We got it! Yesterday the XAU closed above its downtrend resistance line. The next leg up is beginning. Just hold and enjoy the ride. I think we'll see the XAU go to 150-160 by the time of the August 8th Fed meeting. One real positive is the XAU/S&P 500 ratio also broke out to the upside. One thing that bothered me about the action in May and June is that gold stocks seemed to trade along with the broad market. That seems to be ending right now. Not only did this relative strength ratio turn up yesterday, but stocks had a strong day while the Nasdaq fell over 30 points.

I wanted to see the relative strength XAU/S&P 500 break to the upside sometime in August. This would set the tone for gold stocks to act stronger than the broad market and even to rally if the market were to fall, which I think it will over the next several months. You want to own the leading sectors of the market and this indicator makes it likely that gold stocks will remain one of the top three or four sectors for the rest of the year. That will cause them to attract a lot of mutual fund money in December as those funds usually try to goose their portfolios by buying the hottest sector in the last few weeks of the year.

Paramount Gold(OTC: PGDP), which has been on my top ten list for almost a year(I first mentioned it a year ago when it was trading around $1.00 and then took it off along with all gold stocks at the end of last year, then put it back on), released blockbuster drill results yesterday. Here is there press release:

Paramount Gold's first drill results include bonanza gold grade of 35.5 g/t gold over 4 meters at San Miguel Project in Mexico

Chihuahua, Mexico – (BUSINESS WIRE) – August 1, 2006 – Paramount Gold Mining Corp. (OTC:PGDP Frankfurt:P6G), is pleased to disclose the first round of results from its ongoing drill program at the San Miguel project located near Temoris, Chihuahua, Mexico. These first nine drill holes represent initial testing on the San Luis, Montecristo and La Blanca zones, which are three of the over ten known mineralized zones located at San Miguel. Two of the three zones reported very significant intercepts of gold and silver mineralization and included bonanza gold of 35.5 g/t gold with 17 g/t silver over 4.0 meters in hole SL-02 at San Luis and 0.39 g/t gold and 80.62 g/t silver over 19.5 meters in hole MC-01 at Montecristo. Of significance, these intervals contain associated lead, zinc and copper sulfides, however due to backlogs at analytical laboratories, the analysis for these elements has yet to be completed.

Paramount's Exploration Manager for Mexico, Bill Reed, comments "I am very pleased that our initial round of drilling has been this successful. We recently obtained a report by Behre Dolbear & Company for A J Industries, dated 1962, stating "from what can be learned from existing literature, the San Luis deposit contains the highest gold grades in the district". Our initial drilling shows that this gold system can produce high grades and we are only getting started with just a few holes in three zones and have numerous other zones and areas to drill test throughout this large system. With each set of drill results we learn more and will be able to direct our second round of drilling on these targets more effectively. We plan 3 or 4 more holes at San Jose, and then the drill will be moved to the La Union Mine area to test the zone recently defined by 5 trenches. After 5-7 holes have been completed, the drill will be moved to the Santa Clara area to test gold and silver anomalies identified during a recently completed trenching program. Then we will rotate the drill back to previously drilled targets after analytical results have been reported for a second round of drilling."

Further commenting, Chris Crupi, President & CEO stated “These encouraging results have strengthened our commitment to the San Miguel project, evidenced by my recent authorization of an increased budget for further drilling.�

For more detail click this link: http://www.paramountgold.com/News/2005/08-01-2006.asp