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John: Two of the main news items we see and hear about every day are the price of Gold and the value of the U.S. Dollar.   Tonight we will investigate the relationship between the two, purely from a technical analysis perspective as we bypass the complex rhetoric about the causes and effects of government economic policies on each. A chart and indicators are worth a thousand pages of descriptive commentary.

Let us start with a look at the 6-month daily comparative chart of Gold (continuous contract) and the U.S. Dollar Index.  The Dollar Index, by the way, is a weighted geometric mean of the value of the U.S. Dollar relative to a basket of six foreign currencies. On this chart the Dollar Index is the focus in candle format with the price of Gold shown as a single black line.

We often hear that the price of Gold and the U.S. Dollar always have an inverse relationship (one goes up while the other goes down).  But looking at the chart we see that between the two vertical thin blue lines Gold and the U.S. Dollar have moved in tandem, so the inverse relationship is not always true.

Then on August 25, rather abruptly, we see the beginning of a divergence as shown by the dotted blue lines.   I have drawn two vertical green lines to show how accurately the Slow Stochastics can identify the Dollar Index’s tops and bottoms.   We can also see that between August 12 and September 13, a small head and shoulders pattern formed.  This pattern was confirmed September 13 when the Dollar Index broke down through the neckline (green line) and then today when it broke down through the measured target level around 80.5.  This shows that the U.S. Dollar is displaying weakness and is expected to drop further in value as it has broken below the strong support level (horizontal green line).   Gold, on the other hand, continues its march to higher levels in an almost linear fashion.

Looking at the indicators:

U.S. Dollar (indicators shown on chart)

The RSI is just entering the oversold region and is at the 28% level – has room to fall further.

The Slow Stochastics shows the %K (black line) is down in the oversold region at the 13% level but pointing down, and the %D (red line) is higher at 30% and  also pointing down.  This shows that the U.S. Dollar can fall further in value.

By comparison the indicator values for Gold (indicators not shown on the chart) are as follows:

The RSI is in the overbought area at 77% – still has room to move higher.

The Slow Stochastics has the %K high at 91% and pointing up but the %D is at 71% and pointing up.  There is still room for Gold to move up.

Outlook: The chart and indicators show that Gold still has room to go higher before a pullback while the U.S. Dollar is likely to remain weak in the immediate future.   It is increasingly clear, however, that they are overbought and oversold respectively and should be constantly monitored.

3:30 pm Pacific

Gold Bullion Development (GBB, TSX-V) has pulled the trigger on its largest financing ever, $6 million to advance the Granada Gold Property.  The financing was announced after the market closed this afternoon and was set at 54 cents, four pennies below today’s closing price.

Not all market participants will be happy with a 54-cent financing, especially since this stock was trading as high as 79 cents a couple of weeks ago, but today’s news does show how far this company has progressed in a very short period of time.  Frank Basa nearly had to beg for money last December but was able to scrape together a million dollars with the help of Jordan Capital in order to get the ball rolling at Granada.  Now it’s rolling faster and faster and the future is very bright for this once-fledgling junior mining company.

The $6 million injection will boost Gold Bullion’s bank account to approximately $9 million.  That’s more than enough for GBB to carry out all of its exploration plans in the LONG Bars Zone through at least the spring of next year with no need for additional financing in the interim.  At some point down the road, if this project delivers the results we expect it will, the company will have to consider a much larger financing – perhaps three, four or five times what was announced today – but that would likely be at significantly higher prices.  The dilution factor on $6 million at 54 cents is rather minimal (under 10%).

What today’s announced financing shows is that the “big boys” with the money believe in what Gold Bullion is doing at Granada and they like what they see so far.  A cynic could make a strong case that the “big boys” sold a bunch of free trading stock recently and drove the price down to the level they wanted to do a financing at.  If that’s what actually happened, so be it.  We’re looking ahead, not behind.  The bottom line is that Gold Bullion is in very strong shape now financially and in a better position than ever to make a lot of exciting things happen at Granada and build shareholder value in the process.

