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GoldQuest Mining (GQC, TSX-V) has created quite a stir in the Dominican Republic, and in the junior resource sector in general, with some spectacular early holes at its Escandalosa Project (Las Tres Palmas).  There are only a few juniors to choose from with land packages in the mineral-rich DR and one of them is Everton Resources (EVR, TSX-V) which has been a long-time player in the region.  The stock bottomed out at a nickel in the May-June-July period but is looking much healthier now from a technical standpoint as John pointed out in an updated EVR chart posted earlier today.  There’s plenty of potential for EVR to move higher in the coming months but the best time to jump in is before they put all the wheels in motion to commence a drill program through a JV situation.  Everton should have no problem securing a joint venture partner to conduct aggressive additional exploration on its holdings, particularly its flagship APV Property contiguous to the massive Pueblo-Viejo deposit which is soon going into production.

Click on the link below to listen to Part 2 of our interview with Everton President and CEO Andre Audet.  As always, perform your own due diligence.

Aug. 21 BMR Everton Resources Interview (Andre Audet), Part 2

Note:  The interviewer holds a share position in Everton Resources.

Gold has held above the important $1,620 level this morning and is now challenging the critical $1,640 resistance area…as of 6:15 am Pacific, bullion is up $17 an ounce at $1,638 after climbing as high as $1,641…Silver, after a sharp upside move yesterday, is up another 40 cents to $29.21…Copper is up 6 pennies at $3.43…Crude Oil is $1.22 higher at $97.19 while the U.S. Dollar Index has tumbled half a point to 81.95…

Silver Set To Sizzle

Silver staged a breakout yesterday that requires confirmation today as shown in John’s chart below…there are many bullish aspects to this chart, including of course the rounding bottom…

Gold Buyers Prosper In Crisis-Hit Italy

In a country suffering from economic woes, buying Gold off desperate people has become one of the few boom industries in Italy according to a Reuters report this morning…city centres are being transformed as traditional shops go out of business, their signs replaced by ones that announce “Compro Oro”, or “I Buy Gold“…the Eurispes thinktank estimates the number of “Compro Oro” shops has quadrupled in the last two years…the growth of the industry is “a very good indicator of the level of hardship in the country,” stated Gian Maria Fara, the think tank’s president…there are now an estimated 28,000 “cash for Gold” outlets in Italy, according to Gianni Mancuso, one of six centre-right lawmakers who last month presented a request in parliament for the government to regulate the sector more strictly…

Today’s Equity Markets

Asian markets were quiet overnight with China gaining 11 points to 2118…European shares are modestly higher this morning with miners and banks leading the rebound as investors continued to speculate on the prospect of the European Central Bank stepping strongly into bond markets…stock index futures in New York as of 6:00 am Pacific are pointing toward a mildly positive open on Wall Street…

Speculation Grows Over Potential ECB Action

Conjecture continues as to whether the ECB is preparing to cap the borrowing costs of troubled sovereign borrowers…traders cited an article in London’s Daily Telegraph again raising the prospect that the ECB was drawing up detailed plans to put a hard cap on Spanish and Italian bond yields…an initial report in German weekly Der Spiegel on the potential bond-buying strategy of the ECB was played down by bank officials yesterday…where there’s smoke there’s fire, however, and there seems to be little doubt the ECB is working toward some sort of major announcement in September…

The euro surged today, pushing back through the $1.24 level against the greenback to a two-week high on reports the ECB would step in to stabilize peripheral bond markets…ECB executive board member Jörg Asmussen gave support to the idea that the ECB will act decisively to bring down bond yields in struggling euro zone countries at its September meeting…
Asmussen, in an interview with a German newspaper, gave his support to Mario Draghi’s plan for unlimited bond purchases…according to the Financial Times, that support is given extra weight by Asmussen’s closeness to German chancellor Angela Merkel and followed a weekend report (subsequently refuted by German officials) that the ECB would move to cap peripheral yield spreads over German Bunds…

Spain’s short-term debt costs dropped sharply from a month earlier at auction this morning as investors bet on ECB intervention in bond markets, though uncertainty over the details meant yields remained punishingly high…the Treasury sold 4.5 billion euros ($5.6 billion) of 12-and 18-month T-bills at the top end of its target of between 3.5 billion and 4.5 billion euros, though demand was mixed…average yields fell to 3.070% on the 12-month bill from 3.918 percent in July, with 3.5 billion euros of the paper sold…

High Frequency Trading May Account For 42% Of Canadian Trades

An interesting article in this morning’s Globe and Mail regarding High Frequency Trading which is now behind as many as 42% of all Canadian trades according to a study co-authored by Ontario Securities Commission researchers…writer Boyd Eerman:  “From 2010’s ‘Flash crash’ that sent stocks tumbling one spring day to this summer’s debacle at Knight Capital, which lost $400-million in half an hour, HFT is in a harsh spotlight. the sense that markets are unstable at best, and rigged at worst, is eating into investor confidence…events such as the Flash crash, which was blamed on electronic trading, ‘are crystallizing into a situation that suggests some form of regulatory response would be required’, stated Howard Wetston, head of the OSC..

