BullMarketRun.ca

Gold has traded between $1,193 and $1,202 so far today…as of 8:00 am Pacific, bullion is flat at $1,198…Silver is up 17 cents at $16.05…Copper has added 4 pennies to $2.90…Crude Oil, after a volatile day yesterday when it traded in an 8% range, has rallied more than $2 a barrel to $56.25 while the U.S. Dollar Index has climbed one-fifth of a point to 89.41…

Commodity analysts at Capital Economics are among the most bullish among banks in their outlook for the Gold price in 2015…they believe that bullion still has plenty of upside as they expect prices to end 2015 around $1,300 an ounce…not only is Capital Economics expecting a solid performance by Gold in 2015, but they also see that strength accelerating during the year with prices ending 2015 around $1,400.  “Indeed, given the unfavorable market conditions this year, Gold has actually held up remarkably well,” said Julian Jessop, head of commodity research at the research firm. “The downside for the Gold price from current levels is surely now limited.”

The Indian government reported today that there has been almost a 4-fold increase in seizures of smuggled Gold from April to September this year compared to the same period a year ago…

Well-respected Scotiabank economist Patricia Mohr ranks Nickel and Zinc as her top picks for investors in the metals space in 2015…they were the 3rd and 5th best performing metals this year through mid-December with gains of 19.8% and 11.6%, respectively…

Today’s Equity Markets

Asia

China’s Shanghai Composite is continuing its relentless march to the 3200 mark, the next Fib. resistance level…the Shanghai surged another 52 points overnight as investors cheered yesterday’s 400+ point gain in the Dow and the Federal Reserve’s pledge to be patient in increasing interest rates…

Japan’s Nikkei average shot up 411 points to close at 17621, a 1-and-a-half year high…the Bank of Japan kept its monetary policy steady at its final meeting of the year, as had been expected…but the central bank raised its economic assessment, citing signs of a pickup in exports…

Europe

European markets were mixed today…on the data front, German search group GfK said its consumer climate indicator, based on a survey of around 2,000 Germans, forecast a rise to 9.0 in January, from 8.7 in December…

Russia’s ruble strengthened slightly today as the Oil price steadied and the country’s finance minister said he expected the currency to rebound in early 2015…

North America

After yesterday’s powerful run, the Dow is higher again this morning but the gain is more modest at about 30 points as of 8:00 am Pacific…

The TSX, which surged 642 points or 4.7% the last 3 sessions, is up another 87 points through the first 90 minutes of trading…the Venture, meanwhile, is 5 points higher at 670…a technical reversal has been confirmed with the Venture hitting its December low intra-day Tuesday at 637…expect a solid advance into year-end…

Gold 6-Month Chart Update

Gold has lost a little bit of momentum this week with the fall below $1,200 an ounce, but so far key support has held around $1,180…overall, Gold has put in a series of higher highs and higher lows since hitting $1,130 early last month…a continuation of that trend through the end of the year would be highly encouraging…

TSX Gold Index Updated Chart

The TSX Gold Index appears to have put in a double bottom, and if that’s the case then the outlook for the Gold price has to be positive…noteworthy on John’s 6-month daily chart for the Gold Index is the bullish %K/%D cross…the 50-day moving average (SMA), currently at 151, has been providing stubborn resistance over the last month – the Gold Index could accelerate rapidly once it overcomes this hurdle…we’re bullish on producers for 2015…the weakness in Oil will help many companies in terms of cost control and reduction, while Canadian producers will continue to benefit from a low Canadian dollar…

Barrick Gold Corp. (ABX, TSX) announced yesterday that it plans to suspend its Lumwana copper mine in Zambia because of a massive royalty hike introduced by the government…the Zambian parliament passed legislation that eliminates corporate income tax but increases the royalty rate on open pit mines to 20% from 6%…Toronto-based Barrick has warned for months that this legislation, which takes effect in January, would make Lumwana unsustainable…

Richmont Mines (RIC, TSX) Update

One Canadian producer we remain particularly excited about is Richmont Mines (RIC, TSX) which has both price momentum and earnings momentum in its favor entering 2015…in addition, the company will begin extracting a game-changing 1 million ounce high-grade resource beneath existing workings at its Island Gold Mine in northern Ontario…

RIC, with only 48 million shares outstanding, has virtually no debt and is sitting on cash of approximately $40 million…the company recorded adjusted net earnings of 19 cents per share through the first 9 months of this fiscal year including 10 cents per share in Q3…a repeat performance in Q4 would give RIC yearly net earnings of around 30 cents per share…

