GOLD NEARS A NEW RECOVERY HIGH -- NEXT TARGET IS $500 -- GOLD STOCKS REASSERT MARKET LEADERSHIP

GOLD SOARS $9.00... Gold prices have risen $9.00 today and are on the verge of a new multi-year high. That's putting a strong bid under gold stocks which are up 4% and the day's strongest stock group. Chart 1 shows the Gold ETF (GLD) on the verge of breaking through its September high. That would put gold back on course to reach its next major upside target at $500. The monthly bars in Chart 2 show that gold is trading at the highest level since it hit $500 in 1987.

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XAU INDEX NEARS MAJOR BULLISH BREAKOUT ... After climbing back over its 50-day average, the Gold & Silver (XAU) Index is jumping today and nearing a test of its recent high at 115. Its relative strength line, which bottomed during May, is turning back up again. The weekly bars in Chart 4 show how important an upside breakout could be for gold stocks. The XAU is challenging the top of a two-year trading range. A decisive close over 115 would constitute a major bullish breakout. The monthly bars in Chart 5 put that two-year trading range in better perspective. They show that the two-year sideways trend is a consolidation within a longer-term uptrend. Those kinds of patterns usually result in resumption of that uptrend.

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BIGGEST GOLD STOCKS ... The next three charts show the action in the three biggest gold stocks in the XAU in their order of relative strength. Anglogold has been trading over its 50-day line for the last week. Newmont Mining is moving over that line today on rising volume. NEM is one of the top give gainers in the S&P 500 and the top gainer in the materials group. Barrick Gold is still below its 50-day average, but is bouncing off its 200-day line.

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