Gold: Correction is over.

Those of you who follow this blog may have wondered when my prediction for a new high in gold did not materialize as I expected, namely, during the last week of May. I will add that the method used (graphing the duration of corrections in gold and the days till  a new high) is far from exact. During the correction, we had all kinds of jawing that we should not be in gold. I will not repeat the nonsense hey wrote.

So, what is the evidence that gold has broken out? First, here is the gold price itself.

Gold was making a wedge and broke out on the upside.The breakout was on large volume, produced a positive MACD in the short term and reached the 50 DMA. True, if gold bounces off the 50 DMA then the breakout is aborted. Note also, that the volume in these contracts was large, even before the break out.

The second graph shows the strength of gold, i.e. the break out happened even though the US Dollar has been rallying for weeks.

The opposite has happened to the Industrials, which broke through its 200 DMA as foreshadowed by the DOW theory signal I wrote about,.

Is the break out in gold confirmed by the other measures? Previous break outs in gold were not confirmed by the action in gold mining stocks. The graph above this text is the graph of junior exploration companies. There is a sizable jump in prices and again the volume is large.

The graph above shows the action in the more senior exploration companies. The break out is confirmed though the volume is not impressive.

The gold miners have begun to rally earlier, but they, too, confirm the break out and on large volume.

Finally, silver also advanced, but the rally was not as spectacular.

What set off the rally in precious metals? Some pundits attribute the rise to the comments of Berlusconi (former PM of Italy) that if Italy does not get some relief with its debts, it's good by EU. I disagree with Bunga-bunga. What set off the rally was the admission by the Labor Dept that previous employment figures overestimated job numbers. The economy is sick and both Europe and the US must print, which will decapitate the rally in the US Dollar.

We will see Monday.