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Gold, HUI, XAU & GDX Close at 20-day Highs - Considerably Higher is Possible

Technical observations of

Bob Hoye
Institutional Advisors
Apr 12
, 2007

Both Gold and the various related mining indices (HUI, XAU & GDX) have closed at new 20-day highs. This satisfies the requirements for the conclusion of the corrective phase that began following the February 26th high. While the original break did satisfy an optimum oversold CCI(8) reading of -152 as of March 5th it was earlier than anticipated. In previous examples it generally took twelve trading days or more before the selling was complete.

The two instances that correlate well with the current 1.07 year cycle are 1993 and 2002. In those years there was a minor break, but not enough to create an oversold reading. Once the price broke out to a 20-day closing high it continued higher (up of 18% & 20% in the subsequent months). Based upon current market action a comparable move would project to $810 +/- $10 within the next four months.

Independently, our analysis of the symmetrical triangle breakout (measuring width, height and commonalities with thirty years of prior triangles) points to an interim high in the mid July to August time frame above last year's top at $735. Any minor corrections to the 50-ay moving average in the next few weeks should be considered buying opportunities in the related mining stocks.

Hostage Release: The other point to be made is the exceptional performance during the negotiation stage and release of the hostages. Prices should have broken by $10 to $15 (in line with the decline in crude). However, commercials used the opportunity to reduce their net short position by 9K.

-Bob Hoye
Institutional Advisors


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