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Gold hit a three-and-a-half week high of $1,324 overnight but has since retreated…as of 8:15 am Pacific, bullion is down $2 an ounce at $1,311…Silver is off 2 cents at $19.93…Crude Oil is 4 cents lower at $97.30 while the U.S. Dollar Index has declined one-fifth of a point to 81.35, under pressure from by a 14-month low in 10-year U.S. Treasury yields…

Geopolitcal “hot spots” from the Ukraine to Iraq to Israel are keeping a floor under the Gold price and generating some rallies, but a clear pick-up in physical demand will be needed in order to push bullion through a stiff resistance band between $1,320 and $1,330…Gold reacted within that band again this morning…

U.S. President Barack Obama has authorized air strikes in Iraq, adding to simmering international tensions…Obama said in an address last night that he had authorized targeted strikes to protect the besieged Yazidi minority and U.S. personnel in Iraq, after the Iraqi government requested help…sensible move on the part of Obama who typically shivers even at the idea of deploying American military assets and force…

Meanwhile, Israel has resumed strikes on targets in Gaza in response to rocket fire from the area shortly after the expiration of a cease-fire between Israel and the terror group Hamas, Israeli military officials said today…the move came after military officials said Gaza militants had fired a barrage of at least five rockets at southern Israel shortly after the three-day truce between Israel and Hamas expired…the Israeli military said it responded with strikes “across Gaza”…

Israeli Prime Minister Benjamin Netanyahu said today in an exclusive interview with Fox News’ Sean Hannity that the battle against Islamic militants “will soon come to a theater near you and it has to be stopped now.”  Netanyahu told Hannity that the threat from Islamic militants is real, and will spread to other countries if the terrorists are not stopped.  “This is a danger I’ve been pointing to, it’s not a spin, it’s not a whim, it is a clinical diagnosis of a pathological movement that is sweeping our area but will soon come to a theater near you and it has to be stopped now,” he declared.  Netanyahu said “this great battle” is heightened by the fact that the militants are under Iran’s “nuclear umbrella.”

Russian Cyber Attack

The Financial Times reported this morning that dozens of computers in the Ukrainian prime minister’s office and at least 10 of Ukraine’s e,bassies abroad have been infected with a virulent cyber espionage weapon linked to Russia…the cyber attack has also affected embassies in eastern Europe of at least nine countries including Germany, China, Poland and Belgium…sensitive diplomatic information has been made available to the perpetrators of the attack as a result, according to the story by FT defence and security editor Sam Jones…

Today’s Equity Markets

Asia

Japan’s Nikkei took a big hit overnight, falling 454 points or 3% to close at its lowest level since May 30, 14778…the yen strengthened to a two-week high after data showed the economy’s June current account logged a deficit for the first time in five months…as expected, the Bank of Japan left monetary policy steady and offered a gloomier outlook for exports and industrial output…

China’s Shanghai Composite gained 7 points overnight to finish higher for the week at 2194…the world’s second-largest economy saw exports surge 14.5% on year, blowing past expectations for a 7.5% rise, while the surplus rose to $47.3 billion, compared to forecasts for $27 billion…

Europe

European markets were down modestly today…

North America

The Dow is up 74 points as of 8:15 am Pacific…

Below is an updated Dow chart from John showing oversold conditions with the Index having perhaps found support at its rising 200-day moving average (SMA) at 16343…

One useful indicator John often tracks is the 25-day SMA for the RSI(7) in the Dow…a drop below the 25-day SMA typically leads to some short-term weakness…in the case now, a very wide gap has opened up between the RSI(7), which has hit extreme oversold levels here in early August, and the 25-day SMA…an imminent turnaround appears likely based on this chart…

The TSX is up 20 points as of 8:15 am Pacific…the Canadian economy added an embarrassing number of jobs last month – a paltry 200, falling spectacularly short of expectations…economists had expected the economy to bounce back from a decline of 9,400 jobs in June by adding around 20,000 new jobs…Canada’s unemployment rate dropped one-tenth of a point to 7.0% for the month, but that’s only because 35,400 people stopped looking for work…

