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Gold continues to encounter resistance at the $1,800 level but found support just above $1,775 this morning…as of 8:15 am Pacific, the yellow metal is up $7 an ounce at $1,792…Silver has dropped 20 cents to $34.70…Copper is off 11 cents at $3.44…Crude Oil is $1.50 lower at $95.30 while the U.S. Dollar Index is up over a point to 77.68 on more euro zone problems and fears…Italian 10-year bond yields today rose above the 7% level that is widely deemed unsustainable after an increase in the cost of using the country’s bonds to raise funds offset hopes for more reforms in Italy as its prime minister agreed to step down…the news from Italy overshadowed some positive news out of China overnight as that country’s October inflation cooled to 5.5% in October,  the third straight monthly decline from July’s three-year peak…Premier Wen Jiabao said prices have fallen further since then…the Chinese could be in a position to focus more on trying to accelerate growth than fighting inflation in the months ahead…

The CDNX is down 24 points to 1646 and nearly touched its 10-day moving average (SMA) this morning when it dipped as low as 1639…the 10-day has provided important support during the rally of the last few weeks, so it’ll be interesting to see if that holds this week…below the 10-day there is strong support around 1575…this remains a market to be very careful with, however, given technical concerns regarding the bigger picture and lackluster volume…we’ve had some inquiries regarding Gold Bullion Development (GBB, TSX-V) which jumped a nickel-and-a-half yesterday to 25.5 cents on volume of nearly 2 million shares…news came out from GBB this morning with the company deciding to replace GENIVAR as its geological consultant with SGS Canada…we view this as a positive move since GENIVAR simply didn’t deliver on the ground for GBB and the stock was being punished for those inefficiencies…Gold Bullion says SGS will provide a NI-43-101 resource estimate for Granada during the first quarter of next year followed by a Preliminary Economic Assessment (PEA)…GBB is currently off 4 cents to 21 cents…we remain very bullish on the prospects for the LONG Bars Zone and hopefully SGS will bring some positive new dynamics into the equation…from a technical perspective as far as the stock is concerned, GBB faces stiff resistance at the moment in the mid-to-upper 20’s, so patience will continue to be name of the game with this play – especially with the 43-101 not coming out now for at least a few more months…John updates the chart below…

The CDNX volume leader so far today is CB Gold (CBJ, TSX-V) which is off 25 cents to $1.46 after having to clarify and re-state some drill results from recently reported hole RM-DDH11-046…while CBJ’s Vetas Gold Project in Colombia looks promising, it’s good that companies are being watched carefully in terms of how they report results…

Gold has encountered some resistance at $1,800 as expected and could test the $1,750-$1,775 area which would be very healthy from a technical standpoint…Gold hit a fresh six-week high yesterday when it touched $1,799.90…though it may require a brief pause, Gold’s bullish trend of course remains firmly intact…as of 8:30 am Pacific, the yellow metal is down $2 an ounce at $1,794…Silver is off 23 cents at $34.75…Copper is down 3 pennies at $3.52 while Crude Oil is up another 79 cents a barrel to $96.31…Crude has advanced for five consecutive weeks…seasonal fundamentals, reduced inventories, demand from China, the potential for political unrest in the Middle East, and new concerns regarding Iran’s nuclear program are all factors helping the oil market at the moment…the U.S. Dollar Index is down one-fifth of a point to 76.86…

The market is watching political events in Italy closely…Silvio Berlusconi’s centre-right government has lost its majority in parliament this morning in a key vote on last year’s accounts that came after mounting concern in bond markets piled pressure on the embattled prime minister by pushing borrowing costs to fresh euro-era highs…Pierluigi Bersani, leader of the main opposition Democratic party, urged Berlusconi to resign, warning that Italy risked losing access to the financial markets…Italy is likely in for months of instability and must come to grips with its huge debt and fix other problems plaguing its economy…the euro zone is going to continue to be in the crosshairs of the market for some time to come and that’s going to contribute to a lot of volatility…

