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Gold prices have traded between $1,578 and $1,587 so far today…as of 6:05 am Pacific, bullion is down $2 an ounce at $1,583…Silver is flat at $29.04…Copper is up 2 cents at $3.51…Crude Oil has gained 74 cents at $91.17 while the U.S. Dollar Index has fallen half a point to 82.06…

If you think your portfolio is hurting, John Paulson’s $900 million Gold Fund, which invests in bullion-related equities and derivatives, is down 26% already this year, Paulson & Co. said yesterday in a client update obtained by Bloomberg News…the firm’s Advantage funds also fell in February after the metal and related stocks weakened as signs of economic optimism curbed Gold demand…Paulson is being hurt as Gold fell for the fifth straight month, its longest slump in 16 years…the manager told clients in 2012 his Gold Fund would beat his other strategies over five years because the metal was the best hedge against inflation and currency debasement as countries pump money into their economies…

Central Bank Watch

European Central Bank President Mario Draghi called on euro zone governments to implement structural reforms on Thursday, warning that the economy should stabilize later in 2013 but that downside risks to growth remained…the bank left its main refinancing rate unchanged at a record low of 0.75% Thursday, as expected…”Our monetary policy stance will remain accommodative,” Draghi told reporters at a news conference shortly after the decision…”The continued implementations of structural reforms should work their way through the economy,” he said…meanwhile, the Bank of England (BOE) has kept its benchmark interest rate unchanged at 0.5% and maintained the size of its asset purchase program at 375 billion pounds ($570 bn U.S.)…while most analysts had expected the BOE to keep policy unchanged, some analysts were braced for a surprise after minutes from the bank’s last meeting showed three of the nine committee members had voted in favor of expanding bond buying by a further 25 billion pounds ($38 billion)…

Today’s Markets

Asian markets were mixed overnight with China’s Shanghai Composite falling 23 points to 2324…European shares are in positive territory while stock index futures in New York as of 6:05 am Pacific are pointing toward a mildly higher open on Wall Street…

Monster Lake Gold Discovery Update

Both TomaGold Corp. (LOT, TSX-V) and Quinto Real Capital (QIT, TSX-V) remain halted, pending news…more highly positive results from Monster Lake would be a very welcome development for the market as a whole…

Venture Exchange Update – Looking For Clues

For now at least, the Venture Exchange is holding Fibonacci support around the 1100 mark…this is important because a decisive break below 1100 would suggest a likely test of the next major support near the 1000 level, specifically the early summer 2009 low of 1027…while Gold and Silver prices have a major impact on the direction of the Index, other commodities are important as well including Crude Oil and Copper…the CRB Index, a basket of commodities, is a valuable guide as well…below we have updated charts on all three…the Venture also performs best when the Canadian dollar is strong and the greenback is weak…unfortunately, those dynamics aren’t in the Venture’s favor at the moment as the loonie is struggling due in part to Canada’s darker trade outlook, a softer housing market and a dovish central bank…the U.S. Dollar Index, meanwhile, recently broke above important resistance at 81.50 which is a concern…

There are supply issues at the moment regarding both Crude Oil and Copper which could limit their upside potential…technically, however, WTIC appears to have stabilized and found support at the $90 level from which a rally could ensue…the 6-month daily chart below shows RSI(14) at 33% after bouncing up from previous support…

Crude Oil 6-Month Daily Chart

Copper Chart

Copper appears to have found support on its 6-month chart as well…what’s also encouraging is that commercial traders have dramatically scaled back their short Copper positions, so the Big Boys at the very least are expecting a rally from near current levels…Copper has recently been forming a basing pattern between $3.48 and $3.55, and has strong support at $3.45…

From a fundamental perspective, Citi Research sees signs of an oversupply of Copper in key consuming nation China and describes the price outlook as “less than positive short-term”….still, consumer buying may limit significant further declines, the firm says…”It is our view that China has a significant over-availability of Copper units, built up during 2012,” Citi says…the firm estimates “over-availability of Copper units of between 1-1.5 mt (million tons) last year alone – i.e. far more significant than the reported 600,000-ton build in bonded warehouse inventory”…meanwhile, Citi says increased government pressure for more restrictions on speculative property purchases will lead to continued “softness” in rates of growth of Chinese demand…Citi trimmed its forecast of growth in Chinese Copper consumption for 2013 to 5.9% from 7.5%…meanwhile, global mine supply grew 2.7% year-on-year in the second quarter of 2012, 8.2% in the third quarter and 9.7% in the fourth…this trend is set to continue into next year on continued brown and greenfield expansions, Citi says…

CRB Index

The CRB index has managed to hold above its summer 2012 lows and could be forming an inverted head-and-shoulders pattern…below is a 2.5-year weekly chart…interestingly, the CRB rally peaked in September at the same time as the Venture’s 200-point move met stiff resistance around 1350…

Gold has traded in a narrow range between $1,571 and $1,580 so far today…as of 6:20 am Pacific, the yellow metal is down $1 an ounce at $1,574….Silver is off 2 pennies at $28.68…Copper is unchanged at $3.51…Crude Oil is down slightly at $90.59 while the U.S. Dollar Index has added one-fifth of a point to 82.22…

Dow At Record High – What’s Next?