Financings Down Sharply In Mining/Exploration Sector

An interesting chart in this morning Wall Street Journal shows how financings have been drying up in the mining and exploration sector…ultimately, this will have some bullish implications for the sector but in the meantime competition for investors’ dollars is extremely fierce with financings at levels not seen since 2005…

Venture Exchange

The CDNX pulled back slightly yesterday but showed some strength toward the end of the trading session, closing at 1229, and should respond favorably to today’s moves in commodities…the short-term trend is clearly bullish, and a challenge of the 1245 resistance could come as early as today or tomorrow…below is a 4-month daily chart from John

Everton Resources (EVR, TSX-V)

At just 11 cents, the risk-reward ratio for Everton Resources (EVR, TSX-V) has to be considered highly favorable given the surge in interest in the Dominican Republic thanks to GoldQuest Mining’s (GQC, TSX-V) Romero discovery at its Escandalosa Project…Part 2 of our interview with Everton President and CEO Audet will be posted at 10 am Pacific this morning…unlike GoldQuest or Unigold, EVR is not drilling at the moment but that will likely change in the upcoming fourth quarter with the company expected to complete one or more joint venture agreements for further exploration of some of its promising landholdings in the immediate vicinity of the massive Barrick-Goldcorp Pueblo-Viejo deposit…a thorough compilation of all the exploration work conducted by Everton in the DR over the last number of years is currently being finalized by Caracle Creek International Consulting…the Everton chart is looking strong as outlined by John below…the 100-day moving average (SMA) has reversed to the upside with solid support at the 200-day moving average (10 cents) which has flattened out and could reverse higher in the near future…

Unigold Inc. (UGD, TSX-V)

Ungiold Inc. (UGD, TSX-V) gained 3 cents yesterday on impressive volume to close at 46.5 cents…the trend with UGD is strongly bullish, as shown in John’s 2.5-year weekly chart below, and a “Wave 5” pattern appears to have developed…note the surge in volume this summer which has coincided with UGD’s solid drill results from its Candelones Project north of GoldQuest’s Romero discovery…

Note: John and Jon both hold positions in Everton Resources.

GoldQuest Mining (GQC, TSX-V) and Rainbow Resources (RBW, TSX-V) Updates

Another fabulous day for GoldQuest Mining (GQC, TSX-V) – up 15 cents to a new all-time high of $1.95.  It seems there’s a huge elephant roaming around the Dominican Republic, and his name is Romero.  Meanwhile, in the West Kootenay region of British Columbia, we’ve spotted what appears to be a very fat cow.  Or maybe it’s an elephant, too.  More on that later as a confirmed breakout occurred with RBW today.  First, let’s recap the GQC situation and then examine the latest chart from John.

On July 31, with GoldQuest Mining (GQC, TSX-V) trading in the $1.30’s, we wrote:

“While it’s still very early in the drilling game at Romero, GoldQuest Mining’s (GQC, TSX-V) world class hole reported yesterday (a 25-metre step-out to the east of its discovery hole) should convince investors that GQC has a potential monster-sized deposit on its hands and now’s not the time to be giving up your shares, especially if Gold and Silver strengthen considerably in the weeks ahead as we believe they will…below is an updated GQC chart from John with a new Fibonacci level after the stock blasted higher yesterday on volume of 5.3 million in just one hour and 15 minutes of trading after the halt was lifted…GoldQuest has also just announced this morning a $10 million private placement at $1.25 per share (no warrants) in an agreement with Dundee Securities on behalf of a syndicate of underwriters…the big money has wasted no time in jumping in after yesterday’s spectacular results”…

GoldQuest Chairman Bill Fisher granted his first interview on the Romero discovery to BMR back in early June when we quickly realized this was about to become one of the most significant exploration stories in years with a game-changing impact on GQC despite the ongoing overall bear market.  Amazingly, at the time of our interview the stock could have been picked up for a mere 70 cents.  GoldQuest is about to close its second major financing (with no warrants) since the Romero discovery, and more assay results are pending (bring them on).  So this has truly become a remarkable story and we’ve been fortunate to follow it since Day 1 with some of our readers cashing in (or sitting on) huge profits.  The insight from the Fisher interview, our general familiarity with the mineral-rich Dominican Republic, and John’s very accurate charts have all helped in demonstrating the potential of this situation for our readers.  It doesn’t always go this way – some luck has been on our side – so we’re very grateful for how the GoldQuest story has unfolded so far.

Below is another picture from John that tells a thousand words – an updated 2-month daily GQC chart after today’s $1.95 close.

So where’s the next discovery opportunity?  We believe investors should be looking at a prolific area in southeastern British Columbia, the mineral-rich West Kootenays, where upstart Rainbow Resources (RBW, TSX-V) is now drilling its International Silver Property 40 miles north of the historic Silver mining community of Kaslo.   Rainbow holds 13,000 hectares in the West Kootenays – the Big Strike Project – which covers land packages very prospective for high-grade Silver and Gold discoveries.  A unique flake graphite opportunity exists immediately west and south of Big Strike, while the company will also soon be drilling the Jewel Ridge Gold-Silver Property along the prolific Battle Mountain Trend adjacent to Eureka.