The goal of a massive near-surface gold deposit at Granada is very achievable – we’re even more optimistic about that today than we were six months ago based on GENIVAR’s current analysis of the Phase 2 program (Sept. 9 news release).    When big money steps into a play, good things happen.  Just ask shareholders of another BMR favorite, Richfield Ventures (RVC, TSX-V). Richfield announced a large financing at $1.95 September 3.  The financing closed September 17 and CDNX approval has not even been received yet. The stock closed today at $2.95.  Richfield, like Gold Bullion, is cashed up and ramping up its exploration plans which translates into a higher stock price.

The potential rewards are truly incredible for those who are patient and can see what’s developing at Granada.  Christmas is just three months away, and we have every reason to believe it’s going to be a very, very merry Christmas for Gold Bullion shareholders.

Gold hit a new record high again this morning of $1,297.40…as of 8 am Pacific, though, the yellow metal has backed off to $1,290, a $3 gain for the day…Gold staged an impressive intraday reversal yesterday after comments by the Fed that it “is prepared to provide additional accomodation if needed to support the economic recovery and to return inflation, over time, to levels consistent with its mandate“…that’s all the Gold bugs needed to hear…more quantitative easing by the Fed is going to put additional downward pressure on the U.S. Dollar which is suffering this morning, breaking below 80 on the Index…the outlook for the U.S. Dollar is not good which bodes well for Gold…the CDNX hit a new 52-week high with a strong start this morning…the Index got as high as 1702 and is currently at 1693, up 12 points…the CDNX showed signs of exhaustion yesterday and we’ll see if today’s early advance can hold…at some point, we’re not sure when, there will be a healthy pullback of 5% or so in the CDNX but that’s all it will be, a healthy pullback to at least partially unwind overbought conditions…BMR is convinced we’re in the midst of a move in the CDNX of historic proportions…Gold Bullion Development (GBB, TSX-V) hit 60 cents this morning on follow-through from yesterday’s advance out of oversold conditions…GBB is currently up a penny to 58 cents…Sidon International Resources (SD, TSX-V) has received quick CDNX approval on its $1.3 million financing at 10 cents…with that out of the way, and a stronger treasury, we now expect Sidon to start to make things happen with its Morogoro East Property in Tanzania…at 8 am Pacific, Sidon is down half a penny at 14 cents…another company we like a lot with projects in Tanzania (and Sudbury) is Currie Rose Resources (CUI, TSX-V) which is up 1.5 cents to 12 cents…Currie Rose has a terrific looking chart and unlike many other companies right now it’s not overbought technically – in fact, it’s just coming out of a nice consolidation…we believe they’ll be starting a drill program shortly in Tanzania…Excel Gold Mining Inc. (EGM, TSX-V) is up half a penny to 16.5 cents…Excel announced yesterday, not surprisingly, that Frank Basa of Gold Bullion has joined its board of directors…we were first alerted to Excel last June when it was announced that Basa’s private company was awarded stock options in Excel…as BMR readers know, we visited Excel’s Montauban Mining Camp project earlier this month…we’re still continuing our due diligence with Excel but we’re very comfortable with its potential…we believe Basa is making Excel see the bigger picture with Montauban which is immense – Montauban is a former producer (gold, silver and base metals) and Excel has assembled a huge land package around it…the geologist we spoke to earlier this month at the property is tremendously excited about the regional prospects for Montauban…mineralization is near-surface at the former mine and there’s also untested depth potential below 200 metres…Montauban has historical reserves, which Excel is trying to quantify, and there’s a good chance there are extensions to the mineralized structures…

