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TSX Venture Exchange and Gold

This is a time to be positive, everyone, because the incredibly strong support that has been building underneath the Venture in recent months is going to provide the foundation and the springboard upon which this market will finally take off through critical resistance in the 970’s in the coming weeks.  The technical evidence in our view is as clear as the light of day, and we’ll walk readers through this in an important chart we’ll be posting Monday morning.

Despite the worst November for Gold in 35 years (yes, since 1978), the Venture managed to maintain support at and slightly above a long-term downtrend line that it finally broke above in late October.  Supported now also by a rising 100-day moving average (SMA), expect the Index to handle the choppy seas that can often occur during the first half of December, and then accelerate to the upside during the last half of the month in a move that will push the Index through its 200-day SMA and stubborn resistance in the 970’s.  That may seem like a bold prediction, but this is a classic set-up for a bullish advance.  This is like late 2010 in reverse.  At that time, so many investors were so bullish there simply weren’t enough new buyers to sustain the amazing energy the Venture had amassed.  In this instance, the sellers have run out of ammunition.

Individual company success stories will be immensely helpful in restoring investors’ confidence in this market.  That is what has brought the Venture out of the doldrums before, and history has a habit of repeating itself.  A stabilization or rise in the Gold price would also be a very welcome development, of course.  Keep in mind, the Venture tends to be a reliable leading indicator of Gold – just like in 2011 when it topped out six months before bullion did.  The fact that Gold has fallen nearly $200 an ounce since mid-August, yet the Venture has held its ground, should be construed as very positive.

Below is a 3-month daily CDNX chart from John.  The 925 support was tested on a few occasions last week and held, and the Index climbed 8 points Friday to finish at 935 for a 2-point weekly gain.  RSI(14) bottomed during the week of November 18 and is now at 45% and pointing up.  The chart that says so much more, and paints the big picture, is the 3-year weekly which we’ll be posting Monday morning.

The Seeds Have Been Planted (And Continue To Be Planted) For The Next Big Run In Gold Stocks

There’s no better cure for low prices than low prices.  The great benefit of the collapse in Gold prices this year is that it forced producers (at least most of them) to start to become much more lean and mean in terms of their cost structures. Producers, big and small, have started to make hard decisions in terms of costs, projects, and rationalizing their operating structures.  Exploration budgets among both producers and juniors have also been cut sharply.  In addition, government policies across much of the globe are making it more difficult (sometimes impossible) for mining companies to put Gold (or other) deposits into production, thanks to the ignorance of many politicians and the impact of radical and vocal environmentalists.  Ultimately, all these factors are going to create a supply problem – think about it, where are the next major Gold deposits going to come from? On top of that, grades have fallen significantly just over the past decade.

It doesn’t take a rocket scientist to figure out that the next huge bull market in Gold stocks is just around the corner due to demand-supply dynamics, much leaner producers who will suddenly become earnings machines, and a junior market that will be healthier simply because a lot of the “lifestyle” companies sucking money out of investors will simply disappear or get taken over by individuals or groups who are actually competent and serious about building shareholder value.   A healthy “cleansing” in the market has been taking place.  As this continues, more and more seeds are being planted for an incredible future move in well-managed Gold producers and explorers that could make the dotcom bubble look like a tea party.  As for the juniors, focus on the small universe of companies that have the ability to execute both on the ground and in the market.

Gold

After a shaky start to the week Monday morning when it dropped as low as $1,226, Gold recovered and was actually able to finish the week on a positive note as it closed at $1,251 – a $7 gain from the previous Friday.  Coming into the week, as we pointed out last Sunday, Gold analysts surveyed by Bloomberg were the most bearish since late June – a bullish contrarian sign.

Below is a 9-month daily chart from John, and what we find particularly interesting – from a short-term perspective at least – is that Gold has broken above an RSI(14) downtrend line.  This could bode well for December.  The downsloping wedge shows clear support and resistance.  Below $1,240, there is additional strong support between $1,200 and $1,215.  Gold has had a rough year, and it wouldn’t be surprising to see bargain-hunters step up to the plate as 2014 draws to a close.  As we pointed out at the top, Gold just went through its worst November in 35 years.  November 1978 was followed by three very positive months plus a rip-roaring finish to 1979.

Silver gained 11 cents last week to close at $19.93 (John will have updated Silver charts as usual Monday morning).  Copper was off a penny to $3.19.  Crude Oil slipped $2.12 a barrel to $94.84 while the U.S. Dollar Index was essentially unchanged at 80.64.

The “Big Picture” View Of Gold

As Frank Holmes so effectively illustrates at www.usfunds.com, the long-term bull market in Gold has been 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, has had a huge impact on bullion.  Despite this year’s drop, the fundamental long-term 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, a Fed balance sheet now in excess of $3.5 trillion and expanding at $85 billion a month, money supply growth around the globe, massive government debt from the United States to Europe, central bank buying, flat mine supply, physical demand (especially from China), emerging market growth, geopolitical unrest and conflicts…the list goes on.  However, deflationary concerns around the globe and the prospect of Fed tapering by the end of the year (not likely now) had a lot to do with Gold’s plunge during the spring below the technically and psychologically important $1,500 level, along with the strong performance of equities which drew money away from bullion.  June’s low of $1,179 may have been the bottom for bullion – time will tell.  We do, however, expect new all-time highs as the decade progresses.  There are many reasons to believe that Gold’s long-term bull market is still intact despite this major correction from the 2011 all-time high of just above $1,900 an ounce.

Welcome to our site, or at least the initial version of it!  BMR has been online for more than 4 years and strictly through word-of-mouth we have built a loyal following.  We encourage reader feedback and the exchange of helpful opinions and ideas among investors in our forum. 

We’re continuing with our plans to ultimately construct a very unique investment and money-management resource site that goes considerably beyond what we have now.  We focus a great deal on the Gold, Silver and Copper markets as well as trends in the global economy, in addition of course to the technical health of the TSX Venture Exchange (CDNX).  An important component of this site, as well, will always be original research on high quality junior exploration companies or small producers 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, and we are being more selective than ever in the current market environment.  We look for companies with the ability to execute both on the ground and in the market, who are determined to build shareholder value, which actually excludes most Venture stocks.  However, investors must understand that the companies we do put forward for our readers’ due diligence are still highly speculative situations and entail considerable risk, volatility and unpredictability.