Technically, RIC is climbing an upsloping channel that should lead the stock to much higher levels in 2015…RIC represents 1 of the best opportunities in our view in the entire Gold stock sector…

RIC is off a penny at $3.56 as of 8:00 am Pacific…

Gold Bullion Development Corp. (GBB, TSX-V) Update

It’s time once again for BMR readers to pay attention to 1 of our old favorites, Gold Bullion Development Corp. (GBB, TSX-V), which is emerging as a near-term producer with a high-grade “rolling start” concept at Granada that features robust economics…

We’ll present the fundamental case for GBB next week, and we look forward to getting our boots on the ground again in the LONG Bars Zone because the upside exploration potential there remains immense…

In the meantime, a picture tells a thousand words…we’ve waited patiently for the right time to pounce on this opportunity after exiting GBB in 2011 and watching conditions go from overbought to oversold…

As you can see on this 5-year weekly chart, what has happened is that GBB broke above a long-term down trendline earlier this year, and then promptly did a normal retrace back to the trendline which (as expected) became new support…this is classic technical behavior, and all indicators now point toward a substantial push higher – consistent with improved fundamentals…

Ironically, it’s almost 5 years to the day that we first introduced GBB to our readers when it was trading around 6 cents…it became a 15-bagger within 12 months…

We see a bright 2015 for GBB…as always, perform your own due diligence but at 4 cents this is an early Christmas gift…

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

It has been an excellent year for Garibaldi Resources (GGI, TSX-V), and there’s every reason to believe the company may add an exclamation mark to 2014 very soon – especially with a busy and successful exploration program continuing at the company’s Rodadero discovery in Sonora State…

Technically, GGI appears poised for lift-off again with the 50-day moving average (SMA) just now beginning to reverse to the upside…in addition, what we’re looking at on this 6-month daily chart is a bullish downsloping flag and a %K/%D cross with the %K rising strongly – fertile ground for the birth of a breakout…

GGI is unchanged at 19.5 cents through the first 90 minutes of trading…

North Arrow Minerals Inc. (NAR, TSX-V) Update

North Arrow Minerals (NAR, TSX-V) has held up very well over the last rocky several months for the Venture, so the path of least resistance appears to be higher…

Diamond discoveries have kick-started the junior exploration market before and could do so again…North Arrow is working on numerous Canadian diamond projects (grassroots to advanced-staged), and the Pikoo play in Saskatchewan (winter drill program coming up) looks particularly exciting in terms of fresh district-scale possibilities with NAR leading the way and well-financed…with President and CEO Ken Armstrong, and Chairman Gren Thomas, among others, NAR features a highly respected management group and board – they’ve been responsible for the discovery of many kimberlites in Canada and Africa, including of course the Diavik mine in the Northwest Territories…

Results from a 1,500-tonne bulk sample from NAR’s important Q1–4 kimberlite at its Qilalugaq Project in Nunavut are expected during the first quarter of next year (at 12.5 hectares, Q1–4 is the largest kimberlite ever found in the eastern Canadian Arctic and includes inferred resources as well as extremely rare yellow diamonds found in a sampling program)…along with drilling at Pikoo, anticipation regarding results from this bulk sample could help give North Arrow a strong speculative lift…

Below is a very interesting 7+ year monthly NAR chart from John…note the long-term support at 50 cents, the rising 500-day moving average (SMA) at 55 cents, the long-term downtrend line, the RSI(14) support, and the switch from sell pressure to buy pressure…given the technical posture here, and events on the ground, we see a strong likelihood of a major breakout in NAR (above the downtrend line) early next year…as always, perform your own due diligence…patient investors could score big here…

NAR closed at 55 cents yesterday…

Note:  John and Jon both hold share positions in GGI, while Jon also holds share positions in RIC and GBB.

Gold has traded between $1,192 and $1,214 so far today…as of 8:40 am Pacific, bullion is up $7 an ounce at $1,196 following yesterday’s Fed news…Silver is up 21 cents at $15.96…Copper is down a nickel at $2.86…Crude Oil has been volatile today, now trading lower at $55.58 a barrel, while the U.S. Dollar Index has gained another one-fifth of a point to 89.23…

The Fed was somewhat more dovish than many analysts had predicted yesterday, though the general consensus continues to be that the central bank will raise interest rates at some point next year (more likely during the second half of 2015, if at all)…much can change between now and the middle of next year, however…significantly, the Fed kept the phrase “considerable time” in its statement yesterday for when it might raise interest rates…