Rainbow has one of the best-looking charts on the Venture and is up nearly 50% for 2012, a testament to the aggressiveness of this company in building a rich portfolio of properties in less than a year.  Three Rainbow directors are highly respected Calgary businessmen, one of them (Bob Libin) a part-owner of the NHL’s Calgary Flames.  This group is playing to win.

We’ve written at length about the International Property over the last number of months and it’s important to point out that this is exactly the type of situation that often results in a discovery:  Historical producer, no previous drilling, and extensive exploration work featuring everything from soil and rock sampling to geophysics.  Several geologists have studied this 4,000-hectare property, including geologists from the British Columbia government in the early 1900’s when an important Silver discovery was first made.  A vein system that was surveyed in the 1930’s over a true strike length of 1.2 kilometres is now believed to extend over a much greater distance.  Something special appears to have been cooked up here.  But only the “truth machine” can confirm that.

At the moment, Rainbow is drilling into a wall of exposed mineralization – a quartz-dominated structure that features disseminated to massive galena, pyrite and rare sphalerite.  Because of the high-grade nature of the mineralization at the International, Rainbow doesn’t need an elephant here – just a big fat cow.  A near-surface, high-grade deposit – if it is defined – could be an extremely profitable scenario especially in a rising Silver price environment.  In another part of B.C., Huldra Silver (HDA, TSX-V) has a low-tonnage, high-grade deposit it’s about to mine and the stock’s market cap is $60 million.  Rainbow appears to have even more potential yet has a modest market cap of only $8.7 million.

Today, Rainbow closed unchanged at 24.5 cents on impressive volume but a confirmed breakout occurred today with that close as John outlines in the chart below.

Note: John and Jon both hold share positions in Rainbow Resources (Jon also holds a share position in GoldQuest Mining).

Gold has traded between $1,613 and $1,621 so far today…as of 4:40 am Pacific, the yellow metal is down $2 an ounce at $1,614…Silver is up 2 cents at $28.11…Copper is 3 cents lower at $3.38…Crude Oil is up slightly at $96.13 while the U.S. Dollar Index is up just over one-tenth of a point at 82.69…

Today’s Markets

Asian markets were mixed overnight with China’s Shanghai Composite dipping below 2100 to a three-year low before recovering modestly to close down 8 points at 2107…new data showed real estate prices rising in a majority of major cities which was viewed negatively by the market…Japan’s Nikkei, meanwhile, hit a three-month closing high for the second straight session as risk appetite remained robust and a softer yen provided support to recently battered exporters…European shares are mixed this morning while stock index futures in New York as of 4:40 am Pacific are pointing toward a slightly negative open on Wall Street…

Average investors continue to shun stocks which is viewed by some as a positive contrarian indicator…despite the fact U.S. stocks are close to their highest level in almost five years, volume on the New York Stock Exchange has hit 2012 lows in recent sessions and is about half of where it was for the same week a year ago…options volume is down about 11% while trading activity at the Chicago Mercantile Exchange is off 30% from its 2011 pace, according to financial services firm Keefe, Bruyette & Woods…fund flows have told a similar story…equity funds, including exchange-traded funds, lost another $6.3 billion last week while bond funds took in $3 billion, according to Lipper…stock funds lost $11.5 billion in the second quarter while bond funds gained a staggering $55.4 billion…the Dow has clocked six straight weeks of gains, making this one of the most disrespected rallies of all time…since the general public is typically often on the wrong side of the fence when it comes to the direction of the stock market (they pile in at the top in a state of euphoria and exit in fear at the bottom), the fact Fred and Wilma aren’t excited right now about equities is likely a bullish sign…however, it’s also fair to say that there are some important issues markets and companies need to address to instill greater confidence in the system by the general public…

Venture Exchange

The CDNX will try to build on a strong performance last week with the Index gaining 42 points or 3.4% to close Friday at 1233…the Venture surged past its EMA-20 resistance for the first time since the downtrend started in March…the 10-day moving average (SMA), currently just above 1200, should provide support during this new uptrend…check out John’s latest CDNX chart in yesterday’s Week In Review And A Look Ahead…

Long-Term Chart Reveals New Clues Regarding Gold

John has another amazing chart this morning that shows Gold could be ready for an explosive upside move based on a Bollinger Band squeeze (volatility indicator) that’s comparable to what was seen just prior to two other major advances in recent years, one in 2007 and the other in 2009…it’s very hard to examine this 10-year monthly chart and not come to the conclusion that Gold is in for a potentially powerful surge over the final four months of 2012…

More On Gold

Gold sentiment likely got a boost when recent filings showed billionaire John Paulson raised his stake in an exchange-traded fund tracking the price of Gold, leaving his $21 billion hedge fund with more than 44% of its U.S. traded equities tied to bullion…in addition, the $25 billion Soros Fund Management LLC portfolio also made a sizable increase in its exposure to bullion…the Soros Fund, based in New York, raised its existing weight by slightly more than 175% from the previous filing…and finally, investment funds in China soon plan on launching the country’s first batch of Gold exchange-traded funds, according to state-run Shanghai Securities…