Our intent is to provide you with information that you can use as part of your own due diligence.  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.  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 perspective (His money that we have been given stewardship of), He will bless you.  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 has traded between $1,240 and $1,253 so far today…as of 7:15 am Pacific, bullion is up $9 an ounce at $1,254…Silver is 33 cents higher at $20.09…Copper is up 2 pennies at $3.20…Crude Oil has gained $1 a barrel to $93.30 while the U.S. Dollar Index is off slightly at 80.54…

UBS analyst Joni Teves notes, “This week, participants in China have become a bit more active: trading volumes over the last few days have averaged over 20 tonnes, the first time in about two months. Premiums also picked up slightly, although still below the year-to-date average of around $16 for the more liquid Au9999 contract,” she said…

Estimates are that an average of about 35 tonnes of recycled Gold – triple the normal amount – is now entering the market in India…“The import policy is not favourable, which has resulted in high premiums. Most consumers are looking to exchange old for new,” said Haresh Soni, chairman of All India Gems and Jewellery Federation, which groups more than 300,000 jewellers…the Indian government will welcome the increased recycling of Gold as it tries to rein in the current account deficit to an acceptable range of 3.6% to 3.8% of GDP, from 4.9% in the June quarter, and is unlikely to reverse its recent measures anytime soon…

Meanwhile, India’s economy grew by 4.8% in the third quarter year-on-year, narrowly beating analysts’ forecasts…economists polled by Reuters had estimated the BRIC country grew by 4.6% between July and September…India’s growth has disappointed in recent quarters, with growth decelerating from above 9% in 2010 to as low as 4.4% in the second quarter 2013 – lagging far behind economic rival China, which has maintained growth rates above 7% this year…

Today’s Markets

North America

U.S. equity markets are open for just half a half a day today, closing at 10:00 am Pacific after yesterday’s Thanksgiving holiday…Wal-Mart and Target are reporting blow-out sales on this Black Friday…the Dow has hit a new record high this morning, up 63 points as of 7:00 am Pacific…the TSX has added 88 points while the Venture is 2 points higher at 929…strong support at 925 has held this week…

Asia

Japan’s Nikkei average fell 65 points overnight to close at 15662, but it still posted its best November performance ever with a whopping gain of 9.3%…Japan’s core consumer price index inflation, which excludes fresh food but includes energy, hit 0.9% in October, up from 0.7% the previous month and in line with economists’ expectations…excluding both fresh food and energy, it reached 0.3%, the highest reading since 1998, indicating that rising energy costs alone were not the sole factor in inflationary pressures…this suggests the country is on track to hit the 2% inflation target set almost a year ago and that monetary easing efforts are beginning to bear fruit…separately, industrial output also increased in October – by 0.5% – for a second straight month…

China’s Shanghai Composite was relatively unchanged overnight, adding a point to close at 2221…investors were cautious ahead of Sunday’s release of November’s official manufacturing purchasing managers’ index (PMI)…a Reuters poll expects the index to ease to 51.1 from October’s 18-month high of 51.4…

Europe

European shares are up modestly in late trading today…euro zone unemployment eased off record highs in October, official data showed this morning, a modest improvement in line with other recent data, but youth jobless numbers edged up…unemployment in the 17-nation single currency bloc fell to 12.1% in October from 12.2% in September, the Eurostat statistics agency said…also, the annual rate of inflation picked up in November, to 0.9% from 0.7%, although it remained well below the European Central bank’s (ECB’s) target level…

Barisan Gold Corp. (BG, TSX-V) Update

After Barian Gold’s (BG, TSX-V) recent run-up to a high of 32 cents, John’s charts suggested waiting for a retracement into the upper teens (15 to 20 cents) which would be the ideal “sweet spot” accumulation zone…indeed, the Fib. targets were bang-on – BG retraced to an intra-day low of 17 cents November 19, and yesterday the stock jumped 7.5 cents to close at 31 cents on total volume (all exchanges) of 1.6 million shares, and it’s surging higher this morning…as we wrote earlier, we’re not too keen on Indonesia, where Barisan recently drilled a whopper of a hole (904 m grading 0.50% Cu Eq, including a zone of 1% CuEq over 262 m), but we can’t help but think speculation (and potential additional results) could drive BG significantly higher before year-end as drilling continues at the Upper Tengkereng prospect…the company has not yet drilled down to the potassic zone and associated bornite mineralization of the Upper Tengkereng porphyry system where higher grades are usually intersected, so this has a chance of getting a lot more interesting in the weeks ahead…

Below is an updated BG chart…Fib. analysis has been very accurate so far with regard to BG’s technicals – hopefully that will continue…the fundamentals on the ground are supportive…as of 7:15 am Pacific, BG is up 13.5 cents at 44.5 cents…the next Fib. target is 49 cents…this will continue to be volatile…as always, perform your own due diligence…

Alberta Oilsands Inc. (AOS, TSX-V)

It has been a while since we’ve mentioned Alberta Oilsands (AOS, TSX-V), but the company got some attention in the market yesterday when it announced it has submitted its application to the government of Alberta for compensation amounting to $56 million under the province’s Mineral Rights Compensation Regulation stipulation…the claim submission is a result of the province’s oil sands division advising the company that certain of its Clearwater oil sands leases within the Fort McMurray urban development subregion will be cancelled…it’ll be interesting to see how this plays out, but we certainly wouldn’t be betting the farm on AOS receiving all that it has asked for…AOS climbed as high as 13.5 cents intra-day yesterday on the news but finished unchanged at 11.5 cents on increased volume of 3.4 million shares (all exchanges)…the company has over 200 million shares outstanding and reported working capital of about $3 million in its latest financials (June 30)…strong technical support at 9 cents as per John’s 20-month weekly chart…AOS is up half a penny at 12 cents as of 7:15 am Pacific…

Wanted Technologies (WAN, TSX-V) Updated Chart

Certain tech plays have been performing well on the Venture recently – Wanted Technologies (WAN, TSX-V) is one of them, and this company is actually making money…in our last update, we suggested the rising 20-day moving average (SMA) can be expected to provide strong support and that was indeed a good accumulation area recently as WAN fell as low as $1.04 intra-day November 19 before reversing…yesterday, it jumped 9 cents to close at $1.21…

WANTED is headquartered in Quebec City with subsidiary offices in New York…it provides real-time business intelligence for the talent marketplace, and it’s also the exclusive data provider for the Conference Board’s Help-Wanted OnLine Data Series™, the monthly economic indicator of hiring demand in the United States…only 24 million shares outstanding…

Below is a 2.5-year weekly chart from John…overbought conditions on the daily chart have unwound considerably but could persist for a while yet on the weekly chart…interesting story here – as always, perform your own due diligence…as of 7:15 am Pacific, WAN is up 2 cents at $1.23…

Note: John holds a share position in BG.