The Venture is off a point at 995 as of 8:15 am Pacific…

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

BMR has conducted an extensive interview with Garibaldi Resources Corp. (GGI, TSX-V) President and CEO Steve Regoci, and we’ll be posting Part 1 of that interview over the weekend or by Monday morning…the interview covered everything from Rodadero and the discovery at Silver Eagle, to progress on the ground at the Grizzly Project in the Sheslay district…there is clearly much more happening behind the scenes in this district than most investors would discern, based on the lack of news flow from all parties the last couple of months…it almost seems like a poker game up there – cards are being held very “close to the chest”…that’s a positive sign, we suspect…

With regard to Silver Eagle, not only is Phase 1 drilling now attempting to immediately expand this high-grade discovery to the south where it appears to widen – very prospective surface exposures continue for at least several hundred metres along a ridge to the south – but Regoci sees something potentially hugely significant unfolding here given the combination of hyperspectral data, high-grade silver and gold numbers from sampling at targets south, southeast and east of Silver Eagle, and the first six drill holes at Silver Eagle…

Regoci:  “There’s no doubt we’ve had numerous discussions about whether the proximity of these targets and the nature of the mineralization – large zones of silicification that are evident at surface and in drill core – it may very well be, from looking at the faults and the cross-faults here, that these separate targets – at least some of them – could be the surface expression of much larger robust system.  We’re going to follow up on that.  It looks like the entire project, from the surface sampling we’re getting and the drill results at Silver Eagle, the first target we’ve successfully drilled into with Phase 2 now starting, this is going to have pretty long legs.”

Imperial Metals Corp. (III, TSX) Update

Imperial Metals (III, TSX) is bouncing back this morning with the stock up 46 cents at $10.18 as of 8:15 am Pacific…the water quality near the site of Imperial’s tailings pond breach meets drinking water standards (Jon says there’s a chance it could taste better and be healthier than his tap water in Montreal), according to results of a preliminary test released yesterday by the B.C. Ministry of the Environment…the long-term impact, however, remains unknown, and a water-usage ban will remain in place in certain areas until more testing is completed…while this event was clearly unfortunate and avoidable, media hysteria (irresponsibility) and fear-mongering by some media and environmental and native groups have not been helpful…we’ll see how things play out over the course of the next week but this spill may not be the “disaster” that many observers, jumping to very early conclusions, first predicted…

Imperial’s Mount Polley incident should not blemish what’s a remarkably strong record of performance for mining in B.C., environmentally and economically…ultimately, global markets and social rhythms will determine the feasibility of mining projects in this province, but the statistics reveal an industry that is growing, continues to produce immense wealth and is increasingly responsible – Monday’s incident notwithstanding, though certain groups have attempted to exploit the issue to advance their own agendas…

InZinc Mining Ltd. (IZN, TSX) Update

InZinc Mining (IZN, TSX-V) has announced it has arranged a non-brokered private placement through mostly insiders to raise $500,000 at 18 cents a share…closing is expected on or before August 20…

InZinc is an emerging mid-tier Zinc producer with its 100%-owned West Desert Project in Utah…a positive PEA was released in May, and excellent opportunities for resource expansion exist…importantly, the project benefits from all-weather road access, on-site grid power, proximity to natural gas pipelines and is just 90 km from multiple transcontinental rail networks servicing western U.S. ports and major North American markets…

Technically, the IZN chart is quite amazing – a classic “cup with handle pattern” with an as-yet unconfirmed breakout the top of the top…looking very bullish…IZN closed at 21 cents yesterday…

Discovery Ventures Corp. (DVN, TSX-V) Update

The combination of Discovery Ventures’ (DVN, TSX-V) Willa high-grade Gold-Copper deposit in southeastern B.C., and the modern mine complex it has acquired just 85 miles haulage distance away, has allowed Discovery to attract the interest of some serious commodities players in the U.S. as evidenced by DVN’s recent signing of a non-binding term sheet for a $12.1-million (U.S.) Gold pre-payment agreement with a New York financing firm…the firm’s interest in the project is understandable…

We’ve seen the Max mine and mill facilities and they are first-rate…Discovery has pulled off a major coup with that purchase agreement for only about $6 million as it makes the potential economics of the Willa deposit as a modest Gold-Copper-Silver producer unusually robust…we’ll have a lot more on Discovery in the weeks ahead…as we’ve stated numerous times, it is very worthy of our readers’ due diligence…