Gold has hovered between $1,272.50 and $1,283.50 so far today ahead of the FOMC meeting of the Federal Reserve…investors will be paying very close attention to this afternoon’s Fed statement…any hints of additional economic stimulus measures from the Fed (i.e., more quantitative easing) will certainly be bullish for the Gold market…as of 8:35 am Pacific, the yellow metal is down $5 an ounce to $1,274…the CDNX hit a new 52-week high of 1,694.45 in early trading today but has since retreated on profit-taking to 1681, down 5 points…some degree of sanity has returned to the Gold Bullion Development (GBB, TSX-V) market…bargain hunters stepped in right at the opening bell and GBB is currently up 4 cents to 57 cents on CDNX volume of 1.8 million…Seafield Resources (SFF, TSX-V) is down half a penny to 23.5 cents…its overbought condition is unwinding, which is positive, with very strong technical support at 23 cents – an area of previous strong resistance and just above its rising 20-day moving average of 21 cents…we expect news almost any day now out of Seafield regarding its exploration program at Quinchia including initial drill results out of Miraflores…another rising star in the prolific Middle Cauca Belt of Colombia is Bellhaven Copper and Gold (BHV, TSX-V) which appears to have its La Mina Project on the fast track to success…the very respected Paul Zweng is directing Bellhaven’s operations which also include interests in Panama…Bellhaven is currently off a penny to 56 cents after a powerful move (10.5 cents) to the upside yesterday…Sidon International (SD, TSX-V) is down half a penny to 14.5 cents…its rising 20 and 50-day moving averages just below 13 cents are providing tremendous technical support…we see another beautiful chart in Currie Rose Resources (CUI, TSX-V), also with interests in Tanzania, which has been consolidating recently and is trading just above its rising 20-day moving average…Currie Rose raised a million dollars in a recent financing and they’re now ready to go back to work in Tanzania…

Gold’s strength continues…as of 8:45 am Pacific, the yellow metal is up $8 an ounce to $1,282.50…the U.S. Dollar, in a 5-week old downtrend on the daily chart, is under pressure again this morning…Gold has gone up this year even when the U.S. Dollar was going up, so Gold is moving higher no matter what and there are very strong underlying fundamental and technical reasons for that…speculation is that the Federal Reserve will be engaging in more QE (“quantitative easing”) of monetary policy which is bearish for the American dollar and bullish for Gold…Silver prices hit a fresh 30-month high Friday and are up again this morning to $20.87, a 10-cent increase…the CDNX is closing in on a new 52-week high…the Index is up another 24 points to 1686, just 5 points shy of the 1691 high reached this past spring…there’s no question this market is significantly overbought at the moment, but it continues to blast through every bit of resistance…it’s possible it may not take a rest at 1691…Gold Bullion Development (GBB, TSX-V) is off another 3 pennies to 55 cents…this type of situation sometimes ends with an explosive upside move that catches a lot of traders and investors by surprise, an event we certainly see as quite possible with Gold Bullion which has been driven into oversold territory…the old adage of buying on weakness certainly applies with GBB at the moment…Sidon International (SD, TSX-V) is up a penny to 14.5 cents on CDNX volume of 1.3 million shares…Sidon is underpinned by extremely strong technical support around 13 cents and it’s not overbought like many other plays at the moment…another one in Tanzania we like is Currie Rose (CUI, TSX-V) which also has a favorable chart and is not overbought…Currie Rose is currently unchanged at 10.5 cents…it recently completed a $1 million financing and is getting set to launch a drill program…Colombian Mines (CMJ, TSX-V), which John featured this morning with a chart update, is up another nickel to 94 cents…a breakout appears immiment with CMJ…also in Colombia, of course we are very bullish on Seafield Resources (SFF, TSX-V) – currently down a penny to 24 cents – and we also like Bellhaven (BHV, TSX-V) a lot which Paul Zweng is doing some great things with…Bellhaven appears to have its La Mina gold/copper project on the fast track to success and it has other irons in the fire as well…Bellhaven is up 6.5 cents to 53 cents…

