The XAU.X gold/silver (+3.5%) is currently the strongest performing sector. The index has been able to maintain its intraday gains, despite the broader market's reversal. What seems to be pushing this group higher is the steady drumbeat of hawkish rhetoric from the White House. Vice President Chaney stated in a recent CNN interview that the U.S. has proof that Iraq is working on a nuclear weapons program. Although this evidence has yet to see the light of day, President Bush plans to plead his case to the U.N. General Assembly on Thursday.
The prospect of imminent war in the Middle-East has crude oil futures (cl02z) trading near 52-week highs. In turn, the gold sector is experiencing defensive buying. Hindsight is always 20/20, but the XAU gave one heckuva point-and-figure buy signal on August 29th when it traded $68.00. Not only did this create a triple-top buy signal, but it also sent the index above bearish resistance.
Point-and-figure chart of XAU.X Gold/Silver index:
The XAU.X is trading at seven-week highs and could experience further upward movement if the war talk continues to heat up. One stock gold bugs might want consider is playing is Newmont Mining (NEM, +2.5%) on a rally above $30.00. A break of this psychological resistance level could lead to a retest of the 52- week high at $32.75. Such a move would also create a double-top buy signal on the p-n-f chart.