John Murphy: A Look at Gold

08/29/2003 12:00 am EST


John Murphy

Head Market Analyst,

"There's always a bull market somewhere, and our job is simply to find it," says technical expert, John Murphy, chief technical analyst at "With bonds having peaked, and stocks stuck in the summer doldrums, there's one group that is clearly in a bull market. That's the precious metals group."

"Gold bullion has closed at its highest closing price in three months. This pushed gold through the upper line in a symmetrical triangle that has existed since February. That suggests that gold is starting a new upleg, which should exceed the highs hit over the past year. The next major upside target is to the $400 level. Gold wasn't the only precious metal rallying today. Platinum gained $19 to hit a new multi-year high. Silver gained 13 cents to close near $5.15. Silver recently broke out to a three-year high and appears to be completing a major bottom. One of the factors in favor of higher gold prices is the recent action in gold shares. The Gold/Silver Index ($XAU ) recently broke out to a new multi-year high. Historically, gold shares usually break out before bullion does. It's no surpise therefore to see the price of precious metals following the shares higher.

"Barrick Gold (ABX NYSE) has hit a new 52-week high. The daily chart shows the stock having recently broken through chart resistance at $19. The weekly chart shows ABX trading at the highest level since last July. ABX had been a laggard in the gold group--until the last month. The recent upside breakout suggests that ABX may be starting to play catch up to the rest of the group.

"Meanwhile, silver miner Hecla Mining (HL NYSE) hit another 52-week high after having recently achieved a bullish breakout through chart resistance at six. Coeur D'Alene (CDE NYSE) is even more impressive. The silver stock soared to a new recovery high after recently achieving a bullish breakout at 2.5. The weekly volume bars since July are particularly impressive. The action in both stocks augurs well for rising silver prices."


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