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John: Yesterday the price of Gold (continuous contract) climbed during the day then fell to a low of $1,243 before closing at $1244, a loss of $11.  The high around $1,260 yesterday was very close to Gold’s all-time high, thus it encountered resistance.  To understand what is happening to Gold let us look at the 5-month daily chart:

We see that Gold has climbed from a low of $1,156 in late July to yesterday’s high for a gain of $103 (9%) in just 6 weeks.  The two horizontal parallel blue lines at the top of the chart form a resistance band.  The top line is at the intraday levels and the lower line is at the closing levels.  This is the resistance that Gold is facing at the moment.   The move described above can be considered Wave #1 of a new Motive Phase. Elliott’s Theory of Wave Analysis states that each Motive Phase is made up of 5 Waves, but it also says that each one of the Motive Phase Waves can also be divided into 5 Waves called Sub-Waves. These Sub-Waves which form Wave #1 are shown by the 5 green lines.   The last three days, candles have formed a pattern called an “evening star” which is a reversal candle pattern so we can expect Gold to go lower in the near term.  The two green horizontal lines form a support band between the Fibonacci 61.8% retracement level and the low of Sub-Wave #4. The other probable support level, should Gold fall below $1221, is the 50% Fibonacci level at $1209. The retracement does not usually fall below the 50% level. The red candles of the last two days are the start of Sub-Wave #2.

For over a week the RSI was flat around the 70% whereas the price of Gold kept rising. This caused a bearish divergence (mauve lines).

Looking at the indicators:

The RSI has turned down in the last two days as expected with the drop in the Gold price.   The Slow Stochastics has been in the overbought region since Aug 6 and appears ready to fall below the 80% level.  It is necessary for this overbought condition to unwind before Gold can go higher.

The ADX trend indicator has the +DI (green line) moving down and the -DI (red line) moving up, indicating the price will probably weaken. The ADX trend strength indicator (black line) is low at 17 and turning down.  This shows the existing bullish trend for Wave #1 is weakening but the primary trend for Gold is still very bullish.

Outlook: The price of Gold is testing its all-time high and after its recent run-up needs to consolidate and retrace to form Sub-Wave #2 which is countertrend.  Thus in the near term we can expect some weakness in the Gold price. After sufficient consolidation and the formation of Wave#2, the price of Gold should have the energy and momentum to break up through the resistance band and climb to new highs because the primary trend is very strong.

3:15 pm Pacific

Gold Bullion Development (GBB, TSX-V) came out with a much anticipated major exploration update shortly after the market close today, jam-packed with juicy geological details that have thrown a whole new light on exactly what might be unfolding in the LONG Bars Zone which has suddenly become more intriguing than ever.

We are still reviewing the release and will go into some more detail in Part 2 of this article tomorrow morning prior to market open.  But here are the highlights as we see them so far:

1. Porphyry Potential: The news release doesn’t actually come out and say it (that Granada, or a portion of it, is now determined to be a porphyry deposit) but more and more this deposit is taking on the characteristics of a porphyry-style system which has potentially very significant implications for tonnage.   “The geological interpretation of Granada is evolving,” the news release states.

2. Best Result Yet: GR-10-53 (68.3 metres grading 2.16 g/t Au within 100.5 metres of 1.34 g/t Au) is an outstanding drill result by any measure and the best yet at Granada.  Drilled perpendicular to Vein #2 within the Preliminary Block Model and believed to closely represent true width;

3. Extension of Vein #2: Buried in the news release is a VERY significant development:  It appears Gold Bullion has hit an “extension” to this higher grade structure on a 250-metre step-out from the Preliminary Block Model to the east-southeast.  GR-10-86, with assays pending, has hit visible gold at two different depths – in a quartz vein and also in feldspar porphyry – and strong alteration zones.  GR-10-86 is the southernmost hole drilled to date at Granada – a very pleasant surprise that the south is also now showing  excellent promise.  Will be interesting to see the assay results on this hole – a section of the core posted on the web site looks VERY nice;

