOLD STOCKS HIGHER

BULLION IS TESTING JULY HIGH... Continuing weakness in the U.S. Dollar is lighting a fuse under the gold market -- and gold-related stocks. Gold is trading up more than $3.00 today and is testing its July peak at $410. A close through that chart barrier would represent a bullish breakout and put bullion at the highest level in four months. Chart 2 shows that the Goldman Sachs Precious Metals Index is also on the verge of a similar upside breakout. That's giving a big boost to precious metal stocks.

Chart 1

Chart 2

XAU HITS FOUR-MONTH HIGH ... The Gold & Silver Index (XAU) is breaking out to a new four-month high today, and is nearing a test of its (red) 200-day moving average. The relative strength line beneath the chart is also breaking out to the upside, which is another sign that money is flowing back into this sector. Newmont Mining, which is the biggest stock in the XAU Index, is leading the way higher.

Chart 3

NEWMONT CLIMBS OVER 200-DAY LINE... It's always a good idea to track Newmont Mining's direction because it's the biggest stock in the XAU. And the news is good. Chart 4 shows NEM breaking through its July peak and its 200-day moving average at the same time. That's a good sign for the stock and the entire sector. While everyone in the media is watching oil, the better play right now appears to be in gold.

Chart 4