A Happy Thanksgiving to our American readers…U.S. equity markets of course are closed today, and as a result this is an abbreviated edition of Morning Musings…Gold has traded between $1,236 and $1,246 so far today…as of 7:30 am Pacific, bullion is up $6 an ounce at $1,244…Silver has added a penny to $19.68…Copper is flat at $3.18…Crude Oil is unchanged at $92.22 while the U.S. Dollar Index has fallen more than one-tenth of a point to 80.57…

As a gauge of investor sentiment, holdings in SPDR Gold Trust, the world’s largest Gold-backed exchange-traded fund, fell 5.7 tonnes to 843.21 tonnes yesterday to their lowest since early 2009…the fund has seen outflows of more than 450 tonnes this year with investors switching into rallying equities…the outflows from ETFs have been the biggest factor in Gold prices dropping more than 25% this year…on a positive note, selling of Gold by North American investors has been soaked up by investors in eastern countries, especially China, and they tend to be longer-term players…the shift in Gold holdings from west to east has been an important theme this year as we’ve pointed out on numerous occasions…

China, which unquestionably has now overtaken India as the world’s biggest consumer of the metal, has seen a pick-up in demand this week due to lower prices…traded volumes of 99.99% purity Gold (the “four nines”) on the Shanghai Gold Exchange hit 18.3 tonnes today, the highest volume in nearly two months according to Reuters data…China’s net Gold imports from Hong Kong climbed to their second highest on record in October as it bought more than 100 tonnes of Gold for a sixth straight month to meet unprecedented demand…

Today’s Markets

Canadian markets will be quiet today with the U.S. holiday…the TSX is up 34 points as of 7:30 am Pacific while the Venture is flat at 930…volumes are low…

Asian markets were strong overnight with China’s Shanghai Composite pushing 18 points higher to finish at a one-month high of 2219…the market was aided by news that Chinese industrial profits rose at annual rate of 15.1% in October…a close above 2200 for the week would be bullish from a technical perspective…Japan’s Nikkei average, meanwhile, jumped 277 points or 1.8% to close at 15727, its highest level since December, 2007, as the dollar-yen rose above the 102 mark to a fresh six-month peak…

European shares were up slightly today…morale in businesses across the euro zone increased again this month, boosting hopes that firms could spur on the euro zone’s bumpy economic recovery…the European Commission’s monthly business and consumer survey, published today, revealed that economic sentiment increased to 98.5 in November – up from 97.7 in October…the figure slightly exceeded expectations…

The European Central Bank yesterday issued a stark warning over the threat posed by the scaling back of U.S. monetary stimulus, calling on euro zone policy makers to do more to prepare for potential market shocks from Federal Reserve “tapering”…in its latest financial stability report, the ECB said the risks to the euro zone’s financial system from outside the currency bloc had grown since May due to the Fed’s talk of scaling back its monthly bond purchases – despite a general improvement in market conditions…

Fed Has Created A “Massive Bubble” – David Stockman

The actions of the Federal Reserve have created a massive bubble not just in U.S. stock prices, but in a variety of assets all across the world, contends David Stockman, who served as the director of the Office of Management and Budget under President Ronald Reagan…Stockman didn’t mince words during an interview on CNBC yesterday…“The Fed is exporting this lunatic policy worldwide,” Stockman said, referring to the Fed’s  asset-purchasing program. “Central banks all over the world have been massively expanding their balance sheets, and as a result of that there are bubbles in everything in the world, asset values are exaggerated everywhere.” The issue, says Stockman, is that central banks around the world have followed the Fed’s dovish lead “for either good reasons of defending their own currency and their trade and their exchange rate, or because they’re replicating the Fed’s erroneous policies.” Either way, “Central banks have been massively expanding their balance sheets,” which has reduced interest rates on government bonds, and increased the amount of money chasing a fixed set of assets…Stockman, who is the recent author of The Great Deformation: The Corruption of Capitalism in America, says that it takes little digging to discover that assets are overextended…

S&P 500, Nasdaq Charts

U.S. equity markets are showing little sign of slowing down – so if there is a bubble, as Stockman contends, it’s likely about to become even bigger…

Below is a 20-year monthly S&P 500 chart from John…the trend since the Crash of 2008 has been remarkable indeed…the S&P closed yesterday at another record high of 1807, and the next Fib. target level is 1918…it’s reasonable to expect a correction to the long-term uptrend line, or close to it, at some point next year…in the meantime, the party continues…

S&P 500 20-Year Monthly Chart

Nasdaq 20-Year Monthly Chart

The Nasdaq hit a 13-year high yesterday, closing at 4045, and the next main resistance levels are 4250, 4728 and 5133 as shown in this chart from John…

LX Ventures Inc. (LXV, TSX-V) Updated Chart

Social media darling LX Ventures has closed its $3.04 million private placement – not hard to do when your stock is trading nearly three times higher than the PP price (in this case, 35 cents)…the Fib. target of 89 cents remains resistance until a breakout above this level is confirmed as per John’s 2.5-year weekly chart…technically overbought conditions clearly exist in LXV, which investors need to be cognizant of, but the stock does have powerful momentum on its side which means these overbought conditions could persist for a while yet…as of 7:30 am Pacific, LXV is up 2 pennies at 91 cents…don’t forget this wise market saying, though – be fearful when others are greedy, be greedy when others are fearful…

Contact Exploration Inc. (CEX, TSX-V) Update

We’ve mentioned Contact Exploration (CEX, TSX-V) on several occasions in recent months as it’s certainly a company worthy of our readers’ due diligence…CEX, which had production of 330 BOE/d for the quarter ended September 30, continues to successfully extend its East Kakwa Montney program westward…the company is completing wells at or below industry leading levels, laying the foundation for future success…

Technically, CEX has been trading in a horizontal channel between 18 and 28 cents for the last year…as the company’s fundamentals continue to improve, a breakout above that channel seems highly likely…patient investors should do well with this one in 2014…below is a 2.5-year weekly chart from John…CEX is off a penny at 26 cents through the first hour of trading…

Note: John, Terry and Jon do not hold share positions in LXV or CEX.