4.  Northern Half Preliminary Block Model Potential: Very interesting information here as we learn that “large porphyry intrusions” cover much of the northern part of the 34,000 square metre waste pile and northeasterly trending fault structures are interpreted to run through the waste pile.  “Waste” from previous mining operations, which sampled well for gold, was dumped on a highly prospective geological area, preventing any drilling until the rock was removed (Gold Bullion is now in the process of removing all of this rock).  A section east of the waste pile – we’ll call it the “northern quarter” – is looking very promising with one hole out of 15 reported so far (GR-10-47, 1.68 g/t Au over 28 metres within a wider envelope of mineable grade);

5. The Growing Eastern Extension: It seems highly probable in our view that at least some spectacular results are yet to come from the Eastern Extension (an area of “extreme” interest).  The surface area of the Eastern Extension is now essentially the same as the Preliminary Block Model (a little more north-south than the Block Model).  A handful of assays from early drilling in the East are in and a couple are good (GR-10-42 and GR-10-44), but it appears the best holes are yet to come.  The following paragraph is of major importance:

“GENIVAR reports that visible gold and disseminated sulphides, along with large alteration zones, have been observed within the porphyry in numerous holes drilled since July in all directions (north, south, east and west) surrounding Phase 1 discovery hole GR-10-17.  Assay results are still pending for these holes where mineralization was encountered near-surface and at depth.  The fact that feldspar porphyry is hosting gold is an interesting development historically for Granada as a 2006 Technical Report on the Property stated that all economic mineralization at Granada was related to quartz veining.”

Other notes:

Mineralization remains open in all directions at Granada;

Higher grade gold potential in areas close to northeasterly trending faults – these Granada secondary fault structures, spatially related to the Cadillac Fault that runs through the northern portion of the property, are prime target areas for high or higher grades;

GBB has contracted a third assay lab (Chemex out of Val d’Or) to “expedite the delivery of additional results”;

There’s also an interesting paragraph near the end of the news release that states that Gold Bullion is in possession of a Testwork Study Report from Gekko Systems Ltd. of Victoria, Australia, regarding extensive metallurgical testing on Granada ore samples taken from the LONG Bars Zone Eastern Extension last May.  Results will be reported shortly.  Gold Bullion surprised us Tuesday with the Baseline Environmental Study, and now we learn they’ve already been working on the best and most efficient way to process Granada ore.  This company is thinking production and lots of it.

Gold Bullion and GENIVAR have more than satisified our appetitie for more geological facts pertaining to the LONG Bars Zone which in our view now has even greater potential as the newest major open-pit deposit along the Cadillac Trend.  More in part 2 of this article tomorrow morning as we study today’s new information in more detail.