DVN, which has also applied for a listing on the OTCQX to increase exposure in the U.S., continues to look very solid technically with a confirmed breakout in June above triangle resistance at 23 cents…that area has since held as support…the primary trend is clearly bullish with rising long-term moving averages…DVN closed at 25 cents yesterday…

Highbank Resources Ltd. (HBK, TSX-V) Update

Highbank Resources (HBK, TSX-V) has been a big winner for some of our readers since we first mentioned the company when it was trading in the mid-teens in March…a consolidation phase has set in after the stock climbed as high as 38 cents intra-day July 21, though it has yet to close at or above the Fib. 35-cent measured resistance that John pointed out…Fib. levels are indeed important to watch (support at 27 cents)…RSI(14) on this 10-year monthly chart is in overbought territory at 74% – potentially it could remain above 70% for a period of time but eventually there will be an unwinding of that condition…the company came out with an update this morning on progress at its Swamp Point North aggregate project near Stewart which is moving closer to production…

Note:  John and Jon both hold share positions in GGI.  Jon also holds a share position in DVN.

Gold has traded between $1,301 and $1,310 so far today after yesterday’s strong rally…as of 7:45 am Pacific, bullion is unchanged at $1,306…Silver is down 9 cents at $19.92…Copper has gained 2 pennies to $3.18…Crude Oil is flat at $96.91 while the U.S. Dollar Index has jumped more than one-tenth of a point to 81.58…

Deutsche Bank’s global head of commodity research, Michael Lewis, summed up the current Gold market quite effectively with this observation yesterday:   “There are a lot of crosswinds going on for Gold.  You have long-term U.S. real yields going down to new lows and geopolitics, which should be supportive, but on the flip side you have dollar strength coming through and equities hitting new highs.”

Russia today banned most food imports from the West – specifically, the U.S., Canada, the European Union, Australia and Norway, in retaliation for sanctions over  Ukraine  – a sweeping move that will cost Western farmers billions of dollars but could also lead to empty shelves in Russian cities…the decision shows that President Vladimir Putin has no intention of bowing to Western pressure over Ukraine…it also demonstrates that the Kremlin is prepared to inflict damage on Russia while pursuing its agenda in Ukraine…

Rio Tinto, he world’s second biggest mining company, reported today a 21% profit increase and a higher dividend for the half-year to June 30, with the promise of more to come…

Today’s Equity Markets

Asia

Asian markets were mostly lower overnight, though Japan’s Nikkei bucked the trend with a gain of 73 points to snap a 5-session losing skid…China’s Shanghai Composite fell 30 points, its worst day since mid-June, to close at 2188…

Europe

European markets are down slightly in late trading overseas…ECB President Mario Draghi today said it’s too early to judge whether Russia’s sanctions on EU exports will have a significant impact on the euro zone’s modest economic recovery…he indicated that unless there’s an escalation in the exchange of sanctions between the bloc and the Kremlin, the recovery is likely to continue… The ECB announced no change today with its monetary policy…Dragi stated that key interest rates will remain at their current level for an extended period of time, adding that the ECB expects a gradual upward movement in inflation toward levels closer to 2%…

North America

The Dow is up 44 points as of 7:45 am Pacific…the TSX is down 17 points while the Venture is up a point at 993…

Source Exploration Corp. (SOP, TSX-V) Update

Strong results reported yesterday by Source Exploration (SOP, TSX-V) from Phase 2 drilling at the Santa Cruz target (Las Minas Project) in Mexico…SOP intersected long near-surface intervals of Gold, Silver and Copper mineralization in four out of six diamond drill holes, including 3.57 g/t AuEq over 99 metres in LM-14-SC-08…that’s the best hole drilled by Source so far at Las Minas…Santa Cruz, one of six priority drill targets at Las Minas, forms part of the El Dorado corridor skarn zone that has been intersected by diamond drilling for approximately 840 metres along strike and 400 metres down dip, with mineralized drill intercepts varying from 20 to 245 metres in length…

Results from other zones are pending, and planning is under way for the next phase of drilling…

Source climbed as high as 15.5 cents intra-day yesterday before closing up a penny at 14 cents on total volume (all exchanges) of 842,000 shares…as expected, powerful support held around 10 cents the last couple of months with Source and the long-term trend remains very bullish…technically, SOP’s immediate challenge is to overcome Fib. resistance at 17 cents…

