By James Turk
Freemarket Gold & Money Report

       The mounting evidence continues to suggest that the low in the gold mining stocks is behind us. Further, the gold stocks still represent good value.
        The gold mining stocks are still near their buying area.
        The important point that we should take from gold's chart is that gold has climbed relentlessly higher, which has happened regardless of everything that central banks have thrown at it, including their anti-gold propaganda, their build-up of gold derivative positions, and the dishoarding of physical metal from their vaults. In effect, gold is telling us that it does not want to stay below $432, which perforce means that it wants resume its 4-year old uptrend.
        In fact, I think that is what's happening now. The recent (and probably final) successful test of support around $420 means that gold is ready to once again start climbing higher, and indeed, it has in fact been climbing higher since testing that important support. Gold is resuming its uptrend.
        Gold is just a chip-shot away from $500, the next level of resistance. That's where I expect gold is headed, and given the way gold has been trading of late, it will probably reach that level much sooner than we expect.
        Gold does not normally begin to rally during the summer months, but it does happen occasionally. I remember very well how gold rallied in the summer of 1982. It began its climb higher in June of that year, much to the surprise of everyone because there was no apparent reason for gold to rally. The reason for gold's climb did not become apparent until August, at which time it became widely known that Mexico was defaulting on the billions of dollars of debt it owed to US banks. We can see that rally on the chart - gold climbed from $282 to $500 in just six short months.
        That sharp climb is a mark of a bear-market rally, which we now know is what that 1982 rally turned out to be. But gold's technical position is entirely different this time around. In 1982, gold's price had been more than halved from the 1980 high, so a bounce was to be expected. This time, gold is climbing higher from a huge and powerful base in which strong hands - like us - have been accumulating gold.
        Gold's technical position today is a night-and-day difference from that which existed in the summer of 1982. Consequently, if gold can more than double in price in a few months like I did that 1982 summer when it was in a much weaker technical positions, imagine what it can do over the next few months, not to mention the balance of this year. I am increasingly taking the view that my $500 target for this year will probably prove to be too conservative.
        Central banks have been sitting on the gold price for so long, it is increasingly likely that gold will explode to the upside. The experience thirty-five years ago provides a good illustration of gold's potential.
        When President Nixon closed the 'gold window' in August 1971, it was a long-delayed wake-up call fro everyone who had until then been ignoring gold. Gold immediately began a steady and unrelenting climb higher. Only eighteen months later the gold price had tripled.
        Could history repeat making $1200 gold possible in the next eighteen months? YES! It is becoming increasingly clear to me that gold has at least that much upside potential.
        Turning now to silver, I noted in the last letter that silver "climbed too far, too fast". It needed a breather, and we got one. But note how silver has held above $7.25. I had hoped to buy back a trading position below this level.
        We might still fall back below $7.25, but then again, I wouldn't be on it. The fact that silver has repeatedly been unable to close below $7.25 indicates strong support for it. Like gold, there is a lot of money on the sidelines waiting to 'buy the dip'.
        The long-term picture for silver look very bullish. Silver continues to trade within a triangle formation. These are consolidation patterns normally found within uptrends, which is the present case with silver.
        Also, these patterns more often than not conclude with an upside breakout. This chart supports that point of view. It is a very bullish chart, so one would normally expect it to be resolved with an upside breakout.
        Initial overhead resistance for silver begins around the $7.80 area. Look for silver to break through this area in the weeks just ahead, followed soon thereafter by gold breaking through resistance at $456.
        In summary, be prepared for some upside fireworks in gold and silver. These upside fireworks could start anytime.
        Editor's Note: James Turk is editor of the Freemarket Gold & Money Report, P.O. Box 5002, North Conway, NH 03860, 1 year, 20 issues, $260. www.fgmr.com.