Gold has hovered between $1,250 and $1,260 an ounce so far today as it seems to have stalled, at least for now, just beneath its all-time high…the action in the CDNX is confirming that Gold is going to a new high but what could occur first is a slight pullback…as of 7:05 am Pacific time, Gold is unchanged at $1,255…any pullback in the CDNX would be healthy from a technical point of view as this market has been on fire through much of July, August, and into early September…as strong as the CDNX has been recently, we believe we’re still in the early stages of a massive move which will likely accelerate over the final quarter of the year…technically, we should also see a reversal in the CDNX 100-day SMA within about a month or so which will be a very bullish development…looking at the chart, there is clearly resistance at 1625 and huge support between 1500 and 1525…our theory is that a test of that support could occur before the next big wave to the upside and a new 52-week high…the CDNX is up 4 points in early trading to 1592…Gold Bullion Development (GBB, TSX-V) went on a rollercoaster ride yesterday (right off the bat this morning, too) that probably unsettled a few investors…par for the course, really, in the volatile junior resource market…the stock ran to a new all-time high of 79 cents yesterday and then rather abruptly crashed to 64 cents before recovering and finishing the day at 71 cents…this type of volatility is not unusual just prior to major news…some pros are likely also playing some games…our advice is stay focused on the fundamentals which tell us the LONG Bars Zone is developing consistently and impressively…a multi-million ounce deposit is in the making here, we believe, and all Gold Bullion needs to do is just keep on drilling…news will come either today or tomorrow and as we stated before, we’re hoping to see some detailed geological information which GENIVAR should have after so many months of drilling…Gold Bullion has been very volatile again this morning, hitting 73 cents at the open, dropping to 65 cents, and then running back up to 74 cents…it’s currently down 2 pennies at 69 cents…Richfield Ventures (RVC, TSX-V) is up 4 cents at $2.29 and seems to be trading comfortably in a fairly tight range just above the $1.95 proposed financing…our expectation is that RVC will really start to fly not longer after the PP is closed…could be a similar situation as well with Sidon International (SD, TSX-V), which is finalizing a 10-cent financing for $1.2 million…Sidon is down half a penny at 12 cents…we mentioned Savant Exploration (SVT, TSX-V) the other day as well as Rye Patch Gold (RPM, TSX-V) as situations investors should do some due diligence on…Savant has property immediately adjacent to Gold Bullion’s LONG Bars Zone 2…Rye Patch has a gold property of merit in Nevada…we’re looking at several other situations at the moment as our intention is to give readers a small basket of what we believe are quality opportunities to investigate, outside of the main BMR Portfolio, and introduce them at the best time possible (i.e., on a CDNX pullback)…Excel Gold Mining (EGM, TSX-V) hit a new 52-week high of 19 cents on volume of nearly 800,000 shares in the first half hour of trading…as we mentioned in our report Tuesday, Excel has all the right components to be another BMR home run opportunity…EGM is currently up half a penny to 18 cents…

Gold continues to flirt with record highs…there is clearly resistance in the $1,260’s but the action in the CDNX confirms that it’s just a matter of time before Gold does surge to a new all-time high…a quick test of $1,300 could occur upon a breakout followed by some consolidation and a test of current resistance…just one theory of several right now but one thing is for certain – the CDNX, a terrific leading indicator, is telling us a new high in Gold is not far off…as of 7:30 am Pacific time, the yellow metal is trading at $1,256, up $1 per ounce…the demand-supply equation for Gold is looking good…the World Gold Council said in their second-quarter Gold Demand Trends report that the supply of gold grew 17% from a year earlier while Gold demand grew 36%…the CDNX, which has been on a tear after blasting through resistance around 1500, hit 1600 in early trading but is now unchanged at 1595 on a little profit taking…the CDNX is being powered by higher Gold prices, fresh discoveries, sector takeovers, and by what we believe is an improved outlook for the overall world economy…this is a very powerful bull market and the reverse of what everyone went through in the summer and fall of 2008…we’re not there yet, but the potential clearly exists for junior gold stocks to go through the “hysteria stage” similar to what happened in the dot com cycle…Gold Bullion Development (GBB, TSX-V) has surged to a new all-time high of 79 cents…the company announced yesterday that GENIVAR, its geological consultant, has started a Baseline Environmental Study for the Granada Property…this shows Gold Bullion’s confidence in the LONG Bars Zone and their strategic and forward thinking…an exploration update will come either later today, tomorrow or Friday from Gold Bullion, including additional drill results, as the company confirmed yesterday…the market is obviously expecting good news and rightly so as Granada has delivered all year…what we’ll be paying close attention to is what’s happening geologically in the LONG Bars Zone to give us a better clue of just how big that structure could possibly be…as of 7:30 am Pacific, GBB is up 4 cents to 78 cents…Richfield Ventures (RVC, TSX-V) is unchanged at $2.30…Blackwater has become an outstanding project, so it was no surprise Richfield was able to attract a $15 million financing at nearly $2 per share…Colombian Mines (CMJ, TSX-V) has surged another dime this morning to 95 cents, slightly above its rising 200-day moving average…there is considerable technical resistance around 90 cents, so it’ll be interesting to see if CMJ is able to hold its current price…the move in this stock has been pretty significant in recent days, leading us to believe there could be news on the way…Sidon International (SD, TSX-V) is down half a penny at 12 cents…we’re hoping the company can quickly complete its proposed $1.2 million financing at 10 cents and get on with advancing Morogoro East…Excel Gold Mining (EGM, TSX-V), on our “Watch List”, is strongly bid and up half a cent to 17 cents…

Gold Bullion Development (GBB, TSX-V) came out with news after the close today and it was an interesting surprise.  While Gold Bullion confirmed that a much anticipated exploration update and additional drill results will be released this week, they also announced that GENIVAR, their geological consultant, has commenced a Baseline Environmental Study for Granada which goes to show just how far along this project has really come.