The Dow finally hit a new all-time high yesterday, piercing through levels last seen in October, 2007, thanks to a range of factors including ongoing Federal Reserve monetary support…the euphoria on Wall Street could be short-lived, however, given certain technical indicators as described below by John in a 10-year weekly Dow chart…at some point in the near future, the most likely scenario in our view is a Dow/broader market correction coinciding with a powerful reversal in Gold…bullion may have to drop a little lower before that occurs, with the Dow reaching slightly higher levels, but a change in trend appears to be brewing…the Dow is also now more than 1,000 points above its 200-day moving average (SMA), a situation that typically precedes a correction…how the Venture Exchange would react during a broad market pullback combined with a reversal in Gold is anyone’s guess, but the producers would likely perform the best…active juniors with strong cash positions and discoveries would also draw attention…

John: When a new record is established it’s always wise to analyze the situation to determine if the present upside move is sustainable…an insight can be obtained by using indicators with a long-term weekly chart…in this case, I have a 10-year weekly Dow chart that includes RSI(14), Bollinger Bands(40,2.0), %B, the ADX with +DI and -DI, and Volume…

Starting with the RSI(14), a vertical red dotted line indicates each time it has broken above 70% (as it has now)…note that where these lines intersect the price chart, the Index is close to a peak and there is a retracement immediately or shortly after…

It is also known that when a price drifts too far away from a close moving average, a reversal occurs…one way to measure this is to use Bollinger Bands with the %B indicator…when the price touches its upper band it has a tendency to reverse toward the middle line (dotted)…the %B indicator has a value of 1 when the price touches the upper band…the chart shows %B was at 1 or above each time it was intersected by the red dotted lines…this indicates a reversal was expected at these points…

On the ADX indicator, we are only interested in the +DI(green line)…we see that each time the red vertical lines intersect the +DI line, it has peaked and immediately reverses downwards…this shows the bullishness has weakened….

Yesterday, RSI(14) finished the day at 70.44, %B is at 1.05, +DI is at 22.74 and pointing down…

The last indicator to be considered, perhaps the most important, is volume…note on the chart that leading up to the previous high in 2007, the weekly volume was increasing…increasing volume is necessary to sustain a rising price, but since mid 2011 the weekly volume has been in decline…yes, the Dow can keep going up but, in my humble opinion, only for a short time before it corrects…keep in mind, markets go up further and go down further than anyone expects…be careful…

As a side note to the Dow’s record high yesterday, an article in the Wall Street Journal pointed out this morning that when inflation is factored in, the Dow is far from a record – it hasn’t been in real record territory for 13 years since January 14, 2000…

Venture Exchange/Gold/CRB Comparative Chart

The Venture rallied 15 points yesterday to climb back above the 1100 level, closing at 1112…there is Fibonacci support around 1100, as John has indicated…if the 1100 level ultimately can’t hold, however, then the next major technical support is obviously right around the 1000 mark…during an early summer correction in 2009, the Venture found support at 1027…below is a 2.5-year comparative chart that features the CDNX, Gold and the CRB…the Venture has definitely been hurt by the recent decline in both Gold and the CRB…on a positive note, RSI(14) for the Venture on this chart is very close to support at 29%…a drop of another 100 points on the Venture certainly can’t be ruled out but that could open up some terrific buying opportunities…the next few weeks will certainly be interesting…

U.S. Dollar/Euro Ratio With Gold

One interesting way to track Gold is through a U.S. dollar-euro ratio with bullion…this ratio and Gold are currently (as they typically are) in an inverse relationship, attempting to form a top and a bottom respectively…based on John’s 2.5-year chart below, the current ratio in our view suggests that bullion is very close to a bottom – just one more piece of bullish evidence, along with many other factors including the dramatic scaling back of short positions by the commercial traders…

Today’s Markets

Asian markets were stronger overnight with Japan’s Nikkei average hitting a fresh 4.5-year high while China’s Shanghai Composite continued to rebound from a 6-week low…European shares are in positive territory this morning while stock index futures in New York as of 6:20 am Pacific are pointing toward a higher open on Wall Street, and another new all-time high, after a better-than-expected private sector employment report released this morning…