Gold has traded between $1,244 and $1,256 so far today…as of 7:05 am Pacific, the yellow metal is up $4 an ounce at $1,246…Silver is up a dime at $19.92…Copper has edged a penny higher to $3.20…Crude Oil is off $1.34 a barrel to $92.34 while the U.S. Dollar Index is flat at 80.65…

Many Gold producers are making progress at reducing costs wherever they can, according to a New York-based commodities research firm…CPM group sees this trend continuing into 2014…in a report released yesterday, CPM Group said they’ve seen all-in sustaining costs decline roughly 18.3% to $1,003 an ounce in the third quarter of this year, compared to $1,227 an ounce in the second quarter…that’s quite a dramatic improvement and likely better than most investors realize…CPM surveyed Gold mining operations and companies that cover 41% of global mine production…

“CPM Group has stated in the past that producers can and would cut their costs, to the surprise of many Gold equity investors,” they said. “The third quarter may prove to be the beginning of an extended period of cost reductions.  The ability of mining managers to demonstrate to investors that they can restrain costs and focus on profitability over growth in ounces of production could help lure investors back into the Gold share market over the next few years”…the cuts have come from costs associated with sustaining production, which include the development capital and exploration expenditures on sustaining production and general and administrative costs, CPM said…cutting operating costs is a little more difficult, they emphasized…“Labor and energy costs are among the highest operating expenses. Labor costs are sticky, and energy costs are beyond the control of producers unless they hedge their diesel, natural gas, and electricity costs.  Additionally, scaling back on sustaining costs may not (affect) the mining company’s near-term operations significantly.”

They also cautioned that the current reductions in capital and exploration expenditures for new and existing operations will weigh negatively on future Gold mine supply as well as be supportive for Gold prices in the medium term.  “The loss in mine supply can be supportive of Gold prices, but it does not necessarily push Gold prices higher,” CPM said. “The primary driver of Gold prices, which can make it move significantly higher or lower, is investment demand.”

Yamana Gold Inc. (YRI, TSX) and New Gold Inc. (NGD, TSX) – Encouraging Charts

Two companies with all-in sustaining costs well below the industry average are Yamana Gold Inc. (YRI, TSX) and New Gold Inc. (NGD, TSX)…after examining long-term charts for each yesterday, John sees plenty of evidence for a near-term reversal which suggests Gold will hold above its late June low ($1,179) and perhaps surprise some investors with a year-end rally (this is also consistent with the behavior of the Venture over the past few months and its encouraging 3-year weekly chart)…

Both Yamana and New Gold have exceptionally strong support around current levels – Yamana closed yesterday at $9.22 while New Gold finished at $5.21…RSI(2) levels on each are at 10.70 and 3.24, respectively, reflecting the kind of oversold conditions seen on just a few other occasions over the last decade…historic opportunities? – absolutely, especially for investors with longer-term time horizons…

Yamana Gold (YRI, TSX) 10-Year Monthly Chart

New Gold Inc. (NGD, TSX) 10-Year Monthly Chart

Today’s Markets

Asian markets were mixed overnight…Japan’s Nikkei Average fell 66 points while China’s Shanghai Composite gained 18 points to close at 2201, putting it just 11 points shy of a one-month high…

European shares are moderately higher in late trading…Germany’s two dominant political blocs pledged billions in fresh spending on pensions, education and infrastructure as part of a coalition deal (still needs ratification) reached in the early hours today, potentially moving the country to the left on some economic and social issues…meanwhile, consumer sentiment data from German think tank GfK managed to beat market expectations…the forward-looking figure for December showed a tick higher to 7.4, against an estimate in a Reuters poll of 7.1…

In New York, the day before American Thanksgiving, the Dow is up 21 points as of 7:05 am Pacific…a slew of mixed economic data out of the U.S. this morning…the Thomson-Reuters consumer sentiment index rose to 75.1 in November, above expectations…a gauge of planned U.S. business spending on capital goods unexpectedly fell in October and new orders for long-lasting manufactured goods were down, pointing to a loss of momentum in factory activity…meanwhile, initial claims for state unemployment benefits fell 10,000 to a seasonally adjusted 316,000, the Labor Department reported this morning…economists polled by Reuters had expected first-time applications to rise to 330,000 last week…the four-week moving average for new claims, which irons out week-to-week volatility, slipped 7,500 to 331,750…

The Nasdaq closed above 4000 yesterday for the first time in 13 years (since Sept. 7, 2000), the latest milestone in a 2013 stock rally fueled by easy money from the Fed and robust investor demand for a broader swath of fast-expanding companies…a rise of 23.18 points yesterday to 4018 put the index up 33% for the year…it remains more than 1000 points below its record close of 5049 on March 10, 2000…

Both the S&P 500 and the Dow Jones Industrial Average have surpassed records with regularity this year…the Dow has set 43 all-time closing highs in 2013 and is up 23% for the year…the S&P 500 has climbed 26%…

The TSX is 10 points higher while the Venture has added 2 points to 930 as of 7:05 am Pacific…

Ryan Gold Corp. (RYG, TSX-V)

Ryan Gold (RYG, TSX-V) is yet another company that is pulling out of the Yukon, citing “generally poor market conditions”…but investors should be able to read between the lines – the Yukon is simply not as friendly as it used to be for mining and exploration…one geologist we spoke to, who has worked in the Yukon for over 30 years, complains about how environmentalists have hijacked many government departments…capital will quickly flee any jurisdiction where it doesn’t feel welcome, and that’s what has been happening in the Yukon and even in Quebec which for the first time in years is no longer in the top 10 list of the Fraser Institute’s survey of mining friendly jurisdictions around the globe…

Ryan Gold added in its Monday post-market news release:  “Going forward, the company plans to evaluate assets for junior mining companies that are more advanced than its Yukon projects. The company currently has approximately $20 million in working capital, which the company will seek to deploy into projects or investment opportunities that have become available because of current poor market conditions”…investors liked what they heard, and RYG gained 3 cents yesterday on one of its best volume days of the year (925,000) to close at 14 cents…

Madalena Energy Inc. (MVN, TSX-V)

The recent weakness in Madalena Energy Inc. (MVN, TSX-V) has been an opportunity brought about by the company’s announcement of two separate financings – a bought deal in the amount of $8 million at 47 cents which is expected to close next week, and a flow-through financing at 54 cents which has already closed…it has been a good year for MVN, and the company’s prospects for 2014 look better than ever…MVN was the Venture’s volume leader yesterday, gaining 3 pennies to close at 51 cents…it’s unchanged through the first 35 minutes of trading after dipping as low as 49 cents…below is an updated 2.5-year weekly chart from John…the EMA(20) has been providing terrific support…accumulation has been strong throughout 2013…

Note: John, Terry and Jon do not hold share positions in YRI, NGD, RYG or MVN.