The CDNX has pared its early 13-point gain (it hit 1675) and is now up just 3 points at 1665 with the nine most active stocks through the first two hours of trading all posting gains…the Index, which faces stiff resistance at 1700, has climbed a whopping 27% since the 1306 October 4 low (25 trading sessions), though the move has not been broad-based and volume has been unimpressive…that’s why this is so different from previous sharp advances during 2009 and 2010…investors have to be careful and extremely selective even though Gold appears headed for a new all-time high by early 2012…

Great Panther Silver (GPR, TSX) is up 4 cents as of 8:30 am Pacific morning to $2.90 with resistance at $3.25…the company will be releasing its Q3 financial results next Monday…given John’s very bullish long-term outlook for Silver (an updated Silver chart was posted yesterday), the potential for this producer in the year ahead is certainly significant as John’s GPR chart below shows…

Gold has enjoyed a solid day, trading as high as $1,785 this morning…as of 8:30 am Pacific, the yellow metal is up $27 an ounce at $1,781…there is near-term resistance at $1,800 and just below, so a minor pullback is very possible this week which could set up some better buying opportunities in certain Gold stocks…Silver is up 47 cents at $34.60, Copper is off 4 pennies at $3.54, Crude Oil, which has climbed for five straight weeks, is up another 54 cents to $94.85 while the U.S. Dollar Index is up nearly one-fifth of a point to 77.16…

The CDNX is up 2 points to 1652…the Index is currently trading in the middle of a strong resistance band and volume must increase, especially in order for the CDNX to  push through the top end of that band which is 1700…this is a difficult market to trade and invest in at the moment and selectivity is key…

Visible Gold Mines‘ (VGD, TSX-V) announcement late Friday afternoon of a flow-through private placement at 30 cents was disappointing to say the least…given the selling by Pinetree’s Sheldon Inwentash in September, the resignation of board member Mike Curtis shortly thereafter, and now a financing involving no hard cash, the signs are not good…the biggest risk investors face with these speculative juniors is not just drill results, but how these companies are managed…VGD has a tremendous land package around Wasamac and a superb project at Joutel – none of that has changed – but President and CEO Martin Dallaire has surprisingly given confusing signals to the market recently and that’s never good…smart investors always look for consistency, clarity and transparency in a company’s approach…VGD is currently off 3.5 cents at 20.5 cents…

Richmont Mines (RIC, TSX) announced strong third quarter earnings this morning which were in line with our expectations – $6.08 million or 19 cents per share…the stock shot up to $13.35, just four pennies below its all-time high, on the news and a strong Gold market this morning…the company, however, has lowered its 2011 production guidance from 80,000 to 85,000 ounces to 75,000 to 80,000 ounces…Francoeur is taking longer than anticipated to reach commercial production which means a loss of development ore at the moment…the company now expects Francoeur to be in commercial production by the middle of next year…Richmont remains in strong shape, however, and an updated NI-43-101 resource estimate for Wasamac by year-end is on track…Wasamac has excellent potential to exceed market expectations in terms of its size, so any pullbacks in Richmont should be considered opportunities…this emerging intermediate producer has extremely bright prospects especially considering the outlook for Gold…the news this morning increases the likelihood of a short-term double top on the RIC chart as John showed yesterday…RIC needs to close above $13 to negate that possibility…it’s currently up 36 cents at $12.97…

John’s chart on Silver over the weekend was so interesting, we’re posting it again…we continue to investigate opportunities in Silver stocks, producers and speculative plays that could be top performers in 2012…

TSX Venture Exchange and Gold

The CDNX went pretty much according to script last week, pulling back to support around 1575 before pushing higher toward the top end of the resistance band that ranges from 1600 to 1700.  According to John’s most recent chart, a breakout beyond 1700 appears increasingly possible which would carry the Index to additional resistance at the 1800 level which is also the 500-day moving average (SMA).  This is not a move we’re comfortable with for several reasons, however, including poor volume and declining major moving averages, which is why it’s critical to be extremely selective at the moment – more so than usual – in the highly speculative CDNX.  At this point we prefer the small to medium-sized producers over the speculative juniors with the exception of those that have substantial NI-43-101 resources or potential major discoveries.  This is not 2009 or 2010 or early 2011 when there was intense speculation and a rising tide that was lifting all boats.