A Baseline Environmental Study is a precurser to a full Environmental Impact Study which would be concurrent with a Pre-Feasibility Study once the particulars of a deposit (43-101 confirmation of size and other important facts and details) have been defined and confirmed.  Obviously Frank Basa is thinking hard already about the future for the Granada Gold Property as a potential producer.  He is a metallurgical engineer who has been involved in past producing situations with Agnico-Eagle and other companies.  It’s clear he believes Granada is destined for production at some point down the road.  In the meantime the drills keep turning.  Given the vastness of the LONG Bars Zone – our boots have been on the ground there as BMR readers know – Gold Bullion could easily drill another 100,000 metres and still have a large number of targets to explore.  This is an immense project with major upside potential, which is why it’s good to see the company thinking beyond today and planning for what could be a very bright future.

Gold is closing in on an all-time record high…the yellow metal has traded in a range of $1,244 to $1,261 so far today and as of 9:25 am Pacific time it’s at $1,257, up $10 for the day…concern over the health of eurozone banks is contributing to Gold’s strength today while Obama is talking about throwing more money around to stimulate growth in the United States…Gold is nicely underpinned…the CDNX is very strong again today, up another 15 points to 1580….Gold Bullion Development (GBB, TSX-V) has hit a new all-time high of 74 cents…it’s currently up 5 cents to 73 cents on CDNX volume of 1.5 million shares…an exploration update and more drill results are expected from Gold Bullion sometime this week…Richfield Ventures (RVC, TSX-V) hit a new all-time high this morning of $2.33…it’s currently up a nickel at $2.25…the company announced stellar new drill results from Blackwater last Thursday and a nearly $15 million proposed financing a day later…Colombian Mines (CMJ) overcame resistance at its 50-day SMA last Friday and is ahead another 9 cents to 84 cents…the rest of the BMR Portfolio (SD, SFF and NAR) is quiet so far today while Excel Gold Mining (EGM, TSX-V), on our watch list, is off half a penny to 17 cents…a couple of situations for investors to follow and perform due diligence on are Savant Explorations (SVT, TSX-V) which holds property immediately to the east of Gold Bullion’s LONG Bars Zone 2, and Rye Patch Gold Corp (RPM, TSX-V) which has an interesting property in Nevada…SVT is up 2 cents to 19 cents while RPM is ahead 2.5 cents to 16 cents…both have the potential of pulling back slightly, so timing as usual is important…

BMR’s due diligence continues with Excel Gold Mining (EGM, TSX-V) which moved 2 cents higher last week on continued strong volume to close at 17.5 cents, just half a cent shy of its 52-week high. As we’ve already pointed out, Excel has a phenomenal-looking chart and its volume surge this year, particularly since June, is an extremely important technical development.  Strong volume patterns are critical in a junior resource stock (any stock for that matter) and we see those patterns in Excel.

On Tuesday, August 31, I visited the former Montauban Mine which is nestled in a rural area about a 30-minute drive from Trois Rivieres, Quebec.  Montauban is a former significant near-surface gold, silver and base metals producer but has not been in operation since the early-to-mid 1980’s.  There is strong local support for a re-opening of this mine which likely wouldn’t be too difficult to do.  That is one of Excel’s objectives.  Their other objective is to determine if there’s an extension of the Montauban structures, in all directions, and quite often that’s the case in situations like this – Gold Bullion discovered the same thing at Granada.  We’ve stated this many times – the best place to find a new mine quite often is near an old mine.  Osisko (OSK, TSX) is the best example of that.  Below is just one of the pictures I took around the former Montauban mine site:

It took several years but Excel has cleverly tied up a lot land around the former mine.  In fact, their total land package now sits at 130 square kilometres and much of it is very under-explored.   A geologist I spoke to on-site is very excited about the possibility of a detailed regional exploration program.