Gold is trying to rebound today after 4 straight days of losses…as of 7:00 am Pacific, bullion is up $8 an ounce at $1,582…Silver has gained 42 cents to $28.96…Copper is up 2 pennies at $3.52…Crude Oil is 52 cents higher at $90.64 while the U.S. Dollar Index is off slightly at 82.04…

Merrill Lynch Cuts Gold Price Forecast

For what it’s worth, Bank of America Merrill Lynch today cut its outlook on Gold prices for this year and next, citing improving economic conditions and a rise in U.S. nominal rates…the bank reduced its 2013 average price forecast for Gold by 6.9% to $1,680 per ounce and its 2014 forecast by 9.8% to $1,838…it now doesn’t expect Gold to break above $2,000 an ounce until 2014, a turnaround from its previous forecast for a move above $2,000 during the second quarter of 2013…”After a multi-year rally, Gold prices have been range-bound for several quarters,” said Michael Widmer, Bank of America Merrill Lynch’s metals strategist…”In our view, headwinds to Gold prices will persist in the near term…a rise in U.S. nominal rates – which raises the cost of storing Gold – is proving a particular drag on investment interest in the metal,” said Widmer…improving economic conditions also raise doubts over the metal’s safe-haven appeal, he added…”At the same time, sizeable output gaps in many nations have prevented a meaningful pick-up of inflation and inflation expectations in the current recovery phase,” he said…longer-term, Widmer is more optimistic regarding bullion…”Most notable, real yields could trend lower in 2014,” he said…”Also, foreign-exchange reserve diversification from emerging market central banks on the back of currency interventions to offset a weaker yen could bring about increased Gold buying later this year…Further out…emerging countries will become more affluent, which should lead to higher jewellery purchases”…

Another Sign The Gold Sector Is Nearing A Bottom

The purpose of the chart below from John is to compare the BPGDM (Gold Miners Bullish %) Index with the price of Gold over the past 4 years, looking for relationships that can give us an indication for a bullish reversal in the Gold markets…we first note that the BPGDM is at its lowest level in this 4-year period…the BPGDM RSI is in the oversold zone at 22% and the -DI is approaching an all-time high and shows the bearishness is starting to wane… this tells us that we MAY be nearing a bottom…also note, the BPGDM has a +98% correlation with the TSX Gold Index…on the comparative chart the vertical red dotted lines identify bullish reversals in the price of Gold which also shows there is a corresponding reversal in the BPGDM but with far more volatility…this chart should be watched…we can conclude then that we may be close to a bullish reversal in the price of Gold…how close we just don’t know, but in previous different charts we’ve already demonstrated powerful support around the $1,500 area while commercial traders have also dramatically scaled back their short positions which is another positive sign that a bottom is quickly approaching…

Copper Outlook

Copper may advance this year as consumption in China, the world’s biggest user of the metal used in wires and pipes, is poised to expand, according to Li Baomin, chairman of Jiangxi Copper Co. (358), China’s largest producer…”Demand growth momentum is strong on expansion of urbanization,” said Li, whose promotion of chairman was announced in Beijing yesterday…”The global Copper market is expected to be in balance,” he said, without giving a forecast for Chinese demand growth…according to Goldman Sachs Group Inc., Copper use in China will jump 8% to a record 8.833 million metric tons this year, boosting global demand and creating a 6,000-ton product deficit compared with a surplus of 216,0000 tons in 2012…nonetheless, the metal tumbled 4.3% last month – erasing this year’s gains…

U.S. Dollar Index Updated Chart

The recent strength of the U.S. Dollar Index has been a surprise given the fact that a head-and-shoulders top that formed over a period of more than a year has been rendered invalid due to last week’s powerful climb above the left shoulder and through strong resistance at 81.50…what this might mean for the balance of 2013, we’re not sure…typically, the Venture Exchange performs best when the greenback is weak which helps explain why the Venture just experienced its worst February ever…over the near-term, the Dollar Index faces a strong resistance band between 83 and 84 as John’s 5-year weekly chart outlines below…the 81.50 area has obviously become new support…

China Outlines Reform Plans

Outgoing Chinese Premier Wen Jiabao set out a reform plan during the gathering of lawmakers in Beijing, known as the National People’s Congress, in order to achieve a 2013 growth target of 7.5% (typically, China exceeds its official growth targets)…”We should unswervingly take expanding domestic demand as our long-term strategy for domestic development,” said Jiabao, delivering his final report to the Congress after 10 years at the helm…the key to that change, he said, is to “enhance people’s ability to consume”…Beijing’s broader goal is to shift the economy away from reliance on investment and exports, with a stronger role for domestic consumption, as it kick starts painful reforms to rebalance the country’s economic model…underpinning that is an ambitious plan to raise household income and ensure more equal distribution of national wealth….a stronger social safety net, which frees up money for households to spend, is an important part of the plan…the central government promised a substantial 27% increase in its health-care spending to $41.8 billion, and spending on employment and social welfare is also rising fast…Wen also reiterated commitments to bring China’s 200 million-plus migrant workers into the urban social welfare system and provide stronger protections for farmers’ land rights, both seen as crucial to support higher household income and greater social equity…Wen also reiterated the need to tighten regulations in the property sector…the head of the country’s largest real estate developer, speaking on the CBS program “60 Minutes” over the weekend, is warning of huge risks in the sector which he says is already in a bubble state…China has seen a boom in the property sector recently with some cities seeing a 10-fold increase in prices that have driven the average home buyer out of the market…according to estimates, the cost of a home in Shanghai would be around 45 times the average resident’s annual salary…

