GOLD INDEXES BREAKOUT TO THE UPSIDE AS GOLD JUMPS $13 -- FREEPORT MCMORAN COPPER AND GOLD BREAKS OUT ON METAL GAINS

GOLD INDEXES BREAK OUT... Both of the precious metal stock indexes that I follow are breaking out to the upside today. Charts 1 shows the AMEX Gold Bugs Index (HUI) breaking through its summer highs to the highest level since mid-May. Chart 2 shows the PHLX Gold & Silver Index (XAU) doing the same. Although both precious metals are rising today, most of the buying is coming in the gold market which is up $13.70. That strong buying in gold is contrasted to crude oil which is trading down today. My Friday article suggested that gold was undervalued relative to oil. Copper prices are also showing a strong gain of 4% today which is also boosting copper shares. One of the XAU stocks that benefits from gains in both commodities is Freeport McMoran Copper & Gold (Chart 3). It also happens to be the day's biggest gainer in the basic materials group.

Chart 1

Chart 2

Chart 3

GOLD ETFS GAP UP ... The next two charts show the two gold ETFs gapping higher today. Their chart patterns are identical. Chart 4 shows the COMEX Gold iShares (IAU) testing a down trendline near 64 on rising volume. Chart 5 shows the more liquid StreetTRACKS Gold Trust (GLD) testing the same resistance line. Its upside volume is more subdued. It looks very much like gold is making a run to the upside. The fact that gold stocks and silver have already broken out the upside increases the odds that bullion will do the same.

Chart 4

Chart 5