Gold has traded between $1,241 and $1,257 so far today following yesterday’s intra-day reversal after bullion touched a 5-month low…as of 7:30 am Pacific, Gold is down $6 an ounce at $1,246…Silver is off 27 cents at $19.94…Copper is down a penny at $3.19…Crude Oil is up 9 cents at $94.18 while the U.S. Dollar Index is unchanged at 80.80…

The President Obama-inspired 6-nation deal with Iran over its nuclear program may actually have made the world a more dangerous place, not a safer place, so this could turn out to be long-term bullish for bullion…with Israel feeling further isolated and calling the deal an “historic mistake”, the likelihood that it may eventually take matters into its own hands with regard to Iran has surely increased…some of the wisest comments on the deal, in our view, came from Arizona Senator and former Presidential candidate John McCain who stated the following:  “I am concerned this agreement could be a dangerous step that degrades our pressure on the Iranian regime without demonstrable actions on Iran’s part to end its pursuit of a nuclear weapons capability – a situation that would be reminiscent of our experience over two decades with North Korea” (our emphasis)…on the opposite end, Mohammed ElBaradei, Egypt’s pro-democracy leader and former director of the United Nations watchdog agency, welcomed the deal in a tweet on his official account:   “After decade of failed policies, world better off w/ Iran deal. Equity, trust building, respect & dialogue R key to any conflict resolution”…what will be interesting to watch in the coming weeks is how the Obama administration, already badly damaged by the botched healthcare roll-out, will try to head off new congressional sanctions against Iran which could jeopardize this high-stakes deal…many in Congress are skeptical, if not outright hostile, to the agreement reached in Geneva – the first since Iran’s nuclear program came under scrutiny in 2003…

Today’s Markets

Asian markets were mixed overnight…China’s Shanghai Composite slid 3 points to close at 2181…the Wall Street Journal reported this morning that yields on Chinese government debt have soared to their highest levels in nearly nine years amid Beijing’s relentless drive to tighten the monetary spigots in the world’s second-largest economy…China’s tolerance for higher financing costs comes amid a broad effort to lessen the economy’s dependence on cheap credit and to rein in the riskiest types of lending…

Japan’s Nikkei average, meanwhile, fell 104 points to finish at 15515 after hitting its third consecutive six-month high yesterday…minutes from the Bank of Japan’s October meeting showed some members saw downside risks to the economy, underscoring pessimism within the board on achieving its 2% inflation target…

European shares were down modestly today…

In New York, the Dow is up 27 points through the first hour of trading…U.S. consumers’ confidence in the economy fell in November to the lowest level in seven months, as Americans expressed more concerns about hiring and pay increases in coming months…the Conference Board reported that its index of consumer confidence dropped to 70.4 in November from a revised October reading of 72.4 in November…confidence has now fallen for three straight months after reaching a five-year high of 82.1 in June…meanwhile, the permits for future U.S. home construction rose to their highest level in nearly five-and-a-half years in October, suggesting the housing market recovery remained intact despite recent signs of slowing down…the Commerce Department said this morning that building permits jumped 6.2% to a seasonally adjusted annual rate of 1.03 million units…that was the highest rate since June, 2008…permits increased 5.2% in September…

The TSX is down 44 points as of 7:30 am Pacific…the Venture, meanwhile, is off a point at 928…

“It takes courage, but this is the time to buy” Gold and Gold stocks, Adrian Day, founder and president of Adrian Day Asset Management, advised attendees at the Metals & Minerals Investment Conference in San Francisco yesterday as reported by Mineweb’s Dorothy Kosich this morning (www.mineweb.com)…right now, he observed, a “once in a decade opportunity” exists tobuy both physical Gold and Gold stocks…

Detour Gold (DGC, TSX) is down for the 7th day in a row…CEO and founder Gerald Panneton resigned yesterday after a weekend discussion with the company’s board of directors…Detour’s problem is quite simple – it has a massive deposit (Detour Lake) in northern Ontario (Canada’s biggest Gold mine), but it’s producing Gold at too high of a price…the company will continue to optimize the operation to reach nameplate capacity of 55,000 tonnes per day, but all-in sustaining costs for next year were recently projected to be between $1,150 and $1,250 per ounce (other companies of course face a similar problem)…at $3.50 as of 7:30 am Pacific, DGC has lost nearly 90% of its value this year…in May, billionaire investor John Paulson’s hedge fund put $153 million into the company…

Venture 3-Month Daily Chart

The Venture’s strong support was on display again yesterday as the Index held above 925 despite the early sell-off in Gold…below is a 3-month daily chart from John…the Slow Stochastics indicator (%K has broken above %D) suggests important support should hold this week, though volumes will drop off due to the U.S. Thanksgiving holiday Thursday…

LX Ventures Inc. (LXV, TSX-V) Update

A Fibonacci support band (retracement levels between 53 and 63 cents as outlined in John’s chart yesterday) was a valuable guide with LX Ventures (LXV, TSX-V) yesterday which dipped as low as 58 cents intra-day before reversing and finishing up 7 cents at 74 cents…as of 7:30 am Pacific, LXV is up another 6 cents at 80 cents – closing in on the second Fib. target level of 89 cents…below is an updated 2.5-year weekly LXV chart…

Global Cobalt Corp. (GCO, TSX-V) Update

Global Cobalt (GCO, TSX-V) continues to drill its Karakul Cobalt Project in Russia (a third rig was added just recently), while the stock continues to consolidate within a bullish ascending triangle…in the 3-month daily chart below, you can see how GCO has been testing the upsloping support line of the triangle…RSI(14) is now moving up from a bullish “W”, so this is looking very positive despite this morning’s minor weakness…as of 7:30 am Pacific, GCO is down a penny at 16.5 cents…