Today’s Markets

Asian markets rebounded overnight with China’s Shanghai Composite jumping 53 points or more than 2% after posting its biggest single-day loss yesterday since November, 2010…European shares are up sharply after stronger than expected PMI data was announced…for the euro zone, the figure for February was 47.9 against a forecast of 47.3…this was down from 48.6 in January…the composite data for Germany, which measures both manufacturing and the services sector, was 53.3 against a flash reading of 52.7 but below January’s number of 54.4…ECB policymakers meet in Frankfurt on Thursday as political deadlock in Italy fuels fears the euro zone crisis could reignite…the bank is likely to hold off quick-fire action, but could hint at looser policy in future…North American markets are in the green in early trading…the Dow has gained over 100 points in the first 30 minutes of trading to hit a new all-time high, surpassing the previous high of 14198 set October 9, 2007…the TSX is up nearly 100 points while the Venture Exchange has gained 14 points to 1111 after closing at a new 3.5-year low yesterday of 1097…there’s important Fibonacci support in the immediate vicinity of 1100 while the next major support below that is 1027, a low that occurred during an early summer correction in 2009…

Huldra Silver (HDA, TSX-V) Updated Chart

The weakness in the Venture has taken its toll on many companies, even very promising new high-grade Silver producer Huldra Silver (HDA, TSX-V) which plummeted from a high of $1.39 in January to a low of 62 cents last Thursday…the stock jumped nearly 30% to 78 cents on news Friday that the company has received $2.2 million (U.S.) in smelter payments since it began shipping concentrates last November…Huldra continues to see significant monthly increases in production and shipments of concentrates while continuing to make adjustments to the mill equipment and processes to maximize metallurgical recovery and throughput…the company expects to announce commercial production by the end the month…in addition, a 4,000-metre underground drill program at Treasure Mountain is scheduled to commence within the next couple of weeks…this is well-run company that just recently raised $10 million through the issuance of convertible debentures, and it seems unlikely Huldra will have to raise additional equity this year given the cash flow it’ll be generating as production continues to ramp up (possibly 1.5 million ounces of Silver could be produced by Huldra this year)…its current market cap is a modest $40 million…as always, perform your own due diligence but in our view Huldra has a great opportunity to be a huge success story for patient, long-term investors…John’s 6-month daily chart, completed after last Friday’s close, shows HDA beginning to emerge out of very oversold conditions…HDA is up 2 pennies in early trading at 77 cents…

Note: Jon holds a share position in HDA.

Gold, which has experienced five consecutive monthly declines, has traded between $1,571 and $1,583 so far today to begin the new week…as of 7:15 am Pacific, the yellow metal is down $1 an ounce at $1,576…Silver is flat at $28.58…Crude Oil is down slightly at $90.57 while the U.S. Dollar Index is relatively unchanged at 82.31…

PDAC Underway

The 81st Annual Prospectors & Developers Association of Canada (PDAC) convention kicked off yesterday and continues through Wednesday…over 30,000 people are expected to attend the mining convention that brings a mix of investors, analysts, mining executives, geologists, prospectors and international government delegations from around the world…“Canada leads all countries with 18% of the world’s mineral exploration spending and Toronto is the global capital of mining finance – it makes sense that we host the industry’s most important networking and educational event here,” said PDAC President Glenn Nolan in a news release…“We’re looking forward to another banner year for the PDAC convention”…in 2012, 30,369 people attended the convention in downtown Toronto, with roughly 7,500 international attendees from 125 different countries…the so-called “PDAC” curse struck the markets the last two years with the Venture Exchange falling sharply in March, 2011, and again last year following the convention…this time around, it struck early as the Venture plunged 7.3% in February – by far its worst February performance ever…