Below are a couple of excellent charts from www.usfunds.com and Frank Holmes’ weekly Investor Alert…

Using the last 10 years of data, if you plot the 12-month rolling return, you can see that Gold has reached an extreme low, registering a -2 sigma…

The last time Gold reached this point was in August, 2008…you can see below the yellow metal’s significant climb after hitting that standard deviation low…

Rainbow Resources (RBW, TSX-V) Update

One of the best-looking charts on the Venture throughout this year belongs to Rainbow Resources (RBW, TSX-V) which, in determined fashion, continues to “move up the ladder” in a way that suggests at almost any point – especially with drilling now underway – it could explode higher…drilling started just over a week ago at RBW’s International Silver Property north of the historic Silver mining community of Kaslo in southeast British Columbia, and an exploration update is expected from Rainbow sometime this week…we have a great deal of confidence in how this project is being managed on the ground as it’s headed by respected veteran geologist Bob Morris of Moose Mountain Technical Services…the fact Moose Mountain also appears quite excited about the Fugro geophysical data for the International, showing clear potential for new discoveries well outside the originally identified 1.5-km-long mineralized structure, leads us to believe that there are many more chapters yet to be written in this highly interesting potential “discovery play”…geological engineer Jim Snell, who wrote a report on the International for privately-held Braveheart Resources in 2007, seemed to have a very good feel for the property after investigating it rather thoroughly beginning in 1998…”The structure as surveyed by Dawson (BCLS) in 1933 is exposed along a true strike for 4,000 feet and in the opinion of the writer, because it has the nature of a sill, it can be expected to continue for some unknown but possibly a considerable distance beyond the claim boundaries”, Snell stated…what’s also interesting is a historical report from a geologist for Kaslo Mines Corporation (Kaslo’s mining plans for the International in the early 1940’s were derailed by the American entry into World War 2) who indicated the International vein got much wider going “farther toward the southeast” from the Forgotten claims in the northern portion of the property where the initial high-grade Silver discovery was made…

Quartz intrusion and replacement of the country rock appears to be what has formed a potential deposit at the International, and now it’s up to the downhole tools to define what’s there…we know there’s high-grade material at the International (20, 30, 40 ounces of Silver per ton, plus very high lead values) and encouraging vein widths based on historical information and Rainbow’s sampling…early indications of the continuity of the mineralization along strike and at depth is what the current drill program is expected to reveal…a rich Silver find would obviously have a dramatic impact on Rainbow’s market capitalization which currently sits at $8.7 million…it’s interesting to note, for comparison purposes, that Huldra Silver’s (HDA, TSX-V) Treasure Mountain deposit near Hope, BC (Treasure Mountain is soon going into production with mill feed being trucked to Merritt, just over an hour away) contains a 43-101 indicated resource of 33,000 tonnes grading 24.2 opt Ag, 4.2% Pb and 3.8% Zn, and an inferred resource of 120,000 tonnes grading 27 opt Ag, 2.8% Pb and 4.4% Zn using a 10 opt Ag cut-off (like the International, plenty of galena, sphalerite and pyrite)…the property is in a very remote location, vein widths are narrow, tonnage is low but grades are high for this underground operation…Huldra has a market cap of $60 million, 7 times that of Rainbow which also has several other projects in its portfolio including a promising Gold property in Nevada…we like Huldra, especially in a rising Silver market, but a good case can be made that RBW’s International Property has greater potential and intriguing near-surface opportunities…

Below is John’s latest Rainbow chart after Friday’s strong close of 24.5 cents…the stock finally appears to have overcome key resistance at 24 cents which should become new support (20 cents was previous resistance and then support)…

RJK Explorations Ltd. (RJX.A, TSX-V)

Another Silver (and Gold) situation we’ll be keeping an eye on in British Columbia in the coming weeks is RJK Explorations (RJX.A, TSX-V) which is exploring in the rich Blackwater district in the central part of the province…that’s of course where Richfield Ventures made a huge discovery and got taken out last year by New Gold Inc. (NGD, TSX)…RJK has been in “quiet mode” over the last couple of months after reporting results from the first phase of drilling at its 9,200-hectare Blackwater East and Northeast properties…while the market may have been looking for Gold, what it got instead from one hole was an impressive Silver drill result of 79.04 ounces per ton over 3.3 metres (at a depth between 79 and 82.3 metres)…with no new drilling until September, any excitement over that result was somewhat muted and the stock has gradually drifted down to a very strong support area (it closed Friday at 10 cents)…with drilling expected to resume within a few weeks, to follow-up on that Silver intersection, RJK can be expected to begin a climb back up in the very near future…the company holds a large overall land package in the prolific Blackwater area and much of it has yet to be systematically explored…we’re impressed with how the company has taken blind, completely overburden-covered exploration targets with unmapped and unknown geology to what now may be the early stages of an important discovery…so this is definitely a situation to watch closely and be on top of…

Wildcat Silver (WS, TSX)

John’s chart last Thursday was bang-on for Wildcat Silver (WS, TSX) which gained 18% the last two trading sesions…it closed Friday at 94 cents, just below its declining 100-day moving average…once WS is able to overcome the resistance band between 95 cents and $1, which seems inevitable given the quality of the company’s deposit in Arizona and Silver’s primary trend, then the stock could really gain some traction…notice how it made a rapid advance in early 2011 when Silver last exploded…