Brigus Gold Corp. (BRD, TSX)

Brigus Gold (BRD, TSX-V) continues to build a strong foundation in the immediate vicinity of 70 cents, setting the stage for what we believe could be a fresh move higher by year-end – especially with underground drilling continuing at the Black Fox Mine where a new zone of high grade is being outlined right below the existing resource…BRD is off 4 cents at 66 cents as of 7:30 am Pacific…below is a 3-year weekly chart from John…BRD has a rising 100-day moving average (SMA) not indicated on this chart at 62 cents which provides additional support during this consolidation period…

Note: John, Terry and Jon do not hold share positions in DGC, LXV, GCO or BRD…

Gold has traded between $1,226 and $1,240 so far today…as of 5:15 am Pacific, bullion is off $14 an ounce at $1,229 after enduring its biggest weekly fall in two months last week…Silver is down 16 cents at $19.67 (updated charts at bottom of today’s Musings, strong support for Silver at $19.50)…Copper is off a penny at $3.19…Crude Oil is $1.32 lower at $93.52, thank to the “historic” 6-nation deal with Iran that we’ll comment about tomorrow, while the U.S. Dollar Index is up one-fifth of a point at 80.92…

Frank Holmes, in his weekly Investor Alert at www.usfunds.com, commented:  “Citi Research, in its annual commodities forecast for 2014, suggests that we will have strong physical buying (much from Asia) over the next year, limiting the downside for Gold prices. However, the western buyers who are getting out of the market will likely continue to do so. Citi Research specifically pointed to two reasons why these buyers are getting out of the Gold market: 1) Inflation concerns and expectations have all but evaporated, and 2) The opportunity cost of holding Gold as opposed to other assets is high. As a result, we are seeing funds moving out of Gold and into other asset classes”…

Barclays is expressing a tone of optimism regarding base metal prices…“With LME inventories for most base metals either flat or falling, Chinese demand surprising to the upside, and market balances tightening, the recent move in base metals prices has little to do with fundamental signals, in our view,” the bank says. “As such, we caution against getting too bearish on the sector at these levels. Nickel and aluminum prices have sunk to close to the year’s lows and we see limited downside from here. Prices for these metals are already eating so far into industry cost curves that production cuts are beginning to address surpluses, and in the case of aluminum, are close to moving the market into a deficit.”

Updated CDNX 3-Year Weekly Chart

The Venture weathered the storm of a $46 drop in the price of Gold last week, and its three-year weekly chart continues to have a bullish overall tone to it with RSI(14) still slowly climbing an uptrend line…the Index’s long-term downtrend line, which was finally overcome last month, continues to provide support which is also very encouraging…the Venture’s rising 100-day moving average (SMA) is giving the Index additional much-needed support, especially given the time of the year…the type of pattern that we see here suggests the Venture is on its way to pushing through critical resistance in the 970’s within the next several weeks in what could be an impressive year-end finish if there’s indeed a breakout at that time…it’s interesting to note that since late June, the Venture has actually outperformed both Gold and the TSX Gold Index…this sends a message that Gold’s slide is nearing an end though a new low in bullion is possible first…the Venture is a reliable leading indicator – keep in mind, it topped out in 2011 six months ahead of bullion…likewise, it may have found a bottom in late June at 859 – six months or more ahead of a final low in Gold…we’ll see what happens but there are good reasons for optimism right now…

U.S. Dollar Index 2.5-Year Weekly Chart

How the greenback performs over the coming weeks will provide strong clues as to what’s in store for the Venture…the Dollar Index recently has been trading between strong support at 79 and resistance around 81…however, the drop below a long-term uptrend line in September as shown below, combined with a 200-day SMA that has flattened out and is threatening to reverse to the downside, leads us to believe that the Dollar Index could be headed toward rough waters – but it’s still premature to draw that conclusion…the next few weeks, especially following the mid-December Fed meeting, should be very telling, so it’ll be important to follow the Dollar Index closely…

Today’s Markets

Japan’s Nikkei average surged another 237 points or 1.5% overnight to close at 15619, a new 6-month high and just 323 points shy of last May’s 5.5-year peak of 15942…China’s Shanghai Composite slid 10 points to finish at 2186 after surging 3% higher last week…

European shares are up moderately in late trading overseas…

Stock index futures in New York as of 5:15 am Pacific are pointing toward a positive open on Wall Street…the S&P 500 closed above 1800 for the first time ever last week, while the Dow has strung together its best weekly winning streak (seven) in nearly three years…

The TSX begins the new week at 13478 while the Venture, despite some weakness in Gold and Oil this morning, will try to build on last week’s mid-week reversal to the upside…some tech deals of course are doing very well at the moment and John has an updated chart this morning on social media darling LX Ventures Inc. (LXV, TSX-V)…we also update Magor Corp. (MCC, TSX-V) which has been flying mostly under the radar but posted a nearly 30% gain last week…the strategy in the resource area is to focus on those companies that are financially strong, active, and have the potential to seriously take off over the next month or two on news and a rebound in that sector…Garibaldi Resources Corp. (GGI, TSX-V) is one of those…

Garibaldi Resources Corp. (GGI, TSX-V) Update

The GGI rig keeps turning in Mexico, and that’s not only great news but one more reason we’re so excited about this company…there were a multitude of reasons why we brought GGI to our readers’ attention last June beyond just the potential of the company’s Grizzly Property in the Sheslay Valley, an area that has indeed emerged in our view as the #1 exploration hotspot in B.C.’s “Golden Triangle”…the Sheslay Valley will heat up immensely and leave the North ROK discovery to the east in the dust…at the moment, what we see unfolding imminently in Mexico for GGI is a bountiful harvest from the seeds that have planted recently (La Patilla) and over the last few years at the Tonichi, Iris and Rodadero projects…you like high-grade? – GGI has it…you like constant drilling and exploration excitement? – GGI has it…you like a company with cash and working capital? – GGI has it…you like an exploration company generating some cash flow? – GGI has it…you like a company with no warrants and virtually no share dilution since 2009? – GGI is one of the few that can claim that…

