Gold Gearing Up for New Highs?

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"Rapturous radical bugs say yes."

Is gold gearing up for new highs? Rapturous radical bugs say yes.

Wednesday may prove to have been a very important day in gold. Gold broke early in the day, but then metal reversed, closing higher than Tuesday's high. For technicians, this amounts to an outside reversal.

The Wednesday close put gold back to the level of June 30 and some $73 higher than the July 27 low.

Back then, almost the only cheerful group was what I have called the "radical gold bugs" mustered around Bill Murphy's banner at LeMetropolecafe.

I quoted Murphy saying: "As long as the physical market holds up, it is only a matter of time before gold and silver go back up and make new highs."

Murphy's prediction seems to be happening.

On Wednesday night, Richard Russell commented:

"Strange, the clearest pattern I see in any item is in gold. . .below, gold is a picture-perfect head-and-shoulders bottoming formation. Over the last few days gold has broken out to the upside. The breakout is capable of taking gold to the previous record highs."

What is particularly interesting is that, for once, the gold shares agree.

Two weeks ago the Chartist Martin Pring stipulated that although recent gold action "hints at a possible rally. . .until SPDR Gold Trust ETF consolidated issue listed by NYSE Arca:GLD and Market Vectors Gold Miners ETF consolidated issue listed by NYSE Arca:GDX can take out previous minor highs at $120 and $52, I am remaining cautious."

But on Wednesday, both instruments achieved these levels.

Gold bugs are also taking heart from other factors. They have learned to rely on a powerful upswing in physical demand for gold starting in late August and running through the end of the year.

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