There seems to be a lot of nervousness in the gold market these days when it comes to the nearby future of the HUI. Will it crash? Or will it appreciate further from here on? Sure enough nobody can predict the future so neither can I but nevertheless I wanted to share a few thoughts on this matter since the HUI seems to be on a critical juncture here. In my piece 'HUI - Too Young to Die' I pointed out several similarities between the HUI move of 2003 and 2006 and concluded that there was still some upside potential left in the current HUI run.

Here's a small update on that piece.

First let's take a peek again at the HUI charts of 2003 and 2006:

As you can see the similarities were striking indeed.. Furthermore I concluded that a major bull run isn't terminated that easy. The HUI run of 2003 was terminated only after four major attacks on its 50 dma after breaking its long term resistance of 150 while the HUI run of 2006 only tested its 50 dma twice so far after breaking its long term resistance of 250. The chart below visualizes this painfully clear.

Now here's a small update on the current situation:

The HUI tested its 50 dma again on February 27 and again it bounced of as I suggested it could do in our dispatch of Feb 27 titled 'HUI remarks HUI - Crash or Launch?', see chart next chart:

This was the second attack on the HUI's 50 dma (HUI 303) since it broke out of its long term resistance at 250 and again it bounced off and is trading near 320 now. So where to go from here?

Well, as said before no-one can predict the future so neither can I but when you visualize the 2003 situation vs the current situation one could conclude that a HUI run towards the 430 mark can't be ruled out easily.

Highlights:

• HUI 50 dma only tested twice since break-out of its long-term resistance of 250, in 2003 HUI tested its 50 dma at least 4 times after breaching it long term resistance of 150.
• As long as up-trend B remains intact there's no rush to sell. B trend-line 2006 similar to A-trend-line in 2003.
• HUI gained 72% after breaching its long term resistance at 150 in 2003
• HUI gained only 40% (max) after breaching its long term resistance at 250, a similar move as in 2003 would launch the HUI towards the 430 mark.

You want to read more?

Please feel free to obtain a free (edited) edition of 'The Gold Discovery Letter' - March Issue - by clicking HERE

Eric Hommelberg
The Gold Drivers Report

E-mail: ehommelberg@golddrivers.com
Web-site: www.golddrivers.com

March 5, 2006