Today’s Markets

Asian markets were mostly lower overnight, led by the largest single-day drop in China’s Shanghai Composite since November, 2010…the Shanghai tumbled 86 points or 3.65% to 2273 after Beijing announced an increase in down payments and loan rates to contain rising home prices…more property curbs could be on the way…China will certainly be in focus this week as the annual Chinese People’s Political Consultative Conference began yesterday while the National People’s Congress begins tomorrow with the Congress expected to confirm Xi Jinping as president…Japan’s Nikkei average bucked the trend in Asia, however, and briefly touched a fresh four-and-a-half year high as comments from the government’s nominee as the next Bank of Japan governor fueled hopes for aggressive monetary easing…European shares are mostly mildly lower today…the Dow is off 50 points through the first 45 minutes of trading while the Venture Exchange has fallen another 9 points to 1111…there is Fibonacci support at 1104 (check John’s weekend chart)…

TSX-TSX Gold Index Comparative Chart

Below is an interesting 5-year weekly TSX chart from John that compares the Composite Index with the TSX Gold Index…the “correlation coefficient” is just beginning to bounce off a new low – the divergence between the two in recent months in particular has been extreme with the TSX climbing nearly 10% since mid-November while the Gold Index has tumbled 20% during that same period…generally, since the early summer of 2011, the Gold Index and bullion itself have moved in the opposite direction of the general market…this trend should be expected to continue, though what that means for the Venture Exchange is anyone’s guess…the uptrend in the TSX is weakening, so we do expect the producers to perform better along with Gold in the near future…as we pointed out over the weekend, investor sentiment toward the Gold sector at the moment is at extreme lows not seen since the 2008 Crash…

New Gold Inc. (NGD, TSX)

We’ve stated this on numerous occasions – one of the best-run Gold producers in the business is New Gold Inc. (NGD, TSX), and we encourage investors to study in detail the company’s latest financial results that came out last Thursday…New Gold, which has four operating mines at the moment, posted record net earnings in 2012 and delivered on its operational guidance for the fourth consecutive year…the company continues to ramp up production while keeping costs down, a simple formula for success…its estimate for 2013 all-in sustaining cash costs (includes total cash costs, corporate general and administrative expenses, exploration expenditures and sustaining capital) is $875 per ounce…New Gold made one of the smartest moves of any producer in recent years when it acquired Richfield Ventures and the Blackwater deposit in 2011 and then consolidated a huge land position in the area…the PEA for Blackwater released last September shows robust economics for the project which is expected to produce approximately 500,000 ounces of Gold per year (NGD produced just over 400,000 ounces of Gold in 2012)…if you’re looking for a long-term growth stock in the Gold sector, it would be hard to go wrong with New Gold…

Below is an 8-year NGD chart from John that shows very strong technical support around the $9 level and a resistance band between $12 and $14…NGD climbed 57 cents over the last two trading sessions to close Friday at $9.49…as of 7:15 am Pacific, NGD is unchanged at $9.49…

Updated Silver Long-Term Chart

As regular readers know, each Monday morning John provides updated Silver charts…we’ll begin with the long-term chart this morning which shows the RSI(2) indicator has slipped to 18% – one of the lowest levels reached over the past decade…it could still drop a little lower but a level such as this, especially with Silver trading in the high $20’s, is clearly a bullish signal…history proves that the time to be very cautious is when the RSI(2) approaches 90 and the time to be back up the truck and load up is when this indicator slips below 20…”Wave 5″ is still valid even if Silver dips to critical support at $26…this is a great time to be investigating quality Silver stocks with even better buying opportunities possible this month if Silver tests the $26 level which should hold…

Updated Silver Short-Term Chart

The short-term Silver chart shows support holding for now at $28 with RSI(14) at 31%, just off its recent lows…impossible to predict, based on this chart, if the $28 level will hold – if not, $26 is the key level to watch…in any event, Silver (like Gold) is in the process of forming an important bottom when all factors are taken into account…

TomaGold Corp (LOT, TSX-V) and Quinto Real Capital (QIT, TSX-V)

We were on top of the Monster Lake discovery near Chibougamau, Quebec, since the morning of February 20 when TomaGold Corp. (LOT, TSX-V) and Quinto Real Capital (QIT, TSX-V) reported some stellar results from the first three holes of a 2,500-metre drill program…both stocks have performed extremely well, even in a bad overall market environment, which shows there is still plenty of money on the table looking for legitimate discoveries…the next results will be critical…if they exceed the market’s expectations, both LOT and QIT could really soar though we prefer QIT given its share structure and the fact it has an option to earn up to a 70% interest in the project…below is an updated chart for LOT which has resistance at 35 cents…keep in mind, this discovery in its early stages and both LOT and QIT can be expected to be extremely volatile…the next set of results will dictate where the share prices are headed…

Note: John, Jon and Terry do not hold positions in NGD, LOT or QIT.