6:00 am Pacific

Two stocks in the BMR portfolio – Seafield Resources (SFF, TSX-V) and Colombian Mines Corporation (CMJ, TSX-V) – are major players in Colombia, searching for gold and copper, and both have done very well.   Investors’ appetities are growing once again for companies exploring in Colombia which is regarded as a relatively safe jurisdiction for mining and exploration – “safer than Mexico”, one CEO recently told us.  Colombia is a country blessed with abundant resources and the next decade down there could see some incredible growth in the mining sector.  We’ve written a lot about Seafield recently.  This morning, BMR’s technical analyst updates the outlook for Colombian Mines which is well established in that country with a very large land position, over 150,000 hectares:

On Friday, Columbia Mines opened at 74 cents, its low for the day, and rose up to its daily high of 89 cents and closed there on relatively light volume of 88,000 shares.  The company has only 23 million shares currently outstanding and 28 million fully diluted.

Looking at the 6-month daily chart, we see that between July 14 and September 3 CMJ consolidated between 60 cents and 73 cents in a horizontal trend channel (top blue line is resistance and the bottom green line is support).  Then on Sept. 4 the stock broke to the upside and 2 days later rose as high as 95 cents but closed at 89 cents with a doji candle. This signalled an imminent reversal and a re-test of previous resistance.

Look at the RSI and the Slow Stochastic indicators at the high stock price. The RSI was at the edge of overbought and the Slow Stochastics was very high in the O/B. The candle and the indicators gave clear indication of an immediate reversal and in addition there is a resistance level right at 89 cents (blue horizontal line). The stock price retraced down to the Fibonacci 61.8% level (closing prices are more important than intraday) and consolidated until Friday when it rose once again to a high of 89 cents, right at the resistance level.

Looking at the indicators:

RSI retraced from the 70% level and formed a “W” formation and is now pointing up at 63% with plenty of room to move up – bullish.

The Slow Stochastics has completely unwound the O/B and has also formed a “W” formation at the 50% level – bullish.

The Chaikin Money Flow (CMF) indicator shows that following the high of 95 cents the buying pressure dropped off but has been increasing for the last 3 trading sessions – bullish.

Outlook: The stock appears poised to attempt to get through the 89 cent resistance level, perhaps this week.  The indicators show that with sufficient volume the stock could move up to the next resistance level at $1.20.  The stock’s medium to long term outlook is very positive.  Investors with a near term outlook should wait for a close above 89 cents for confirmation of a breakout.

The BMR Portfolio (GBB was covered separately in Part 2)

Sidon International Resources (SD, TSX-V)

Sidon announced this past week it has raised $1.3 million in a 10-cent financing which will get the ball rolling, so to speak, on its Morogoro East Gold Property in Tanzania…Sidon will have to raise much more money for this project down the road…positive early results from Morogoro and continued strong investor interest in Tanzania would help that cause tremendously…Sidon’s chart is looking extremely bullish…the stock closed last week at 13.5 cents, a gain of 1.5 cents on total CDNX volume of over 14 million shares…the rising 20 and 50-day moving averages are providing very strong technical support at 12.5 cents…so in our view it’s really only a matter of when and not if Sidon blasts off once again…we’ve seen a very positive unwinding of the stock’s overbought technical condition which lays the groundwork for another sharp advance…Sidon is up 170% since we introduced the company to BMR readers last March at a nickel…

Seafield Resources (SFF, TSX-V)