Kaminak Gold Corp. (KAM, TSX-V) Update

The chart for Kaminak Gold (KAM, TSX-V) continues to look highly interesting following a breakout earlier this year above a long-term downtrend line, and the completion of an inverted head and shoulders bottom…

This is almost too obvious – watch for a potential breakout above the neckline…if such a scenario were to unfold, KAM would likely accelerate very quickly to the indicated measured Fib. resistance…

Kaminak recently closed a $13.5 million financing (Ross Beatty was one of two placees) and also commenced a feasibility study for its Coffee Gold Project in the Yukon…results are pending from the 2014 Phase I drill program which has tested some of the greater than 20 kilometres of Gold-in-soil anomalies outside of the current resource area…depending on the numbers from Phase 1, a Phase 2 drill program is possible this quarter…  

Niogold Mining Corp. (NOX, TSX-V) Update

Trading at its highest levels since the beginning of 2013, Niogold Mining (NOX, TSX-V) continues to look strong…recently it staged a confirmed breakout above resistance at 27.5 cents following news that Osisko Gold Royalties Ltd. (OR, TSX) will acquire 14 million flow-through shares of NOX through a private placement at 35 cents per share…

As we pointed out in late May, NioGold commenced a 1,400-metre drill program on its recently acquired H zone, now consolidated as part of the company’s Malartic Block Property along the Cadillac Trend…drill results are pending…the Marban Block already has three deposits (Marban, Kierens and Norlartic) which collectively host estimated measured and indicated resources of 1.5 million ounces of Gold (32,127,000 tonnes grading 1.48 g/t Au) plus inferred resources of 600,000 ounces (16,478,000 tonnes grading 1.13 g/t Au)…

Richmont Mines (RIC, TSX) Update

Nice to see a turnaround in the fortunes of Richmont Mines (RIC, TSX) – good sign for the sector overall – which is up 24% already this month (through yesterday with more gains this morning) after the company reported better-than-expected Q2 results…those included record quarterly revenues ($39 million) and operational cash flow…net earnings were $4.7 million vs. a net loss of just over $1 million for the same period in 2013…

Technically, RIC appears to be forming a cup-with-handle pattern which means a modest near-term pullback could be in the cards with Fib. support beginning in the high $1.60’s…the primary trend has clearly changed with the 200-day SMA (not indicated on this chart) reversing to the upside after being in decline for more than two years…

Note:  John, Jon and Terry do not hold share positions in SOP, KAM, NOX or RIC.

U.S. Dollar Index Long-Term Chart

The recent strength of the U.S. Dollar Index has been impressive but the long-term trend is still bearish which is obviously positive for Gold…while the Dollar Index has broken above a trading band between 79 and 81, it’s near the top of a symmetrical triangle where very stiff resistance can be expected…the Index is also approaching RSI(14) trendline resistance…a sustained move above the triangle (through 84-85) would be a game-changer…

U.S. Dollar Index Short-Term Chart

This 2.5-year weekly chart shows RSI(14) breaking out above a downtrend line beginning in June, and this gave the greenback some much-needed momentum…Fib. resistance levels to watch are 81.76 (50%) and 82.40 (61.8%)…

Note:  John and Jon both hold share positions in GGI.

7:30 pm Pacific

GGI Steps Out And Connects At Silver Eagle, District Potential Grows

What started as a seemingly innocent wildcat “test” hole a few months ago at Garibaldi Resources‘ (GGI, TSX-V) Rodadero Project in central Sonora State is rapidly evolving into a very intriguing near-surface, high-grade Silver and Gold play focused on a growing package of targets.

A total of nine targets are now clustered within a 30 sq. km area – eight of them, importantly, striking south, southeast and east of a now confirmed Silver Eagle discovery.  This has plenty of potential scale and Garibaldi, to its credit, is attacking this system with vigor (Phase 2 drilling is commencing immediately) even in the midst of the rainy season in Mexico.  GGI just keeps pressing on, sniffing the possibility of a second big find in that country.

From Silver Eagle in the north to La Colorado in the south, from Reales in the west to Rambo in the east, Garibaldi now has an even more compelling early-stage discovery on its hands at Rodadero following the release of additional Silver Eagle drill results and fresh regional geological data after today’s market close.  Garibaldi President and CEO Steve Regoci has agreed to our request for an interview which we expect to be able to post within the next 48-72 hours.