Prodigy Gold (PDG, TSX-V)

Prodigy Gold (PDG, TSX-V) has reported a more than 50% increase in its Gold resource at its 100% owned Magino Gold Project in northern Ontario with the release of an updated NI-43-101 resource calculation this morning…Magino now contains an indicated resource of 5.8 million ounces (203 million tonnes grading 0.89 g/t Au) using a cut-off grade of 0.35 g/t Au while the inferred resource is 300,000 ounces (10.3 million tonnes at a 0.35 g/t Au cut-off)…the new estimate includes the results from almost 68,000 metres of core drilling completed at the project since mid-September, 2011, in addition to 151,900 metres of previous drilling…Prodigy closed Friday at 59 cents for a total market cap of approximately $180 million,, so each ounce in the ground at Magino is valued at about $30…important resistance on PDG is at 60 cents where the declining 100-day moving average (SMA) currently sits…PDG has not traded above its 100-day since the end of February…the stock is strongly supported, however, by its rising 500-day SMA in the mid-50’s…

Castle Resources Inc. (CRI, TSX-V)

A company very worthy of our readers’ immediate due diligence is Castle Resources (CRI, TSX-V), another British Columbia opportunity with a growing Copper resource near Stewart…over the last two years, CRI has outlined 1.3 billion pounds of Copper (plus, notably, 15 million ounces of Silver) in the indicated and inferred categories, with four rigs on site at the moment conducting expansion drilling over an area of robust mineralization (the South Zone) that has extended the strike of the current resource by over 600 metres to the south of the historic Granduc orebody…Granduc is a past producer that operated for over 13 years in the 1970’s and 1980’s…the stock is beginning to wake up after plummeting from a high of just over 60 cents in February to a low of 17 cents when the Venture hit bottom at the end of June…below is a 2.5-year weekly CRI chart from John that shows a recovery appears to be underway…

Focus Graphite (FMS, TSX-V)

Graphite plays have been struggling lately, well off their spring highs…looking at the big picture for Focus Graphite (FMS, TSX-V), one of our favorites, it has been trading in a symmetrical triangle for 17 months and has successfully tested support no less than 13 times…below is a 2.5-year weekly chart from John that shows a continuation of the trend is likely for now…

Note: John and Jon hold share positions in Rainbow Resources.

TSX Venture Exchange and Gold/Silver

It finally happened – sellers’ exhaustion peaked and the Venture Exchange took the path of least resistance and broke out to the upside last week, convincingly moving past its EMA-20 for the first time since the downtrend started in March.  For the week, the Venture gained 42 points or 3.4%, far outpacing the gains of the broader markets (Gold and Silver were even down slightly).  This isn’t necessarily the end of a long bear market but it’s definitely the start of a major rally in our view that could result in at least a 20% move off the late June low of 1154 (a lot of money can be made on that kind of advance in the Index).  If history is any indication, expect occasional minor pullbacks to the 10-day moving average (currently just above new support at 1200) as this market continues to trend higher in the coming weeks.

A rising tide at this point will not lift all boats, so it’s still very important to be selective in this market and focus on the companies that are very active on the ground right now and have reasonable chances for success.  Many companies in recent months have given up on the market, just like a lot of investors, and the problem with that is that when the market does turn – just like now – these companies are caught with their pants down and are simply not positioned to take immediate advantage of the new bullish sentiment.  So money will flow first into the plays that have been the most exciting in recent weeks and months, and still are, and of course we’re also watching closely for fresh discoveries – this is a great time of the year for that.

Friday, we posted an updated 4-month daily CDNX chart.  Today, John examines the “big picture” again with a 13-year monthly chart.  Notice how the RSI(14) is now turning upward – this gives us great confidence that we’re now at the beginning of a firm uptrend.  Look also at the CMF (Chaikin Money Flow).  It has likely bottomed out at a level very close to the one reached in late 2008.  In addition, the bearish -DI is weakening.  These are all excellent indications that we’ve seen the low for 2012 and that the final four-and-a-half months of the year could be very different from the last four-and-half months.  The correction from the February high to the late June low was 32% – by historical standards, a very normal major CDNX correction though longer in duration than most.  Overall, this market fell a whopping 53% or 1311 points from the early March, 2011, high to the low six weeks ago.

Gold and Silver

Gold bounced around last week but there was buying on the dips which was very encouraging.  For the week, the yellow metal was down $5 an ounce to $1616.  With the downtrend line broken, we believe it’s only a matter of time before Gold blasts through two key resistance areas – $1,620 and $1,640 – as shown on John’s chart.

Gold jewelery, coin and bar demand was down in both China and India during the second quarter, according to the latest figures from the World Gold Council, but central bank purchases hit a record high since the official sector became Gold buyers three years ago.  According to Marcus Grubb, the WGC’s Managing Director of Investment, if this central bank trend continues through the remainder of 2012, they will be entering a “new territory” of Gold buying that has not been seen since the early 1960’s and since the end of the Bretton Woods System in 1971.