TSX Venture Exchange and Gold

The Venture Exchange fell for the fourth straight week, losing 25 more points to close Friday at previously defined support at 1120.  It’s an understatement that February was clearly a disappointing month – in fact, it was the worst February ever for the Venture.   The monthly decline was a whopping 7.3%, a setback that has hurt many good companies both in terms of share prices and financings.  There have only been two other years (2006 and 2009) in the last decade when the Venture has experienced a negative February.  On both of those occasions, the market dropped just slightly – 1% in 2009 and less than 1% in 2006.  So this year’s February performance was truly staggering with the Index also hitting a new 3-year low (1124).  March didn’t start out any better with the Venture closing another 13 points lower Friday after posting a fresh 3-year low intra-day at 1116.

Why is this happening?  There are many reasons for the Venture’s woes, both technical and fundamental, and certainly some of them are self-inflicted wounds – everything from poor management in certain (too many) cases to the high-frequency trading that’s allowed in these juniors (putting retail investors at a disadvantage).  But one simple fact is key – Gold stocks at the moment are obviously out of favor, and have been for a while.  Since September, 2011, when Gold climbed to an all-time high of just over $1,900 an ounce, the Venture has fallen 38% while the TSX Gold Index is down even more at 45%.  A couple of significant rallies in 2012 notwithstanding, there has been carnage across the board in this industry, from the producers to the juniors.  The bear market began with the juniors in March, 2011, and continues today.

One of our readers posed the question this morning, “It has been a dismal start to 2013.  Is there hope with so much negativity out there?”  In a way, this reader answered his own question.  Yes, there is a lot of negativity out there and that’s why there is hope.  Despair and fear are what one typically sees at or near a market bottom.  Have we seen a final capitulation just yet?  Perhaps not.  The fear factor may have to be ratcheted up just a bit more.  But we’re convinced this is the environment within which fortunes are born – when sentiment is at such negative extremes.  It’s important to point out that, according to the Gold Miners Bullish % Index, sentiment readings regarding precious metals stocks have fallen to an extraordinarily low level – 3.3%, just barely above the previous worst reading at the height of the 2008 Crash.   This sentiment reading stood at 73% just a few months ago, so the dramatic drop since September’s bullishness is remarkable to say the least.  In addition, since last October, hedge funds have cut their holdings of Gold by 56% (source: Bloomberg, Feb. 15, 2013).  There are very few people left who can still turn bearish.  That’s why there’s hope.

Below is a 5-year weekly Venture chart from John that also provides some hope.  What we find encouraging is that on this long-term chart, there’s currently an RSI(14) divergence with price.  One looks for these divergences for clues that a market might be gearing up for a change in direction.  This chart shows support just above 1100 and 1027, a level the Venture touched during a correction from mid-June, 2009, to early July, 2009.   Hopefully the 1100 level will hold – we’ll see.  If not, 1027 is the next key area.  Immediate help for this market would come from a reversal in Gold prices and/or a major discovery or two which would help restore battered investor confidence.

Gold

Gold briefly climbed above $1,600 (resistance) last week but closed Friday at $1,581, a loss of $4 for the week.  What has us encouraged about Gold’s prospects is the current COT structure – commercial traders have dramatically scaled back their short positions, giving a strongly bullish signal.  Bet against the commercials at your own peril (they turned quite bearish in September).  What they’re telling us now is that Gold is putting in an important bottom and bullion’s next major move will be to the upside, but this doesn’t rule out another $50 or $100 drop that shakes any remaining loose apples from the tree.  Keep in mind that Gold’s pullback from its 2011 high is only 18%.  That’s nothing but a mere blip on a long-term chart, yet many commentators are saying Gold’s bull run is over – just like they were in 2008 when bullion crashed 30%.  Gold has tremendous support around $1,500 (plus or minus $50) and there’s every reason to believe this will hold, keeping the 12-year-old bull market completely intact.

Below is a 2-year weekly chart from John that shows a basing pattern between roughly $1,550 and $1,600, a strong support band.  Gold has been trading counter-cyclical to the equity markets in recent months, and that trend can be expected to continue which gives us additional hope that Gold is close to a turnaround.  Near-term corrections in the Dow and S&P 500 appear increasingly likely given sentiment readings (overly bullish) and technical patterns as we’ve pointed out in recent days.  The Dow may yet hit a new all-time high, but watch out after that.

Silver fell 18 cents last week to close at $28.76.  Copper slipped a nickel to $3.48.  Crude Oil lost $2.45 a barrel to $90.68 while the U.S. Dollar Index busted through important resistance at 81.50 to close at 82.28, a gain nearly a full point for the week.

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), a Fed balance sheet now in excess of $3 trillion and expanding at $85 billion a month, 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.

Welcome to our site, or at least the initial version of it!  BMR has been online for more than three years and strictly through word-of-mouth we have built a loyal following. 

