El Gallo's story is continuing to impress the mining community. U.S. Gold has invested a lot of capital into drilling El Gallo this year and believe that by 2013 they can be producing up to 10,000,000 ounces of silver a year plus 35,000 ounces of gold. This drilling program has been extremely successful. They have expanded the mineralization and are now showing a potential to connect different zones to have one large shallow open pit mine. In two weeks the initial resource estimate will be published which should add momentum to this gold and silver growth story.

UXG's shares have significantly outperformed mining stocks and gold bullion this year. Since our initial recommendation from last May, UXG is up close to a 100%.

Even though UXG at the moment has little institutional sponsorship other than the CEO himself, I believe the investment community is coming to realize that the company has an impressive growth story. That has been highlighted technically over the past 12 months. You are welcome to view archived posts where I have shown the incredible strength these past 6 months.

Since investing in the mining sector since 2001 I have found relative strength to be a key indicator of where capital is flowing. It is easy to identify which companies are experiencing increasing demand compared to a benchmark. Since I consider myself a miner of mining stocks, I spend hours researching the mining companies which have the greatest ability to outperform gold bullion and the mining sector. Even in a great precious metals bull market one can underperform if not aware of how to use technical analysis and relative strength.

This chart shows the relative strength of UXG to the gold and silver index. Clearly the breakout to new 52 week highs is confirmed by its bullish strength. The longer the outperformance of price and the confirmed breakout leads me to believe its growth story going forward.

Using relative strength one can evaluate if this recent breakout in UXG is sustainable. The chart above shows a major breakout for UXG confirmed by relative strength. I believe that this stock can significantly outperform the sector over the next few years as did Goldcorp did from 2001-2005 while Mr. Mcewen was CEO.

Over the past 6 months UXG has significantly outperformed Mcewen's former company Goldcorp. While Goldcorp is up less than 15%, UXG is up close to a 100%. This further emphasizes how important it is to use relative strength to really profit in precious metals bull market.

Price volume action is excellent highlighted by the big volume breakouts. I believe UXG is a great long term growth story. New investors who want to get in should wait for a pullback as it is short term overbought.