The GGI chart speaks volumes…John has gone back 10 years in this monthly chart, and the pattern is astonishingly similar to early 2009 when the stock was in the beginning stages of a dramatic move…currently supported by a rising 200-day SMA at 9 cents, GGI has also formed a bullish horizontal flag since July between 9 cents and 15 cents…the 9 to 10 cent area is the “sweet spot” for accumulation, and we anticipate a strong finish to the 2013 calendar year given this technical picture and the fact that GGI will be drilling not one but two properties before the end of December as noted in the company’s last news release…

There aren’t many Venture companies with rising 100, 200 and 300-day moving averages – GGI is part of that select group…

Garibaldi’s La Patilla Gold Property was acquired earlier this year for one specific purpose – to give the company potential near-term additional cash flow (GGI is already generating royalty income from the exploitation of near-surface coal seams by a private Mexican company at Tonichi)…La Patilla is a relatively small property but highly strategic as the extent of artisanal mining going back decades demonstrates the opportunity to quickly confirm enough shallow mineralization (within 25-50 metres) to literally bring in an excavator and haul material out…Dr. Craig Gibson, who’s got 20+ years’ experience in Mexico with a distinguished track record there, didn’t bring this property to Garibaldi without good reason…GGI hasn’t had to do a significant financing since 2009 because of previous success in Mexico (Temoris) – La Patilla may make it possible to go another several years without a major financing, and provide the funds to attack the Grizzly in a major way…a reader pointed out to us that GGI has posted about a dozen pictures of La Patilla on its web site, and indeed the mineralization is clear to see…this could get interesting…the attention artisanal miners have given to La Patilla tells us the grade potential is strong…

Meanwhile, at Tonichi, GGI recently reported the discovery of a supergene zone in the last hole completed at the Locust target, and diamond drilling quickly resumed to follow up on that…in the context of Au-Cu porphyry systems, especially in this area, an intercept of 104.6 metres grading 0.24 g/t Au and 0.16% is highly significant…if you want to know what can happen when you drill a little deeper into something like this, just check out what occurred with Barisan Gold Corp. (BG, TSX-V) recently…it hit almost identical length and grades at virtually the same depth at its property in Indonesia, then drilled deeper and hit a whopper of an intercept that quadrupled the value of the stock…where’s there’s smoke, there’s often fire, and GGI has found some serious smoke at Locust…previous drilling at Locust (widely spaced shallow holes) has already outlined a broad envelope of Au-Cu mineralization over a 5 km strike length that appears to be the near-surface expression of an underlying porphyry system…the last hole, MAR-13-02, has put GGI on the edge of that potential system…using its own drill rig, GGI’s exploration costs in Mexico are dirt-cheap…

The bottom line is that GGI is much better positioned than most other junior exploration companies at the moment given activity on the ground, the quality of its properties, its strong working capital position, a stream of income, and a highly favorable share structure with virtually no dilution in nearly five years…the management team is extremely capable, trustworthy, and determined to build shareholder value…

LX Ventures Inc. (LXV, TSX-V)

Newton’s first law – what’s in motion stays in motion until a force stops it…this law of physics can also apply to stocks…LX Ventures (LXV, TSX-V) had a big week last week – it will continue to be volatile but the overall trend remains bullish according to John’s updated three-month daily chart…Fib. retracement levels range from 53 cents to 63 cents (new technical support in that range), and note the new Fib. target level…as always, perform your own due diligence…LX closed Friday at 67 cents, nearly a double for the week…

Magor Corp. (MCC, TSX-V) Update

Tech plays are drawing a lot of investor interest these days, and one that we continue to be very excited about at BMR is Magor Corp. (MCC, TSX-V) which has a formidable team behind it and a product that has the potential to really catch fire…MCC jumped 28% last week, closing Friday above resistance at 40 cents…this breakout requires confirmation today as shown in John’s 6-month daily chart…

While MCC faces immediate resistance at the 50-cent Fib. level, the potential of share price appreciation over the coming months is truly phenomenal if the company’s launch of its Aerus cloud-based services is successful…they also now have a joint venture to sell and market their products in China…Magor has raised more than $7.5 million since going public in March of this year (including its IPO), and that’s because of the strength of the people behind this deal and the quality of their software solutions…

MCC President and CEO Mike Pascoe is well known for his ability to build shareholder value in the telecommunications industry…he has led several very successful deals, recently and in the past, including of course Newbridge Networks which was bought out by Alcatel for $10 billion in 2000…Sir Terry Matthews is the Chairman of Magor and his record is impeccable – he founded Newbridge and co-founded Mitel…he’s also the founder and current Chairman of Wesley Clover, an investment vehicle and holding company that has interests in a broad range of next-generation technology companies, real estate, hotels and resorts…Wesley Clover also holds a sizable chunk (approximately 30%) of Magor…

Magor – Taking Video Conferencing To The Next Level

Magor could be well on its way to changing the landscape of video conferencing and collaboration…they are a serious potential “disrupter” in this industry as they’ve eliminated the expensive infrastructure currently used by many of their competitors…quite simply, traditional video conferencing cannot provide Magor’s level of interaction combined with its clear, high-definition video on the Internet…they’ve managed to create an environment for their users so that they feel they’re communicating and working as if they were sitting beside each other in the same room – even though they’re in different cities or countries…it’s an amazing system and we’ve seen it in action…

Magor’s first seven months as a publicly traded company haven’t been easy, at least for investors – the stock slipped from a high of 69 cents, shortly after it started trading, to an October low of 23.5 cents before starting its rebound…in its fiscal year ending April 30, Magor reported a net loss of $8.5 million but Q4 revenues grew substantially to $847,000 – nearly half of the total for the entire fiscal year ($1,964,000)…the loss was due to increased operating expenses in the areas of sales, marketing, and research and development as the company continued to prepare for the launch of its Aerus cloud-based services this quarter…it takes money to roll these things out, and we believe Magor has made wise use of shareholder funds so far…there are challenges and risks, of course, but MCC’s strategy has a great chance of paying off big-time…

Aerus – Magor’s Catalyst?