Excel’s Montauban Mining Camp Project has considerable blue sky potential, and the company’s geological consultants are also working very quickly at assembling all the historical data pertaining to the former mine for a Gemcom 3-D cut overview.  This will aid Excel immensely in advance of more drilling aimed at quantifying remaining reserves and increasing those reserves.  They will also test depth potential – very limited historical drilling has occurred below 200 metres vertical depth at the former mine.

We’re keeping a close eye on Excel.  Nice fundamental components –  a former mine, near-surface mineralization (gold, silver and base metals), a large land package, great location.  The company is trying to take a new approach to this former producer.  Very strong technicals with the stock.  We have a little more due diligence to complete but from what we’ve seen so far, Excel has all the ingredients of being another potential home run opportunity for BMR readers.  As always, perform your own due diligence – our task at BMR is to introduce special situations such as this for our readers to follow up on.  We’ll of course be reporting more on Excel in the near future.

– Jon

Seafield Resources (SFF, TSX-V) is finally starting to wake up and bounce back after a 6-month slump.  We’ve stated consistently over the past few months that improving fundamentals will eventually drive this stock higher – the company has an outstanding land package in the Quinchia District of Colombia and Seafield’s drilling is expected to add significantly to its current 43-101 inferred resource of nearly 800,000 ounces (Miraflores) and a non-compliant in-house estimate of another 800,000 ounces (Dos Quebradas).  Chuscal is the company’s third major target at Quinchia – it’s at a less advanced stage but equal to the other two in terms of its potential.  Tonight, John takes a detailed look at Seafield’s improving technical condition:

John: On Friday, Seafield opened at 20 cents, its high for the day, then traded at a daily low of 19 cents before closing at 19.5 cents for a loss of half a cent on total CDNX volume of 207,000 shares.   This was after starting the week at 16 cents and rising to a weekly high of 22 cents on Thursday.

Looking at the 6-month daily chart we see that on May 13, Seafield was trading at 22 cents, then it declined to 16 cents and traded sideways until it climbed during the last week of June to reach a high of 23 cents.   This trading pattern was Cup #1 (maroon). Then it started to decline again to form a handle to complete the “cup with handle” pattern but the handle failed because it retraced down to 15.5 cents and again traded sideways until August 30 when it started to climb again, reaching 22 cents September 2 to form Cup #2 (green).  The handle started to form with Friday’s trading.

The total trading pattern from early April to last Friday can be described as Cup #3 (pink) with only part of the right side of the cup formed.  A breakout above 22 cents would be very bullish and could push the price to the 30 cent level to complete the cup.  The estimated rise above the cup after a breakout is the depth of the cup added on to the top of the cup which is 6 cents + 22 cents = 28 cents.  This forms a resistance band between 28 cents and 30 cents.  At that point it’s expected a handle would start to form on Cup #3.   From the trading patterns to date,  this is a probable scenario.

Looking at the indicators:

The RSI has turned down below the overbought region. This move is expected if a handle is to form.   The volume required to move the stock from 16 cents to 22 cents last week was far less than that on June 28 and May 13, indicating that most of the loose stock at this level has been accumulated. – bullish.

The Slow Stochastics has the %K (black line) crossed down over the %D (red line) indicating the possible formation of the handle in the near future.

The Chaikin Money Flow (CMF) indicator shows a definite increase in buying pressure on Monday, Tuesday and Wednesday of last week.  It slacked off for Thursday and Friday, but bullish nonetheless.

Outlook: I expect in the near future Seafield will finally overcome resistance at 22 cents and take a run at the next resistance area around 30 cents.   The stock is a lot tighter now and drill results are expected sometime this month.