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Gold-bugs, "think gold 400"

Richard Russell
Dow Theory Letters
June 21, 2004

Extracted from the June 19, 2004 edition of Richard's Remarks

Last week was a decent week for gold, and I want to show you what the daily chart of gold looks like. What we see here is a "head-and-shoulders bottom."

The left shoulder recorded its low on April 29, the head recorded its intra-day low on May 10 at 372.50. The current right shoulder hit a low of 384.20 on June 14 (all based on the August contract).

On Friday August gold gapped up above its 50-day moving average (391.90) -- to close at 395.70. That was impressive action. In order to break out of its head-and-shoulders bottom pattern, August gold would have to closed above 400. I would not be shocked if that was to happen next week.

As for gold stocks, they've taken a beating, and they are now gun-shy or I should say "gold-shy." By this I mean that the gold shares want to see gold actually close at 400. And just as important -- remain above 400. In other words, the gold shares are now from Missouri. They're saying to gold, "SHOW ME." I suspect that very shortly gold will show them by moving above 400 and staying there.

By the way, the 200-day moving average for gold stands at 398.60. Thus, a price of 400 for gold would not only break the metal out of its head-and-shoulder bottom, but it would take gold above its important 200-day moving average.

So gold-bugs, "think gold 400."

The number 400 is the current important number for the yellow metal.

Richard Russell
Dow Theory Letters

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