23/07/07: Gold on the up again

Gold appears to be on the up once again, following a decidedly shaky period in June.

Writing in MarketWatch, Peter Brimelow notes that major gold stocks have begun outperforming gold for the first time in more than a year, following the yellow metal's rally over the last couple of weeks.

Last Friday bullion closed at $683.50, and so far this month the Phlx Gold Silver Index is up by 16 per cent, with the Amex Gold Bugs Index increasing by 14 per cent.

"The situation has been transformed" since a "chilling drop below $640", he writes, with gold share action impacting heavily on sentiment.

And analyst Martin Pring is particularly bullish about the future: "The Amex Gold miners Gold Share ETF has tentatively broken out from a large consolidation pattern. If it can build on this strength in the coming days, such action would suggest that gold will also be able to manage a rally above the all important $700-720 area."

Other commentators have predicted an eventual rise above $800, as the price of gold is bolstered by a weakening dollar and a general decline in production of the precious metal by mining companies.