Colombia is heating up again (check out the bullish chart for Ventana, VEN-TSX) and Seafield has already been a major beneficiary of that in the last couple of weeks…the stock is up 39% this month after closing Friday at 25 cents, a 2-penny increase for the week…the story with Seafield is very simple…they hold a significant land position, nearly 70 square kilometres, in the highly prospective Quinchia District of Colombia on the doorstep of Medoro’s (MRS, TSX-V) 10-million ounce Marmato Deposit…Seafield’s goal is to confirm a series of deposits (specifically, Miraflores, Dos Quebradas and Chuscal) that combine for a total of several million ounces…this is a very achievable goal based on historical records and what we know about those three main properties…initial drill results from Miraflores are expected any day now and drilling should soon commence at Dos Quebradas…drilling likely won’t begin at Chuscal until early next year which could be saving the best for last…Miraflores already has a 43-101 inferred resource of 800,000 ounces…current drilling is expected to increase that to a million ounces…Dos Quebradas has an in-house non-compliant resource of 800,000 ounces with considerable blue sky potential…Seafield has the right people on the ground (Ian Park and Stewart Redwood) to effectively advance their Quinchia Project…Seafield is up 317% since we introduced it to BMR readers a year ago…

Richfield Ventures (RVC, TSX-V)

It was a spectacular week for Richfield which hit a new all-time high of $3.05 before closing Friday at $2.75, a 45-cent gain for the week…the company announced the closing of its $14.62 million financing at $1.95, placed mostly with institutional investors…Richfield now has a war chest of nearly $20 million to ramp up its drilling at Blackwater in central British Columbia and produce a 43-101 resource estimate sometime next year…Richfield is doubling its drill program from 25,000 to 50,000 metres, so the news is good here and it’s likely only going to get better…the company’s market cap is now approximately $100 million but that still leaves considerable upside potential if 3 to 6 million ounces can be outlined at Blackwater which appears quite possible given the long intersections and decent grades so far…Richfield is up 129% since we introduced it to BMR readers last December…

Colombian Mines (CMJ, TSX-V)

Colombian jumped 16 cents a share Friday to close the week at 89 cents, a sharp reversal from the previous Friday when the stock dropped 12 cents to close that week at 73 cents…technically, CMJ faces considerable resistance between 90 cents and a dollar…however, CMJ’s 50-day moving average has now swung positive, a bullish sign, and the 100-day SMA is close to reversing as well…what this tells us is that Colombian is gearing up for another potentially powerful move, consistent with a renewed interest in junior exploration companies operating in that country…Colombian has a huge land package of over 150,000 hectares which includes Yarumalito, its most advanced project, where drilling continues…CMJ is up 48% since we introduced it to BMR readers late last year (it did run to a high of $1.62 last March)…

North Arrow Minerals (NAR, TSX-V)

North Arrow gained a penny this past week on improved volume…the stock closed at 16.5 cents, down just slightly from when we introduced it to BMR readers last April…the company has finally received approval from the MacKenzie Valley Land and Water Board to begin drilling its Lac de Gras diamond property, but North Arrow has decided it’s getting too late in the year to start drilling at Lac de Gras and has rescheduled its drill program until next year…we find that disappointing but that’s the nature of the exploration business…in the meantime we’ll see if North Arrow can identify another project to excite investors, either within its current impressive portfolio or elsewhere through another acquisition…we continue to be patient with this company as we do believe mining legend Gren Thomas is serious about making something happen with North Arrow…the stock has extremely strong technical support at 15 cents…

“Watch List”

Excel Gold Mining (EGM, TSX-V)

It was a relatively quiet week for Excel as only about 2 million EGM shares changed hands on the CDNX…the stock closed Friday at 16.5 cents, right at its rising 20-day moving average, and the rising 50-day SMA of 15 cents is providing additional very strong support…the stock was down 1 penny for the week…we’re very impressed with the potential of the company’s Montauban Mining Camp Project which includes the former producing Montauban Mine (near-surface gold, silver and base metals)…Excel is organizing itself to unlock the full value of Montauban, so we believe the outlook for this stock is very bullish…

The BMR Portfolio (Part 2 of 3)

Gold Bullion Development (GBB, TSX-V)

When put into proper perspective, the current share price weakness in Gold Bullion is nothing to be concerned about and in fact investors should be more bullish than ever at the moment on GBB given the “For Sale” sign that has been hanging over this stock the past 8 trading sessions.  There is a serious “disconnect”, in our view, between this decline and what’s actually happening on the ground in the LONG Bars Zone.

