Patience Pays Off

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Gold market enthusiasts, who had been urging skeptics to stay invested despite the sustained price lull, were vindicated by the recent move. Some even predicted that the latest high would prove to be the beginning of a breakout drive.

Investor patience was rewarded last week when gold made its first strong move in two months.

The yellow metal rose to $687.60 an ounce - its highest price since May 9 – before settling back to $684.70. Analysts and pundits pointed to a weaker dollar as the key driver, with some suggesting that subprime woes, rising oil prices and ongoing geopolitical tension also had helped to buoy the precious metals market.

Gold market enthusiasts, who had been urging skeptics to stay invested despite the sustained price lull, were vindicated by the recent move. Some even predicted that the latest high would prove to be the beginning of a breakout drive.

Brien Lundin, author of Gold Newsletter, told readers that the gold price has “bounced off our major bottom indicator, and appears to be staging an important rally earlier than expected.” Lundin said that physical demand “has been surprisingly strong in recent weeks, belying expectations for a typical slowdown during the depths of summer.”

Earlier this month, The Aden Forecast readers were told “gold is telling us to stay invested…If gold stays above $640 and closes above $670, a C rise will clearly be underway. Gold could then test $696, the April high and once that’s broken, $722 will be the next stop. Above $722 would mean a strong C rise and a strong bull market are underway.” The Aden sisters reiterated their $722 target when gold began making its latest move.

According to a July 23 Bloomberg report, “Gold may rise, topping $700 an ounce for the first time since May 2006.” The report cited speculation that the dollar will weaken further against the euro, boosting the appeal of the precious metal as an alternative investment. Bloomberg surveyed 27 traders, investors and analysts – 23 of whom advised buying gold.

Gold shares are also showing “solid strength,” according to The Aden Forecast: “The XAU gold & silver share index is at a 14-month high and it’s super strong above 145 . . . Likewise for the HUI index above 343. Our recommended gold and silver shares are doing fine; continue to buy and hold.”

James Turk, author of the Freemarket Gold & Money Report, predicts we may finally be seeing the start of a “really big move” in the gold mining stocks. “What’s really impressive to me is the fact that the mining stocks gained last week notwithstanding the headwind of higher energy costs, which puts pressure on mine operating margins,” said Turk. “In fact, the mining stocks have been facing this headwind all year, which may explain why they have not risen already and also why they remain relatively undervalued compared to gold itself.”

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