Gold

Gold tested support around $1,685 last week and now appears ready to test resistance at $1,800. We’re in a traditionally strong period for both the yellow metal and the TSX Gold Index as the following chart from www.usfunds.com shows:

John’s latest Gold chart shows strong potential for a move to a new all-time high during the first quarter of next year:

For the week, Gold was up $11 an ounce after closing Friday at $1,754.  Silver, though it’s looking extremely bullish, fell $1.16 to $34.13.  Copper lost 9 cents to $3.58, Crude Oil gained 94 cents to $94.26 (its fifth straight weekly advance) while the U.S. Dollar Index jumped to 76.91 from 75.09.

The “Big Picture” View Of Gold

As Frank Holmes so effectively illustrates at www.usfunds.com, Gold is being driven by both the Fear Trade and the Love Trade.  The transfer of wealth from west to east, and the accumulation of wealth particularly in China and India, is having a huge impact on Gold.

The fundamental case for Gold remains incredibly strong – currency instability and an overall lack of confidence in fiat currencies, governments and world leaders in general, an environment of historically low interest rates and negative real interest rates (inflation is greater than the nominal interest rate even in parts of the world where rates are increasing), massive government debt from the United States to Europe, central bank buying, flat mine supply, physical demand, investment demand, emerging market growth, geopolitical unrest and conflicts, and inflation concerns…the list goes on.  It’s hard to imagine Gold not performing well in this environment.  The Middle East is being turned on its head and that could ultimately have major positive consequences for Gold.

What’s also driving Gold is the weakness of the United States, brought on in no small part by one of the most ineffectual Presidents the nation has ever been saddled with.  America has lost its way and the recent S&P downgrade is both a real and a symbolic reflection of that.  Since the summer of 2009, the U.S. economy has produced a net total of just two million jobs while federal spending has gone through the roof.  Throughout its incredible history, the United States has demonstrated an amazing resiliency and the ability to bounce back from major economic, social and political troubles.  It will do so again but this will take time and a real Commander-in-Chief in the White House by November, 2012.  By then Gold will have climbed another 50% or more.

As readers know, one of our favorite smaller Gold producers is Richmont Mines (RIC, TSX) which has also been one of the top-performing stocks on the TSX this year.  This is a very well-run company with an impressive growth profile that’s on track in our view to earn at least 80 cents per share in 2011 (3rd quarter results this coming week perhaps), giving it a current PE multiple of only about 15 given Friday’s closing price of $12.61.

Commercial production at Francoeur is expected to commence during the first quarter of next year, boosting RIC’s monthly production by approximately 40%, while an updated NI-43-101 resource estimate for the growing and impressive Wasamac deposit west of Rouyn-Noranda is expected by year-end.  The company has other “irons in the fire” as well.

Given the above factors and the bullish outlook for Gold, Richmont’s current market cap of $400 million has to be considered low – Wasamac alone could be worth that much.  From a fundamental standpoint, therefore, the odds of a “double top” on the chart appear remote.  Richmont has been a huge success story this year and we expect that trend to continue.

Note: John and Terry do not hold positions in RIC (Jon does).

An emerging intermediate Gold producer with an interesting chart is Kirkland Lake Gold (KGI, TSX) which closed Friday at $18.78 for a total market cap of approximately $1.3 billion.  That may seem high for a company expected to produce only 110,000 to 130,000 ounces of Gold in its current fiscal year ending April 30, 2012, but KGI is sitting on substantial proven and probable reserves (1.5 million ounces) in addition to M&I and inferred resources (1.3 million and 1 million ounces, respectively) in a rich historic camp (nice grades) that could produce fresh discoveries (see company’s April 5 news release).  The fact the KGI chart looks so strong bodes very well for the price of Gold.

Note: John, Jon and Terry do not hold positions in KGI.

Gold enjoyed a solid week.  It pulled back at the beginning of the week, as expected, to test an important support area just below $1,700.  It then powered higher and closed Friday at $1,754 for a weekly gain of $11.  John’s updated chart shows we can expect Gold to continue to rise in a determined but orderly fashion that should take the yellow metal to new all-time highs by no later than the first quarter of 2012.

Silver closed Friday at $34.13, a loss of 35 cents for the day and $1.16 for the week.  However, Silver is looking extremely bullish on the charts and a move to much higher levels by mid-2012 appears likely.  John updates the technical picture below.