Follow-through

After a brief intraday pullback on Wednesday, gold leapt 2% today to close at $704.60, surpassing April's high of $698. It appears that this breakout from the 15-month consolidation has legs. There are no further peaks to surmount before gold tackles May 2006's 26-year high of $730.40.

However, longs taking profits at the $700 round number could supply temporary resistance around this level by obliging those shorts who are urgently covering their positions. A pullback to the breakout point is still possible, though perhaps less likely now. MACD looks strong, but RSI has reached the 70 level, which preceded declines in April and July.

Silver was repelled at its 50-day MA, around $12.66, and some resistance remains overhead.

The fact that silver seems to be falling behind in this rally, as shown by the chart of the gold-to-silver ratio above, must give the gold bulls pause.

This ratio does, however, appear to have found support at its 200-week MA. The weekly MACD histogram may have bottomed out, and RSI appears to be recovering from a brief plunge below 30.

The major gold-mining stocks, as measured by GDX, advanced by 6.4% on good volume, overcoming substantial resistance around $40 and both the 50- and 200-day MAs. MACD, though still below zero, is rising strongly, as is RSI, which is convincingly above 50.

The fact that GDX has begun to rise faster than gold, as shown in the chart of the GDX-to-gold ratio above, is positive for the yellow metal, since in major advances GDX traditionally leads gold.

However, the ratio was halted today at its falling 50-day MA, which lies below its also falling 200-day MA, so a period of consolidation could lie ahead before the rally resumes in earnest.