Central banks from developing markets led the buying trend once again. The WGC says Kazakhstan indicated that it is “targeting an allocation to Gold of 15% of its foreign exchange reserves” and one way it plans to build up its allocation is to purchase “the country’s entire domestic production over the next two to three years”.

Other emerging countries with central banks increasing their Gold holdings include Mexico, the Philippines, Russia, Turkey and Ukraine. According to Grubb, central banks have been motivated to add Gold mainly as a currency hedge. Central banks want to increase their weightings in reserve asset portfolios and move away from their dependence on U.S. dollars – and possibly the euro. There’s also a belief that sovereign debt is no longer considered to be a “risk-free” asset, says the WGC.

Silver was off slightly last week, just 4 pennies, to close at $28.09 (John will have an updated long-term Silver chart as part of tomorrow’s Morning Musings).  Copper gained 3 cents to $3.41.  Crude Oil continues to climb, adding another $3.14 a barrel to close at $96.01, while the U.S. Dollar Index was essentially unchanged at 82.55.

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 that won’t end anytime soon (inflation is greater than the nominal interest rate even in parts of the world where rates are increasing), money supply growth, 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.  Massive central bank intervention appears increasingly likely to prevent a breakup of the euro zone and to kick-start the global economy.  It’s hard to imagine Gold not performing well in this environment.

Venture Exchange and Rainbow Resources (RBW, TSX-V) Chart Updates

It was an important week for the Venture Exchange which, as expected, finally took the path of least resistance and powered higher, breaking above the 1200 level and closing today at 1233 on increased volume.  If you have followed John’s excellent charts throughout the week, you’ll know that this move could develop into something very big by September.  Some key indicators have turned decidedly bullish.  Whether this is going to turn out to be The Mother of All Bear Market Rallies, or the start of a new bull cycle, remains to be seen.  But one thing is certain – the Venture is going higher, and perhaps by a lot.  Along the way there will be pullbacks to supporting moving averages.  But it’s time to make some hay.  More on that over the weekend.

Below is another chart from John, freshly updated after today’s 12-point gain.

Rainbow Resources (RBW, TSX-V)

It was a great week for Rainbow which successfully tested support at 21 cents and then finally pushed through resistance at 24 cents at the end of the day today. On the ground, RBW continues to drill for a high-grade, near-surface Silver discovery at the International Property in the West Kootenay region of southeast British Columbia.  An exploration update is expected sometime next week.  The chart below from John is even sweeter than mom’s homemade apple pie.  Given the bullish technicals and the underlying power of this “discovery play”, Rainbow is looking more delicious than ever.  Expect robust trading on Monday after today’s activity.

Note:  John and Jon both hold share positions in RBW (Terry does not) with Jon adding to his position today.

Gold made a nice move yesterday but is still finding resistance around the $1,620 level…as of 5:25 am Pacific, the yellow metal is up $1 an ounce at $1,616…it has traded in a narrow range so far today between $1,612 and $1,621…Silver is flat at $28.23…Copper is up 3 pennies at $3.41…Crude Oil is down 28 cents at $95.32 while the U.S. Dollar Index is up slightly at 82.46…Oil prices have risen to three-month highs this week, notching up gains of 30% from lows seen in June, lifted by supply constraints, geopolitical concerns and easing worries over the European debt crisis…

Today’s Markets

Asian markets were up modestly overnight while European shares are generally slightly positive this morning…stock index futures in New York, as of 5:25 am Pacific, are pointing toward a flat to slightly lower open on Wall Street…it has been another good week for equity markets…investors seem to be welcoming comments from German chancellor Angela Merkel in which she said the pledge by the European Central Bank to do whatever it takes to support the euro project was “completely in line” with the views of the bloc’s leaders…the statement appears to have calmed fears among some traders that Germany was not on board with the ECB’s strategy of using possible intervention to reduce the borrowing costs of heavily debted nations such as Spain and Italy…

The University of Michigan Consumer Sentiment survey for August is due out at 6:55 am Pacific (analysts polled by Briefing.com expected the index to read 72.2, down from 72.3 the previous month) while the Conference Board releases its leading economic indicators index for July at 7:00 am Pacific (the expectation is for a 0.2% rise compared with a 0.3% fall in June)…

Obama Better For Business?  What Are These Executives Smoking?

In a rather startling Financial Times poll reported by Reuters this morning, twice as many business executives around the world say the global economy will prosper better if Barack Obama wins re-election as U.S. president in November than if Republican challenger Mitt Romney takes the White House..Obama was chosen by 42.7% in the 1,700 respondent poll, compared with 20.5 percent for Romney..the rest said “neither”…the result was different, however, among respondents in the United States, where a slim majority thought Romney would be better for their business than Obama…the Democrat maintains a 7-point lead over Romney among registered voters in the race for the Nov. 6 presidential election, despite the fact Americans are increasingly pessimistic about the future, according to a Reuters/Ipsos poll conducted last week…the Financial Times poll was conducted before Romney picked Wisconsin Congressman Paul Ryan as his vice-presidential running mate over the weekend, a move that could dramatically shift the election debate between two sharply contrasting views of government spending and debt…Romney’s choice for running mate gave him no immediate boost to his White House prospects, a Reuters/Ipsos poll suggested Monday…