We’re continuing with our plans to ultimately build a very unique investment and money-management resource site that goes considerably beyond what we have now.  While we focus a great deal on the Gold and Silver markets and trends in the global economy, and of course the technical health of the TSX Venture Exchange (CDNX), an important component of this site will always be original research on undiscovered junior exploration companies or small producers, mostly in the Gold and Silver exploration space, that offer very real and significant upside potential. We are extremely selective in the companies we feature and put forward to investors – we prefer quality over quantity.  However, investors must understand that these are still highly speculative situations and entail considerable risk, volatility and unpredictability.  Our stock coverage is for informational and entertainment purposes only and must not be viewed or interpreted as “buy”, “sell” or “hold” recommendations. We are not Registered Securities Advisers. Our opinions can only be construed as a solicitation to buy and sell securities when they are subject to the prior approval and endorsement of a Registered Securities Adviser operating in accordance with the appropriate regulations in your area of jurisdiction. Always perform your own due diligence and please read our disclaimer at the bottom.

We use a combination of fundamental and technical factors in determining the value and potential of a stock.  In terms of fundamentals we look for a company with a superb project supported by strong management.  Management must possess integrity, solid ethics and a determination to succeed and build shareholder value.

At BullMarketRun (BMR) we approach the handling of money from a biblical perspective and this is an important topic we will be sharing with our readers (and listeners) as the site continues to develop. The Bible teaches so much about money and how to handle it and invest it –  there are literally thousands of verses on how we should handle the money and possessions that God entrusts us with.  By examining the life of Jesus and reading the Word of God, we can all become fully equipped to be successful investors and handle money wisely.  If it’s the other way around –  if you’re a slave to money by being in debt for instance, or if you don’t respect the value of money and spend it foolishly –  you’re in trouble and you’ll never be blessed financially.  We have a God who thinks big – He created the universe – and He wants us to think big  in every area of our lives.  When we handle money from a Biblical perpective (His money that we have been given stewardship of) He will bless our financial decisions and an increase of tenfold or a hundredfold is always possible.  This all begins, of course, with a personal relationship with Jesus Christ by accepting Him as your Lord and Savior and putting Him at the throne of your life.  It is the most important decision you’ll ever make.

God Bless,

Terry Dyer

Owner/Publisher, www.BullMarketRun.com

Disclaimer:

BullMarketRun.com (BMR) is completely independent from any companies it covers.  BMR accepts no compensation of any kind from any groups, individuals or corporations for coverage of any company mentioned on this site.  We accept no advertising either.  Our stock coverage is for informational and entertainment purposes only and must not be viewed or interpreted as “buy”, “sell” or “hold” recommendations. No investment opinion or other advice is being rendered on any stock or company. We strongly recommend that you consult with a qualified investment adviser, one licensed by appropriate regulatory agencies in your legal jurisdiction, and do your own due diligence and research before making any investment decisions. The stocks we cover, by definition, are highly speculative and potentially very volatile. Investors are cautioned that they may lose all or a portion of their investment if they make a purchase or short sale in these speculative stocks.  We are not Registered Securities Advisers. Our opinions can only be construed as a solicitation to buy and sell securities when they are subject to the prior approval and endorsement of a Registered Securities Adviser operating in accordance with the appropriate regulations in your area of jurisdiction. It should be assumed that BMR personnel, writers and their associates may hold or dispose of or trade in positions in any securities mentioned herein at any time.  Owner/Publisher of BullMarketRun.com is Terry Dyer of Langley, British Columbia.

Forward Looking Statements:

All statements in BMR’s reports, other than statements of historical fact, may be forward-looking statements. These statements relate to future events or future performance. Forward-looking statements are often but not always identified by the use of words such as “seek”, “anticipate”, “plan”, “continue”, “estimate”, “expect”, “may”, “will”, “project”, “predict”, “potential”, “targeting”, “intend”, “could”, “might”, “should”, “believe” and similar expressions. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements.

Gold is recovering after falling as low as $1,6654 overnight…as of 7:00 am Pacific, the yellow metal is up $4 an ounce at $1,583…Silver has gained 15 cents to $28.66…Copper is off 6 pennies to $3.47…Crude Oil has fallen $1.43 a barrel to $90.62 while the U.S. Dollar Index continues to surge (not a good sign), gaining more than one-third of a point to 82.37…we’ll have more on the Dollar Index Monday…if today’s gains hold., it will have decisively broken out on a weekly basis above important resistance around 81.50 – negating what appeared to be a head-and-shoulders pattern that had formed for over a year…Gold has put in its longest run of monthly declines (5) since 1997…

