Excerpt from GDR Update August 02 :

If the August/September period could live up to its own historical performance then we could be witnessing a break-out of the gold shares soon since gold clocked impressive gains over the past 4 years during this period (2001 +11%, 2002 +10%, 2003 +13%, 2004 +8%, 2005 ??) (entire GDR Update August 02 - www.golddrivers.com/GDRUpdates/gdrupdate20050802.htm)

Gold could benefit imo from a rising Euro (declining Dollar). The Euro simply doesn't want to go down below 120 it seems. It broke important down-trend lines to the upside and seems to have a free ride to the 126 area now, see chart below :

• The steep down-trend of May-June (DT-3) ended early July because of strong support at 120.



• The DT-2 down-trend line and the 50 dma are broken to the upside now.



• Next resistance near 126 (38% FIB retracement of the 136-120 down-move)

Now what if this scenario plays out this way ? Sure it bodes well for the gold shares which are outperforming gold anyhow since mid-May (declining Gold/HUI ratio). It even bodes better for the junior shares which in turn are outperforming their senior brothers since mid-May. END.

Now this scenario seems to unfold itself as projected above, see Euro chart below :

Euro heading to first FIB level resistance at 126 ?

So what happened to the HUI after August 02 ? Sure it took off on the back of rising gold prices and slashed its 200 dma resistance. Then it fell back and breached its 200 dma level again to the upside on August 10, see chart below.

HUI break-out imminent ?

So where are we now ? Is it over or does it mark the beginning of a significant August/September rally ?

Again my guess is in favor of the latter. Why ?

First of all the Euro doesn't seem to have lost it's upward momentum yet and could benefit the price of gold even further thereby pulling the gold-shares up.

Second is that more widely followed investment bankers are playing the August/September tune for gold which attracts new investment capital to the gold-arena. Merrill Lynch came out yesterday with the following :

Gold and gold equity markets witness rally
Wednesday, August 10, 2005 7:37:52 AM ET

LONDON, August 10 (newratings.com) - Analysts at Merrill Lynch say that the annual rally in gold and the gold equity markets has begun.

In a research note published this morning, the analysts mention that the S&P/TSX Gold Index has risen 7.1% since July 19, while gold price has jumped 3.9%. Historically gold and bullion shares have risen significantly in the period from early summer to mid autumn, Merrill Lynch says. The increase is likely to be due to renewed fabrication demand for the holiday seasons, the analysts add. END.

Now there seems to be money moving into the junior shares indeed. The month of August is still young but I've not seen one single month so far this year which showed such a remarkable performance of the junior shares. The junior monthly ranking list below says it all. Just take peek and judge yourself.

www.golddrivers.com/Juniors/juniorpagemonthly.htm

Conclusion :

• Junior shares are being accumulated which is a sign of strength.
• August so far showed the strongest performance for junior shares so far this year.
• Upward momentum for the gold-shares is not threatened yet

Comments and feedback are welcome at :

Eric Hommelberg
The Gold Drivers Report

Email : ehommelberg@golddrivers.com
Web-site : www.golddrivers.com

August 11, 2005