Below is a map of the Rodadero Project taken tonight from the GGI web site, followed by our initial “take” on tonight’s news.

1.  GGI has hit on five out of its first six holes at Silver Eagle, and mineralization is remarkably very shallow – within 50 m of surface, giving this obvious open-pit potential.  Maintaining these grades while building tonnage at this emerging deposit is now key.  Silver Eagle has excellent road and water access, and power lines run right through the target;

2.  In this business, sometimes you’re only as good as your most recent hole.  In this case, SE-14-06 – the farthest step-out from SE-14-01 – has returned the widest mineralized intercept to date (24.4 m near-surface), suggesting (along with SE-14-03) that the system at Silver Eagle is indeed widening to the south after the 7-m bonanza grade section (85 m to the north) found in SE-14-01.  SE-14-06 intersected 104 g/t Ag over 18.93 m between a depth of 27.57 m and 46.5 m;

3.  A whopping 1,935 g/t Ag (62.2 oz/t) beginning at just 4.3 m in SE-14-03 (4.3 m to 5.2 m) underscores Silver Eagle’s powerful combination of impressive grades and very shallow mineralization;

4.  Mineralization remains open in all directions but Silver Eagle to the south and the east looks particularly exciting.  It’s still early, of course, and the geometry of this system has yet to be defined;

5.  Here’s the kicker: 

“Hot spot” hyperspectral remote sensing signatures = (leads to) high-grade surface sampling results = (leads to) high-grade drill intercepts at Silver Eagle.  That has been the pattern so far.  In some cases, drill core is assaying higher than the surface samples.

Surface sampling results are in on three targets immediately east and southeast of Silver Eagle, as GGI reported tonight.  Two dozen samples out of 218 returned Silver values >200 g/t Ag (as high as 8,000 g/t) while, interestingly, 17 returned Gold values of 3 g/t or better (as high as 52.6 g/t).  Average values were 114 g/t Ag and 0.98 g/t Au.

While one has to be cautious due to the inherent biases of sampling, keep in mind that these impressive sampling numbers at Rodadero North coincide with hyperspectral data while drilling has confirmed all surface data so far at Silver Eagle.  The use of hyperspectral remote sensing data is what allowed Garibaldi to cash in on its Temoris option in Mexico in 2009 with follow-up drilling by Paramount Gold & Silver (PZG, NYSE and TSX) resulting in a very significant high-grade discovery that now contains substantial NI-43-101 resources.

No Gold values showed up in surface sampling at Silver Eagle (some minor credits in drill hole SE-14-01) but they are turning up in sampling to the east and southeast of Silver Eagle, plus high-grade Silver.  How important this could be remains to be seen, but Silver Eagle could be just the tip of the iceberg.  And there’s obviously more than just Silver at Rodadero.  The most southerly drilled hole at Silver Eagle so far (SE-14-06) encountered a 4.6-m section of 4.6% Pb.  Could it be a Silver-base metal environment on one side of Rodadero North, striking to the south-southeast from Silver Eagle, and a Silver-Gold system on the other side, also striking to the south-southeast?  We should find out soon enough.  There’s every reason to believe that this is going to get even more interesting.

With a highly capable management and geological team, Garibaldi has demonstrated repeatedly that it can move forward on different fronts at the same time.  The huge advantage with GGI is that it has not one, not two, but three first-rate projects on the go right now, and a proven track record of cost-effective exploration with the ability to convert a project into a reward for its shareholders.  There’s a high probability in our view that Rodadero, La Patilla and the Grizzly will generate some magical moments for GGI in the days, weeks and months to come.  It’s refreshing to see a success story.

Gold has traded between $1,282 and $1,294 so far today…as of 7:45 am Pacific, bullion is down $3 an ounce at $1,285…Silver is off 29 cents at $19.84 (see updated Silver charts below)…Copper has slid 3 pennies to $3.21…Crude Oil has retreated 40 cents to $97.89 while the U.S. Dollar Index keeps charging higher, adding one-third of a point to 81.61…

August has certainly been kind to Silver over the last decade, particularly the last five years with a staggering average monthly return of 10.4% from 2009 through 2013 (last year’s gain was 19.3%)…Silver has finished up seven times in August over the last decade with an average gain of 3.6%…