Today’s Markets

Though Japan’s Nikkei average eked out a small gain, Asian markets were generally lower overnight…China’s Shanghai Composite fell 6 points to 2360…growth in Chinese factories cooled in February to a five-month low after domestic and foreign demand slackened, an official government survey showed today, missing market forecasts and underscoring China’s patchy economic recovery…the official Purchasing Managers’ Index (PMI) eased to 50.1 after seasonal adjustments, the National Bureau of Statistics said, down from January’s 50.4 and the weakest since September, 2012…the index nevertheless signals that a mild economic recovery is still taking hold in China…the 50-point level separates expanding activity from contraction versus the previous month in China’s vast factory sector…European shares are weaker today as euro zone manufacturing and unemployment data raised concerns about the region’s sluggish economy…it’s only fitting that a comedian has become one of Italy’s most powerful political voices…the country’s seasonally adjusted unemployment rate jumped to 11.7% in January from 11.3% the month before to hit its highest level for at lesat 21 years, data showed this morning…youth unemployment also jumped to an all-time high of 38.7%  from 37.1%… rising unemployment was a major issue in the national election on Sunday and Monday which saw a dramatic surge in support for the anti-establishment 5-Star Movement led by comic Beppe Grillo…the election left Italy in political chaos, with no clear parliamentary majority emerging and two clowns – Grillo and Silvio Berlusconi – in the forefront…Italy is the euro zone’s fourth largest economy, and has the world’s third largest sovereign bond market, behind the United States and Japan…the U.S. borrows for 1.90%, Japan 0.67%, but Italy has to pay 4.80%, a heavy premium in today’s credit markets…with Italy’s massive debt-to-GDP of around 120%, the function of their bond markets and the level of interest rates that they must pay to service that debt are vitally important…yields on the Italian 10-year long bond have jumped about 80 basis points in a month…keep an eye on the 10-year Italian bond note…if it surges past 5.25%, equity markets could become very jittery…North American markets are under mild pressure in early trading…the Dow is off 70 points, the TSX has lost 66 points while the Venture Exchange is down 7 points to 1127…

Fresh U.S. Economic Data, “Sequestration” Starts

American consumers increased spending modestly in January from December…income, however, plunged by the most in two decades although the decline followed a one-time surge in December…the Commerce Department reported this morning that consumer spending rose 0.2% in January…the gain was driven by an increase in spending on services, primarily reflecting higher heating bills..spending on durable goods such as cars and non-durable goods such as clothing actually fell…income growth declined 3.6% in January, the biggest drop since January, 1993…but it followed a hefty 2.6% rise in December, a gain that reflected a rush by companies to pay dividends and bonuses before income taxes increased on top earners…the U.S. government enters a controversial new phase of deficit cutting today as an automatic trigger begins slicing budgets in some areas while leaving programs such as Medicare and Medicaid – among the largest drivers of future debt – largely untouched…the $85 billion in so-called sequester cuts push Washington, and the nation’s economy, into uncertain waters…but by focusing on a proportionally small level of spending, the sequester fight is distracting attention from longer-term deficit issues that need to be addressed…

Dow Chart

There is growing technical evidence that a correction in the Dow is near at hand…given the fact that Gold prices have been moving in the opposite direction of the equity markets in recent months, this also suggests that March could mark a reversal in the 5-month slide in bullion…last year, Gold was very weak in March – we could see just the opposite this time around…

Below is a 1.5-year Dow weekly chart from John…from mid-December to the end of February, the Dow climbed from around 11750 to a high this week of 14149 in orderly fashion within an upsloping channel…this move has seen three run-ups and two retracements with recent trading at the top of the channel…

On the chart, two periods are identified…Period #1 is Sept/12 and Period #2 is Feb/13…compare the candle patterns – both show that as soon as the Index reaches the top of the channel the subsequent candles meet resistance and have trouble moving higher even though the buy pressure increases…the sellers match the buyers until, as we see in Period #1, the bears finally win and the Index retraces down to the bottom of the channel…also the +DI in each period starts to decline at the time when the Index first reaches the top of the channel…this is indicated by the vertical red dotted line…

For Period #2, RSI is relatively very high and the level of buy Pressure is far less than that of Period #1…the conclusion from this analysis is that the Index is very vulnerable to a retracement to a support level or to the bottom of the channel in the near future…

GoldQuest Mining (GQC, TSX-V)

We encourage investors to closely read GoldQuest’s February 11 news release regarding new targets and its drilling strategy at Las Tres Palmas, a highly promising trend that of course also hosts the company’s Romero discovery that helped propel the stock over the $2 level last summer…potential overall market volatility this month could open up some fabulous opportunities in many quality juniors, GoldQuest being no exception…GQC is currently trading within a support band (.40 to .485 cents) as noted in John’s 2.5-year weekly chart below…as an “awareness” issue, breach of this support is certainly possible given current technical patterns and oversold conditions – as always – would create attractive opportunities…

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