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Thursday, November 09, 2006

Update -- Gold Breaks Out

The action in gold today is warming the hearts of gold bulls. Take a look at the chart...

What's moving gold today? I can think of a few forces. Here is one of them: The China syndrome. While many analysts are too quick to blame China for everything including a rainy day, it is true that China, because of its huge population, booming economy and massive foreign reserves, is a factor in the markets. Today, Reuters reported that the People’s Bank of China may shift some of its $1 trillion in foreign reserves out of the dollar. That is adding extra weight to the dollar’s decline. Since gold and the dollar sit at opposite ends of the see-saw of pain, as the dollar goes down, gold goes up.

And do you want to know something really bullish? As big as gold's move is today, the PERCENTAGE winner is silver -- up 4% compared to 3% for gold. I expect that outperformance to continue, too.

Use pullbacks to get in. It looks like the precious metals bull market is ready to charge.

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