There have now been 3 major corrections with Gold Bullion since this stock came to life March 1.  The first correction, from late March into early April, took the stock down 27% from 31 cents to 22.5 cents.  The second correction was more severe, a 39% drop from a high of 71 cents in late June to a low of 43.5 cents in early July.  The third correction is the one we’re experiencing right now that appears to have either run its course or is very close to ending – a 28% decline from a high of 79 cents to last week’s 57 cent low.  Despite the current setback, the Chaikin Money Flow (CMF) indicator is still in positive territory – in fact it’s even increasing slightly right now – which shows there are plenty of smart buyers who are eagerly stepping in to take stock from weak hands.

Gold Bullion was off 6 more cents this past week, to 58 cents, but it’s strongly supported by rising 20, 50, 100 and 200-day moving averages with the SMA-50 sitting at 56.5 cents.    There are not only strong technical but sensible fundamental reasons for jumping in at current levels.

Gold Bullion has made it clear in news releases going back to July that we’ve yet to see assay results on a substantial amount of good looking core.  Results on only 18 Phase 2 holes have been received so far – a few of those holes were very good – but it appears the best batch of results has yet to come in from the Preliminary Block Model and from three distinct and promising areas within the Eastern Extension.  A new lab (ALS Chemex), known for its efficiency, was recently contracted by Gold Bullion so additional results may not be far off.  Gold Bullion has drilled over 90 holes to date in Phase 2.

What we see emerging at Granada is a very high tonnage deposit, or series of deposits, that could contain some incredible numbers.  Mineralization is all over the place – historical producing Pits #1, #2 West  and #2 East appear to be just the tip of the iceberg.  As a good example, outside the Preliminary Block Model, we believe it’s safe to make the assumption (based on GBB news releases since July) that Gold Bullion has hit good holes northwest of Phase 1 discovery hole #17, east and southeast of #17, and in the far south with hole #86.  This covers a distance of 450 metres north-south and at least 400 metres east-west (as far as hole #78).  This is extremely encouraging for the first major drill program that has ever been conducted outside the immediate area of the old Granada mine workings.  We know from historical reports that significant mineralization exists several kilometres east of the former mine, along a well defined zone of strong alteration, and if everything connects then Gold Bullion indeed has something huge on its hands (keep in mind a potential non-compliant 2.4 to 2.6 million ounces has already been outlined within the Preliminary Block Model).

Based on Willoughby’s 1994 report on Granada, and the description of hole #86, we do believe Gold Bullion has already made or will make a significant discovery of near-surface mineralization to the southeast and south of the Preliminary Block Model – additional confirmation of the blue sky potential of this property in one of the world’s most prolific gold producing regions.

Gold Bullion announced this past week it has added 5,000 metres to its Phase 2 drill program (now 25,000 total metres) as it continues to plan for an even larger Phase 3 program.  For GENIVAR to want to drill 5,000 more metres (“high priority” targets) without the benefit of more drill results speaks volumes about what is happening here.  GENIVAR is seeing all the right structure and enough visible gold to tell them that all they need to do is drill, drill, drill.

What we see developing here is massive – Gold Bullion needs to bring in more drill rigs and GENIVAR needs to call in the geological calvary as the workload is going to be immense in the coming months.

Astute investors who see what we see should be grateful for this recent pullback in Gold Bullion’s stock price – this is a classic example of how big money is often made by buying into weakness, especially when the primary uptrend remains intact as it does in this instance.  Those who took advantage of the two previous corrections in Gold Bullion will no doubt agree.  There was a 250% move from the low of the first correction and an 82% move from the low of the second correction.  The move from the low of this third correction holds tremendous upside potential as well.