We present extensive ugrizYHJK photometry and optical spectroscopy of SN 2005gj obtained by the SDSS-II and CSP Supernova Projects, which give excellent coverage during the first 150 days after the time of explosion. These data show that SN 2005gj is
the second clear case, after SN 2002ic, of a thermonuclear explosion in a dense circumstellar environment. Both the presence of singly and doubly ionized iron-peak elements (FeIII and weak SII, SiII) near maximum light as well as the spectral evolution show that SN 2002ic-like events are Type Ia explosions. Independent evidence comes from the exponential decay in luminosity of SN 2005gj, pointing to an exponential density distribution of the ejecta. The interaction of the supernova ejecta with the dense circumstellar medium is stronger than in SN 2002ic: (1) the supernova lines are weaker; (2) the Balmer emission lines are more luminous; and (3) the bolometric luminosity is higher close to maximum light. The velocity evolution of the Halpha components suggest that the CSM around SN 2005gj is clumpy and it has a flatter density distribution compared with the steady wind solution, in agreement with SN 2002ic. An early X-ray observation with Chandra gives an upper-limit on the mass loss rate from the companion of < 2x10^{-4} Msun/yr.