The next few quarters are going to be key for Magor…Aerus enables people to engage collaboratively in high-quality visual conversations by simultaneously sharing, viewing, and editing relevant material on desktops, laptops, tablets, smartphones, whiteboards and other devices…Magor has been successful at securing requests for service trials with more than 20 carriers and solutions integrators around the globe, and the list continues to grow…how these “service trials” work out is obviously going to be key…

“Aerus is looking very strong as the traction with carriers and service providers at this stage is significantly exceeding our expectations,” stated Pascoe in a news release September 26…in order to accelerate the growth opportunity associated with Aerus, Magor recently completed a $1.5 million financing at 25 cents which also attracted some new institutional investors to the story…

Interestingly, Magor also appears to be making some inroads into China – the company announced Sept. 27, without going into details, that it has entered into a “joint venture agreement” with 3 Chinese parties – Harbin Venture Capital Management Co. Ltd., Harbin Aobo Venture Capital Management Co. Ltd., and Harbin Kaifu Investment Consulting Co. Ltd…

Effective software solutions often have high profit margins…if the Aerus launch is relatively flawless and Magor can gain the kind of market penetration and traction it expects with this technology, then MCC has huge upside potential from current levels over the next several quarters given Friday’s 43.5-cent close and total market cap of $22.5 million…MCC now has approximately 52 million shares outstanding…if Aerus succeeds the way Pascoe and others believe it can, MCC could easily command a much higher market cap…

Silver Short-Term Chart

Silver has slipped into oversold territory with RSI(14) now at just 27% on the six-month daily chart…expect support at $19.50 to be tested this week…

Silver Long-Term Chart

Sell pressure has been dominant in Silver most of this year, and RSI(2) is now once again below 20% which is typically a time when it’s best to be a buyer…Silver has powerful support in the immediate vicinity of $20 as shown in this 11-year monthly chart…

Note: Both John and Jon hold share positions in GGI.  Jon also holds a share position in MCC.

TSX Venture Exchange and Gold

The Venture dipped as low as 912 intra-day Wednesday but showed its underlying technical strength by bouncing back to close Friday at 932, just a 2-point loss for the week despite a significant drop ($46) in the Gold price (the TSX Gold Index was down nearly 7%).  Over the last five months, the Venture has outperformed both bullion and the TSX Gold Index – an important pattern change that suggests there are better days ahead for the yellow metal in 2014.  John’s three-year weekly CDNX chart, which we’ll be posting tomorrow morning, continues to show a very encouraging trend which leads us to believe that the anxiously-awaited confirmed breakout through the 970’s will occur by the end of December, setting the stage for a strong start to 2014.

The Venture broke above an important long-term down trendline in late October. Since then it has been testing that trendline as new support, which is to be expected.  The 100-day moving average (SMA) has also ended a nearly year-long decline by reversing to the upside, providing this market with additional support.  At the same time, we’re seeing weakness in the U.S. Dollar Index which fell below an important long-term uptrend on its weekly chart in September.  The Venture and the Dollar tend to go in opposite directions.  The next four to six weeks will be very interesting to see if these trends hold up and confirm.

Below is a three-month daily CDNX chart from John.  The Slow Stochastics indicator, with %K on the rise and breaking above %D, is a good sign for the coming week.

The Seeds Have Been Planted (And Continue To Be Planted) For The Next Big Run In Gold Stocks

There’s no better cure for low prices than low prices.  The great benefit of the collapse in Gold prices this year is that it forced producers (at least most of them) to start to become much more lean and mean in terms of their cost structures. Producers, big and small, have started to make hard decisions in terms of costs, projects, and rationalizing their operating structures.  Exploration budgets among both producers and juniors have also been cut sharply.  In addition, government policies across much of the globe are making it more difficult (sometimes impossible) for mining companies to put Gold (or other) deposits into production, thanks to the ignorance of many politicians and the impact of radical and vocal environmentalists.  Ultimately, all these factors are going to create a supply problem – think about it, where are the next major Gold deposits going to come from? On top of that, grades have fallen significantly just over the past decade.

It doesn’t take a rocket scientist to figure out that the next huge bull market in Gold stocks is just around the corner due to demand-supply dynamics, much leaner producers who will suddenly become earnings machines, and a junior market that will be healthier simply because a lot of the “lifestyle” companies sucking money out of investors will simply disappear or get taken over by individuals or groups who are actually competent and serious about building shareholder value.   A healthy “cleansing” in the market has been taking place.  As this continues, more and more seeds are being planted for an incredible future move in well-managed Gold producers and explorers that could make the dotcom bubble look like a tea party.  As for the juniors, focus on the small universe of companies that have the ability to execute both on the ground and in the market.

Gold

Gold got knocked down $46 an ounce last week to finish at $1,244.  Frank Holmes, in his weekly Investor Alert this weekend, referred to “organized price manipulators” in the Gold market who “are still trying to panic investors into selling off their Gold holdings.”

Below is a 9-month daily chart from John.  Two immediate areas of support to note – $1,240, and $1,200 to $1,215.  The late June low, of course, was $1,179, so a re-test of that support certainly can’t be ruled out.  In what we would interpret as a bullish contarian sign, Gold analysts surveyed by Bloomberg News are the most bearish since late June – 19 analysts expect prices to drop this coming week, nine are bullish and three neutral.  That’s the largest proportion of bears since June 21 – just as Gold was about to hit its yearly low.

Silver fell 95 cents last week to close at $19.83 (John will have updated Silver charts tomorrow morning as usual).  Copper added 3 cents to finish at $3.20.  Crude Oil reversed, gaining $1 a barrel to close at $94.84.  The Dollar Index, meanwhile, again couldn’t sustain a move above 81 and finished the week down more than one-tenth of a point at 80.65.  The Index faces considerable overhead resistance as witnessed the past couple of weeks.

The “Big Picture” View Of Gold

As Frank Holmes so effectively illustrates at www.usfunds.com, the long-term bull market in Gold has been 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, has had a huge impact on bullion.  Despite this year’s drop, the fundamental long-term 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, a Fed balance sheet now in excess of $3.5 trillion and expanding at $85 billion a month, money supply growth around the globe, massive government debt from the United States to Europe, central bank buying, flat mine supply, physical demand (especially from China), emerging market growth, geopolitical unrest and conflicts…the list goes on.  However, deflationary concerns around the globe and the prospect of Fed tapering by the end of the year (not likely now) had a lot to do with Gold’s plunge during the spring below the technically and psychologically important $1,500 level, along with the strong performance of equities which drew money away from bullion.  June’s low of $1,179 may have been the bottom for bullion – time will tell.  We do, however, expect new all-time highs as the decade progresses.  There are many reasons to believe that Gold’s long-term bull market is still intact despite this major correction from the 2011 all-time high of just above $1,900 an ounce.