Venture Exchange Starting To Flex Its Muscles

We‘ve been writing at length recently about the improved technical health of the Venture Exchange, and sure enough the CDNX has taken the path of least resistance and has pushed above the important 1200 mark…we’ll have much more on this in our Week In Review this weekend…a new uptrend (either a strong bear market rally or the beginning of a new bull phase) is clearly underway and we’ll examine where it could go over the coming weeks and months…below is another chart from John – the fourth this week – that confirms through various indicators that the short-term trend is definitely bullish…it’s interesting to note the ADX is bullish (above -DI) for the first time since the downtrend began last March…RSI(14) is also the highest it has been in over 5 months, though not yet in  overbought territory…

Rainbow Resources (RBW, TSX-V)

Rainbow Resources (RBW, TSX-V) showed good buying pressure yesterday though it finished the day down half a penny at 22.5 cents…the chart remains exceptionally strong and a move through resistance at 24 cents is only a question of when, not if, based on technical and fundamental considerations…with a rather bullish tone, the company has indicated news is imminent (sometime next week) regarding the drill program at the International Silver Property in the West Kootenays, so we could see sparks fly sooner rather than later…we’ll be examining RBW in more detail over the weekend, presenting the case for a potential major breakout…

GoldQuest Mining (GQC, TSX-V)

The Dominican plays were strong yesterday with the leader of the pack, GoldQuest Mining (GQC, TSX-V), hitting a new high of $1.75…this has been a huge winner for some of our readers as we’ve been following this story since Day 1 and were also granted the first interview with Chairman Bill Fisher following the news of the Romero discovery in late May…is it time to cash in?…that has to be a personal choice (one always has to be careful about greed and fear) but we still see more upside potential than downside risk at current levels…early indications are that Romero could truly be a monster-sized deposit given results released to date…just on continued speculation, it seems likely that GQC will push to a new all-time high…John has a new potential Fibonacci level this morning, and at a minimum that appears to be a high probability…a “Wave” 5 move is underway as John shows in the chart below…

The DR is hot, and as we’ve been saying, we continue to see good things in store for Unigold Inc. (UNG, TSX-V) and Everton Resources (EVR, TSX-V)…we are planning on posting Part 2 of our interview with Everton President and CEO Andre Audet on Monday…John has chart updates below on both plays…also, keep an eye on Precipitate Gold (PRG, TSX-V)…we’re doing some due diligence on PRG which just announced yesterday that it has completed a deal with a private B.C.-registered company to purchase that company which holds a 100% interest in the rights to acquire two mineral concessions in the Dominican Republic that are currently under application…

Unigold Inc. (UGD, TSX-V)

Everton Resources (EVR, TSX-V)

Note: John and Jon both hold share positions in RBW and EVR.  Jon also holds a position in GQC.

Gold has traded in a range between $1,600 and $1,610 so far today…as of 6:00 am Pacific, the yellow metal is up $4 an ounce at $1,607…Silver is 12 cents higher at $27.95…Copper is flat at $3.35…Crude Oil has gained 43 cents at $94.76 while the U.S. Dollar Index has shed one-tenth of a point to 82.55…

Overall Gold Demand Down But Central Banks Remain Aggressive Buyers

Gold demand fell to its lowest level in more than two years in the second quarter, the World Gold Council said today, as a drop in buying in major consumers India and China outweighed a record quarter for central bank purchases…overall Gold consumption fell 7% or nearly 76 tons to 990 tons in the three months to June, its lowest quarterly level since the first three months of 2010…jewelry and investment demand both fell substantially…jewelry consumption was down 72.3 tons at 418.3 tons while investment fell 88.3 tons to 302 tons…the WGC’s managing director for investment research, Marcus Grubb, said he still expects demand growth in the full year but that forecast was heavily dependent on Gold-friendly policy moves from central banks and a recovery in Indian demand…investment and jewelry demand from consumers in India, the world’s number one Gold market, plummeted 38% to 181.3 tons in the second quarter…buying has been hit by a hike in import duties and record-high local prices due to a weak rupee…jewelry and investment purchases in the United States fell 17% to 34.2 tons…European Union demand was a rare bright spot, rising 11% to 86.4 tons…

China To Overtake India As World’s #1 Gold Consumer

China had its first negative quarter for Gold demand in a long time as a slowdown in economic growth and a lack of clear price direction in Gold took its toll…for the first half of 2012, Chinese demand fell 7% to 144.9 tons…the WGC is predicting, however, that for the first time ever, China will become the largest Gold market in the world…while Indian demand is expected to fall to 650-750 tons this year, from 933 tons in 2011, Chinese demand is expected to rise 10% this year to 850 tons…