Bank of America Merrill Lynch has revised higher its 2014 price targets for Gold, suggesting “the worst may be behind” after the sell-off in prices last year…BAML describes a market with reduced investor interest but steady off-take from emerging market nations. “Put differently, as investors put less ounces onto the market, purchases from countries including China and India were sufficient to absorb mine and scrap supply,” BAML says. “We believe that physical demand from emerging markets will gain further clout in the medium-term as countries get more affluent, suggesting the worst may be behind the Gold market.”  The bank gives a Q3 average forecast of $1,300 an ounce, then $1,350 in each of the next two quarters…for now, however, BAMl says “the unfolding normalization of the global macro economy and the implications this has for rates/inflation should continue to provide some headwinds for Gold.”

Today’s Equity Markets

Asia

After a 1.7% move to the upside Monday, China’s Shanghai Composite eased off 3 points overnight to close at 2220…China’s services sector grew at its slowest pace in nearly nine years in July, according to a survey from HSBC/Markit…the services PMI fell to 50 from June’s 15-month high of 53.1…Japan’s Nikkei average fell 154 points overnight to close at 15320…

Europe

European markets are up modestly in late trading overseas, thanks to some positive earnings reports…

North America

The Dow is off 46 points as of 7:45 am Pacific…it reversed intra-day yesterday, erasing a nearly 50-point decline in early trading to finish up 75 points which snapped a four-session losing skid…

Canadian markets are back in business after yesterday’s holiday…the TSX is unchanged at 15215 while the Venture is down 2 points at 999…

Rick Rule On Current Junior Resource Market

Interesting piece from Sprott Global Resource Investments Ltd. a few days ago – “Three Reasons To Start Buying Resource Juniors” from Rick Rule, Chairman and Founder of Sprott Global Resource Investments Ltd.

“In my experience…bull markets begin when the market as a whole exceeds expectations. Since expectations are currently exceedingly low, it won’t take much to beat them. Moves up from lower bases, discoveries, mergers and acquisitions, and particularly the generally low valuations today relative to market norms for the best companies in the sector, all point to a continued uptrend among resource stocks.

“The sector is already so risky that you should try to minimize those risks, not increase them. Bad management teams make the risks of the sector even worse. My friend Doug Casey often says that ‘when the wind is blowing even turkeys can fly.’ The problem though is that the turkeys need to stay fed long enough that they can last until the wind picks up.

“If you took all the juniors together, merging them into a single entity – they would probably lose around $2 to $5 billion a year. Therefore buying the sector as a whole is an excuse to go broke. Meanwhile, the 5 or 10 percent of the best companies in the sector can create such spectacular increase in shareholder value that they add visibility – and sometimes luster – to the overall sector. Confining your portfolio to the best people, the best projects, and the sturdiest balance sheets is not that constraining, but it is critical to maximizing your returns through both upswings and declines in the resource sector.”

Gold Mountain Mining Corp. (GUM, TSX-V)

Interesting news from Gold Mountain Mining Corp. (GUM, TSX-V) late last week regarding its advanced 100%-owned Elk Gold Property near Merritt, a potential open-pit operation…the company resumed a bulk sample test in mid-June, and more than 3,000 tonnes of mineralized material have already been mined and are being trucked on a 24-hour basis to a processing facility…the average grade of the 3,000 tonnes of mined material is approximately 19.1 g/t Au, representing 1,840 ounces of Gold with an attributed gross value of approximately $2.4-million (U.S.) at $1,300 per ounce…the average Gold grade for the bulk sample material immediately adjacent to the exploration drill holes exceeded the average Gold grade for the 13 drill holes by 4.28 times…

The company stated that the higher Gold grades in the mined bulk sample are believed to be due to the significant amount of pyritic gouge material recovered in many areas of the bulk sample pit that may have been lost during diamond drilling…pyritic gouge material can be washed away with drilling mud, and the Gold associated with the pyrite lost in the core sampling process…this hypothesis will be further tested with continued mining, additional sampling and testing of the mineralized bulk sample material…

