GOLD AND SILVER HAVE BIG WEEK -- SO DO GOLD STOCKS -- GOLD LEADERS INCLUDE ABX, GG, KGC, AEM, AND IAG -- PRECIOUS METAL ASSETS ARE BACK IN FAVOR

GOLD TESTING ALL-TIME HIGH... Last Friday I wrote about the bullish potential in gold and gold shares. That optimism was based on two bullish chart patterns which are shown below. The first is the bullish symmetrical triangle shown in Chart 1 for the Gold Trust ETF (GLD). This week's upside break of the upper resistance line (on heavy volume) is bullish and signals a test of its February high near 100 (which corresponds to $1,000 in bullion). Chart 2 shows why that's an important resistance level of its own. Chart 2 (based on the price of bullion) shows an inverse (or continuation) head and shoulders pattern with a neckline drawn over gold's 2008-2009 highs. A close through that level (which appears likely) would be even more bullish for gold and gold shares. In fact, gold shares have risen even more than bullion this past week. So did silver.

Chart 1

Chart 2

GOLD SHARES BREAKOUT AS WELL ... With gold on a tear, it's no surprise to see gold shares top the week's stock rankings. Chart 3 shows the Market Vectors Gold Miners ETF (GDX) breaking out to the highest level in a year. I pointed out last week that the GDX had already broken its 2008/2009 down trendline. Chart 4 is a relative strength ratio of the GDX divided by the S&P 500. The ratio shows us what gold shares have done relative to the stock market. The ratio itself look like a triangular consolidation in an ongoing uptrend. That makes gold shares a pretty good bet as well.

Chart 3

Chart 4

GOLD STOCK LEADERS ... The next five charts are taken from the top ten stock holdings in the GDX. Although all ten had a strong week, I'm showing only those that achieved upside breakouts. The list includes Barrick (Chart 5), Goldcorp (Chart 6), Kinross (Chart 7), Agnico Eagle Mines (Chart 8), and IAMGOLD (Chart 9). IAG is the only one to reach a record high.

Chart 5

Chart 6

Chart 7

Chart 8

Chart 9

SILVER ALSO BREAKS OUT... The week's upside fireworks weren't limited to gold. Silver had a strong week as well. Chart 10 shows Silver iShares (SLV) rising to the highest level in a year on very heavy volume. The SLV has also broken a down trendline drawn over its 2008/2009 highs. A lot of reasons have been put forward to explain the sudden surge in precious metals like a weaker dollar, loss of confidence in stocks, seasonal considerations, and fears of inflation or deflation. The reasons don't really matter. If you don't own some precious metal assets, this is a good time to make sure that you do. If you already own some, it's time to consider increasing the size of your holdings.

Chart 10