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To: ms.smartest.person who wrote (814)	3/12/2006 10:26:26 PM
From: ms.smartest.person	Read Replies (1) \| Respond to of 3198

Short-Term Bottom for Gold Shares? By Michael J. DesLauriers 11 Mar 2006 at 06:26 PM EST TORONTO (ResourceInvestor.com) -- Traders and short-term speculators are facing an increasingly volatile gold market. At this morning’s lows, the HUI was down 16% and gold was off 7% in the last five sessions, before both bounced sharply higher. For the time being it seems that the weak hands have been shaken out and a new short-term bottom is in. The divergence between the behaviour of the metal and the shares Friday would appear to indicate that investors are viewing current levels as a buying opportunity and are willing to initiate or re-establish long positions in this range. With the majority of momentum chasing funds now back on the sidelines, the path of least resistance should be higher. Institutions with a longer-range time horizon are viewing dips in the yellow metal as a chance to load up on hard assets (despite rising interest rates), a trend unlikely to come to an end any time soon. Further, the USDX is once again brushing up against its highs and has repeatedly proven its inability to break though. If one uses early November as the beginning of the real run in gold stocks, then today’s low of 278 on the HUI represents more than a 50% retracement from the early February high around 350. Long-term support on the Gold Bugs Index, as measured by the 200-day moving average is up to 243, with the 50-day all the way up to nearly 311 - that level should serve as resistance for now and if recent action is any indicator could well be tested as early as next week. In terms of the metal itself the 50-day, which served as a support level during the last consolidation was sharply pierced to the downside this time around, and stands at roughly $553. Long-term support levels have been moving up steadily, with the 200-day now at $482. I don’t believe gold is likely to breach the 500 level to the downside on anything more than an intra-day basis in this secular bull, and probably won’t at all. The probability of prices bouncing around between $535 and $570 over the next several months on the back of speculation and economic and geopolitical events is high. In all likelihood, barring any totally unforeseen events (which always crop up at just the wrong time), astute traders will be able to continue to make healthy profits moving in and out of commodity markets by simply tracking momentum. Senior and junior shares are still reacting to good news, indicating an interest level commensurate with a solid long-term bull market, and the ability for knowledgeable speculators to capitalize on news-driven momentum is unprecedented in our bull to date. All in all, it seems advisable for long-term players to hold tight and add to positions on weakness. Gold shares seem to be confirming a bottom and it shouldn’t be long before the hedge funds are changing their tune. The story next week will be physical buying. Gold for April delivery fell $5.70, or 1%, to close at $541.30 an ounce Friday on the New York Mercantile Exchange resourceinvestor.com