Gold Mountain acquired a 100% interest in the 16,700 hectare Elk Project from Almaden Minerals (AMM, TSX) three years ago…at the time, a NI-43-101 Technical Report prepared by SRK Consulting gave a resource calculation of 563,000 ounces in the measured, indicated and inferred categories (200,000 tonnes measured at 8.77 g/t Au; 2,000,000 tonnes indicated at 3.82 g/t Au; 1,150,000 tonnes inferred at 7.13 g/t Au) using a 0.5 g/t and 5.0 g/t Au cut-off for in pit and below pit resources, respectively…exploration drilling by GUM since then has added strike length and depth to the known zones, and new Gold-bearing veins have also been discovered…

Below is an encouraging 2-year weekly GUM chart…after declining throughout 2012 and 2013, the 200-day moving average (SMA) flattened out at the beginning of this year and has finally reversed to the upside…chart support at 18 cents…this one has a good chance for a near-term breakout above resistance at 21 cents…GUM is up a penny at 20 cents as of 7:45 am Pacific…

Imperial Metals Corp. (III, TSX) Suffers Tailings Pond Breach

Oops, not good…Imperial Metals Corp.’s (III, TSX) tailings storage facility at its Mount Polley mine in central B.C. has been breached, releasing an undetermined amount of water and tailings in the early morning yesterday (news reports are stating “millions of cubic meters of toxic wastewater” came gushing out)…the cause of the breach is unknown at this time but it has affected hundreds of people living and camping in a small community southeast of Quesnel…

Imperial issued two news releases this morning…the latest one stated that the breach has stabilized…exact quantities of water and tailings discharged have yet to be determined…the tailings are alkaline with an average pH of 8.5 and are not acid generating…the Mount Polley mine has been placed on care and maintenance for now…while the damaged area is relatively small compared with the overall size of the dam, it is not known how long it will take to restore operations…

The accident has also caused a breach in Imperial Metals’ stock price, not surprising since the “fear” factor comes into play in situations like this and panicked investors run for the hills…III is off just over $7 a share at $9.67 as of 7:45 am Pacific (it fell as low as $9.06)…has to be an opportunity there in our view, but Imperial is going to face some challenges from this…

Anyway, below is a link to a video showing the tailings breach…

http://www.mining.com/amazing-aerial-video-of-mount-polley-tailings-breach-76060/

Crude Oil Updated Chart

On this 1-year weekly chart, you can see how WTIC broke below an RSI(14) trendline at the end of June…that was a sign of things to come in the following weeks with Crude now trying to recover from a 6-month low…the good news is, WTIC has plenty of Fib. support in the low-to-mid-$90’s – support it needs to hold…

Short-Term Silver Chart

This 6-month daily chart shows how extreme RSI(2) conditions in Silver persisted for most of June with a healthy unwinding of that overbought situation in recent weeks…in fact, RSI(2) is now in extreme oversold territory at just 4%…a strong Fib. support band between $19.50 and $20.00 is expected to hold…more near-term consolidation is likely before a reversal to the upside this month…

Silver Long-Term Chart

Silver has broken out above one important downtrend line which should now provide strong support…RSI(2) closed last week at 48% – could unwind a little more…

Note how the SS is moving up from a low bullish “W” while the ADX indicator shows the growing potential for a bullish +DI/-DI crossover this quarter…bottom line – Silver looks highly attractive around the $20 level…

Note:  Jon holds a share position in GUM.

TSX Venture Exchange and Gold

Note:  Canadian markets are closed Monday (holiday), so BMR Morning Musings returns Tuesday.

It was a rough week for the broader equity markets – the worst weekly drop for the S&P 500 (2.7%) in two years – and even Gold got knocked down $14 an ounce for the week despite Friday’s surge while Crude Oil (WTIC) was slammed 4.1% – but the Venture found support Thursday and Friday at the 1000 level and closed the week down just 16 points or 1.6% at 1001 (the 38.2% Fib. retracement on the 6-month daily chart you’ll see below).

For the past 15 sessions the Venture has remained within a support band between 1000 and 1020.  As we’ve stated previously, the worst-case scenario for the Venture is a re-test of the 980 area which is the rising 200-day moving average (SMA) and a massive wall of support.  The upside potential in this market as the quarter progresses substantially outweighs the downside risk, in our view.  As long as patient investors remain focused on high quality situations, and see these minor healthy pullbacks for what they are, then wise (not silly) decisions are made during periods of increased volatility (up or down) when a lot of investors make the mistake of becoming slaves to their emotions.