Central Bank Buying

The world’s central banks bought 157.5 metric tons of Gold from April to June, the highest total since the official sector shifted from net sales to net purchases in the second quarter of 2009, the WGC reported…the April-June total was more than double the 66.2 tons from the second quarter of 2011 and accounted for 16% of overall Gold demand…for the first half, central bank buying totaled 254.2 tons, up 25% from 203.2 in the same period of 2011…the bulk of this buying is from central banks in emerging and developing economies, Grubb said…the largest four buyers in the recently completed quarter were Kazakhstan, Russia, Ukraine and the Philippines…”If you look to the half-year, central banks have bought 254 tons against 200 tons for the half-year last year,” Grubb said…”At this rate, we’ll be looking at a record central bank year, higher than last year, which was a record since 1964″…

Gold ETF Picture

Global ETF holdings were roughly flat year-on-year in the second quarter, dipping by 0.8 ton…“The lackluster net figure was reflective of the directionless price action in Gold, which encouraged profit-taking and bargain-hunting in equal measure,” the report said…some might view the second quarter as “poor” for Gold ETFs since there was not an increase in tonnage, Grubb said…”But if you take the first half of 2012 compared to the first half of last year, ETFs are significantly up in tonnage terms,” he said…for the first six months of the year, ETF demand rose 52.4 tons…

Gold Supply Falls

World Gold supplies declined 6% year-on-year in the second quarter to 1,059.1 metric tons largely as the result of less recycling of the metal, according to the World Gold Council in its quarterly report…mine output changed little from the second quarter of 2011…the supply of recycled Gold declined by 12% from year-ago levels to 363.7 tons…this was marginally below the five-year quarterly average of 376.8…

Brazil Takes Smart Steps To Stimulate Economy, Turns To Private Sector

Brazil’s president Dilma Rousseff has launched a $65 billion stimulus package to spur investment in the country’s creaking infrastructure and shore up ailing investor confidence in the world’s second-largest emerging market economy…in the first of what are expected to be a series of announcements in the coming weeks, Rousseff said the government would sell concessions in nine highways and 12 railways before moving onto other areas of infrastructure…“We are starting with railways and roads but obviously we will take care of airports, ports and waterways,” Rousseff told a gathering of politicians and leading businessmen in Brasília…Brazil’s economy has slowed to a crawl over the past 12 months as inadequate infrastructure including roads and ports and a shortage of skilled labor has raised costs and stifled industry…the economy expanded 7.5% in 2010, the fastest pace in more than two decades, but last year slowed to 2.7% and this year is expected to grow only 2% or less…Bret Rosen, senior credit strategist for Latin America at Standard Chartered, said the move was a step in the right direction, with infrastructure bottlenecks posing one of the biggest obstacles to faster growth in Brazil…but he added, “The easy thing is making the announcements, the harder thing is execution, and the track record not just of Brazil but of Latin American countries in general is pretty poor on infrastructure”…the cost of exporting a container from Brazil is more than double that of China and 1.5 times that of India while the country’s ports are notorious for delays…among the initiatives, the government will sell rights for private companies to operate 7,500 km of roads and 10,000 km of railways…the measures would double the capacity of the country’s main highways, transport minister Paulo Passos said at the event…

Today’s Markets

Asian shares closed mixed overnight after global growth engine China warned its trade outlook was worsening…the Shanghai Composite fell 7 points to 2112…Japan’s Nikkei share average hit a six-week high, gaining a steady foothold above 9,000…European markets are off gently this morning, consolidating the recent rally to five-month highs…stock index futures in New York, meanwhile, are pointing toward a slightly positive open for Wall Street as of 6:00 am Pacific…groundbreaking on new U.S. homes unexpectedly fell in July and gains from the prior month were revised lower, a reminder of the housing markets weakness despite some recent signs of recovery…meanwhile, the number of Americans filing new claims for jobless benefits edged higher last week although a trend reading fell close to a four-year low…

Venture Exchange – Poised To Move Higher

John’s third chart in the last two days shows the Venture Exchange is poised for a potential sharp move to the upside following a 4-month slide that wiped 32% off the value of the market…since the 1154 intra-day low June 28, the Venture has been basing in a grinding sort of way…yesterday, it moved above 1200 for the first time in 27 sessions…this morning, we take a look at the 50-day moving average (SMA) indicator for the Venture which is a definite eye-opener…historically, a move above the 50-day and a reversal to the upside in this SMA has preceded some major moves…yesterday, the Index climbed right up to its 50-day which has started to flatten out…below is a chart that points out some major market turning points over the last decade based on important developments with the 50-day SMA…

Osisko Mining (OSK, TSX)

Osisko Mining (OSK, TSX), which reported solid second quarter results the other day, has been a reliable indicator of the direction of Gold mining shares over the last few months and appears almost ready to start a powerful “Wave 5” move according to John’s latest chart…

Wildcat Silver (WS, TSX)

With an expected jump in Silver prices during this last half of 2012, keep a close eye on Wildcat Silver (WS, TSX) which recently announced it has just over 300 million ounces of Silver in the inferred, indicated and measured categories at its Hermosa Project in Arizona…the deposit also contains some Gold, manganese, zinc and Copper…a revised preliminary economic assessment is expected to be completed by the end of this quarter…John’s chart shows the trend has turned bullish with Wildcat which is currently trading at its 1,000-day rising SMA…

Note: John, Jon and Terry do not hold positions in OSK or WS.