Understand the primary trend, key support and resistance areas, and stay focused on the “Big Picture” which remains very positive for the Venture. Below is the updated 5-year weekly chart with a Gold comparative.  Note the string of higher lows the Venture has made since bottoming at 859 in June of last year.

RSI(14) on this 5-year weekly chart is once again testing the uptrend line (very healthy) which should continue to hold as support after serving as resistance since mid-2011 (major trend change).  A modestly overbought condition in the RSI that emerged in March when the Index hit 1050 has gradually unwound to this new support around 50%.

The Q2 decline that took the Venture to superb support at 968 May 20 came on light volume, and accumulation (CMF indicator) remains steady and strong – the most extended period of healthy accumulation we’ve seen, actually, in a few years.  This is a very bullish dynamic, and includes a recent +DI/-DI crossover.  Those who gave up on this market during the 8% retreat from 1050 made a profound miscalculation.  Astute investors have a great chance to cash in big over the next two to three months in particular before the possibility of a more substantial correction during Q4.

Venture 6-Month Daily Chart

This shorter-term Venture chart shows how a minor correction started in early July when RSI(14) was marginally overbought and then broke below an uptrend line in place since May.  Buy pressure began to decrease and a bearish -DI+DI crossover occurred.  In this kind of scenario, it’s natural for the market to retreat to strong support levels and gather fresh energy for the next wave higher.  Either the 1000 level will hold or the exceptionally solid floor directly beneath it around 980 will keep the primary bullish trend intact.

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 in 2013 is that it forced producers (at least most of them) to start to become much more lean in terms of their cost structures. Producers, big and small, have started to make hard decisions in terms of costs, projects, and rationalizing their their overall operations.  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 carry out exploration or put Gold (or other) deposits into production, thanks to the ignorance of many politicians and the impact of radical and vocal environmentalists (technology has made it easier for groups opposing mining projects to organize and disseminate information, even in remote areas around the globe).   Ultimately, all of  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.

Gold

Gold was smacked down into the high $1,270’s last week, thanks to a slew of economic data including more deflationary signs in the euro zone, but a rally Friday on a weaker-than-expected U.S. jobs report cut the weekly loss to $14 an ounce as bullion finished at $1,294.  Much less economic data will be coming out next week, so bullion may focus more on geopolitical events.  Fib. support ranges from $1,270 to $1,289 while chart resistance bands exist between $1,306 and $1,310, and between $1,320 and $1,330.  A month or so of buy pressure has turned into sell pressure.

A strengthening U.S. Dollar Index has been hurting Gold recently but the Dollar Index at 81.31 is now within a band of Fib. resistance between 81.11 and 82.40.

Silver fell 45 cents last week to close at $20.30 (Fib. support ranges from $19.50 to $20.33).  Copper lost 2 pennies to $3.21.  Crude Oil was off sharply for the week, plunging $4.21 a barrel as it hit a 6-month low.  The U.S. Dollar Index enjoyed another strong week, gaining one-quarter of a point to 81.31.

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 and will continue to support prices.   Despite Gold’s largest annual drop in three decades in 2013, the fundamental long-term case for the metal remains solidly intact based on the following factors:

• Growing geopolitical tensions, fueled in part by a highly dangerous and expansionist Russia under Vladimir Putin, have put world security in the most precarious state since World War II;
• Weak leadership in the United States and Europe is emboldening enemies of the West;
• Currency instability and an overall lack of confidence in fiat currencies;
• Historically low interest rates, a Fed balance sheet at more than $4 trillion (still expanding), and money supply growth around the globe;
• Signs of increasing inflation;
• Continued strong accumulation of Gold by China which intends to back up its currency with bullion;
• Massive government debt from the United States to Europe;
• Continued net buying of Gold by central banks around the world;
• Flat mine supply and a sharp reduction in exploration and the number of major new discoveries

Deflationary concerns around the globe and the prospect of Fed tapering had a lot to do with Gold’s plunge during the spring of 2013 below the technically and psychologically important $1,500 level, along with the strong performance of equities which drew “momentum traders” away from bullion.  The June 2013 low of $1,179 was the bottom for Gold.  Extreme levels of bearishness emerged in the metal last year.  With the long-term bull market remaining intact, we expect new all-time highs in Gold as the decade progresses.  Inflationary pressures should eventually kick in around the globe after years of ultra-loose monetary policy and the reluctance of central banks to increase interest rates.