Chair Janet Yellen suggested in her news conference afterward that the Fed will probably raise rates in 2015 but won’t be in a hurry to do so…the strength of U.S. economic data and the level of inflation, not a calendar deadline, will dictate when the central bank ultimately raises rates…at a time of global economic turmoil and collapsing Oil prices, Yellen stressed that the central bank was making no policy changes at the moment…

In its updated economic outlook, the Fed lowered its inflation forecast for next year to between 1% and 1.6%…because inflation remains so low, Yellen said she would be comfortable waiting until the unemployment rate fell from its current 5.8% to historically low levels in order to help put upward pressure on prices…

Long-time Gold bull and dollar bear Peter Schiff told Kitco that the U.S. economy is not as strong as people perceive it to be. “I think (Gold) is set up perfectly and I think it’s still on that launch pad,” he commented.  Schiff added that too many people believe in what he called a “phony recovery” and warns that a rude awakening is coming when the Fed, instead of raising rates, launches a QE4 to keep the economy from slipping back into a recession…

Russian Bear Growls

President Vladimir Putin sought to reassure Russians today that the country’s economic troubles will pass in no more than 2 years, saying at his annual news conference that the government and central bank are responding appropriately, though a bit belatedly…asked about tensions with the West, Putin struck a harsh tone, accusing the West of seeking to subdue and disarm Russia…acknowledging that Western sanctions over the country’s role in Ukraine were biting, he said the current economic troubles “are payment for our independence, our sovereignty.”  He compared Russia to a bear which could “sit quietly and eat honey”. 

A dramatic film-style trailer for the speech on Russian TV, featuring images of soldiers in Ukraine, Olympic victories and warnings to the U.S., suggested that Putin is maintaining a nationalistic tone that is as defiant as ever to the West…he still commands mass appeal among Russian voters (80% support according to this week’s latest polls), largely in part because he essentially controls the media and therefore the “message”…

The only way Putin will be thrown off his saddle is if Economic Armageddon strikes Russia, and that’s certainly possible in 2015 – especially if Oil prices were to tank into the $30’s…

Shun Canada, Oppose Keystone XL, Cozy Up To Cuba…Does This Make Sense?

While President Obama continues to curry favor with dictators, as demonstrated by his announcement regarding Cuba yesterday, one wonders when he may decide to “normalize” relations with the leaders of Canada, Israel, Great Britain and Australia – just a few of America’s greatest friends, the leaders of which revealingly all have a frosty relationship with the President…it’s also very telling about the judgement of this President when he shows more interest in the relationship between Cuba and the U.S. than the critical one between the U.S. and its largest trading partner, Canada (except of course when it comes to the issue of Keystone XL, which the President opposes with outright lies and half truths)…as much as he tries, fortunately Obama can’t control the media like Putin can – hence Obama’s approval ratings are deservedly near record lows, and he will face a very defiant Congress in 2015…

Congress will also no doubt remind the President that the United States has just lost the first cyber war, a very serious development…officials now believe the disturbing Sony hack was ordered directly by North Korea’s leadership…experts say North Korea has spent its scare resources on building up a unit called “Bureau 121” to carry out cyber attacks…

Today’s Equity Markets

Asia

China’s red-hot Shanghai Composite took a breather overnight, finishing 3 points lower at 3058 following the release of falling new home prices for November which pointed to a persistent property downturn despite efforts by authorities to energize the market…

Japan’s Nikkei average surged 390 points or 2.3%, climbing back above the 17000 level…

Europe

European markets were sharply higher today on a Fed-inspired rally…

North America

The Dow has powered 219 points higher as of 8:40 am Pacific…the U.S. services sector expanded in December at its slowest rate since February as growth in employment and new business slowed, an industry report showed today…financial data firm Markit said its “flash” services Purchasing Managers Index hit 53.6 in December, down from November’s final reading of 56.2 and well below economists’ expectations for a rise to 56.9 according to a Reuters poll…the growth rate has slowed steadily since peaking this year at 61 in June, but is still above the 50 level that signals expansion in economic activity…

After gains of 153 points and 352 points Tuesday and Wednesday, the TSX is up another 55 points but off its highs of the day as of 8:40 am Pacific while the Venture has added 7 points to 666 as the December rally begins to kick in following Tuesday’s intra-day low of 637…

Venture 4-Month Daily Chart

Confirmation should come today regarding yesterday’s Venture reversal that featured a “Morning Doji Star” candle pattern…sell pressure is in rapid decline, the -DI indicator has peaked, and RSI(14) is showing strong up momentum…

CDNX 15-Year Monthly Chart

RSI(14) on this long-term monthly chart hit its most oversold level this month since the 2008 Crash, creating fertile ground for a rally going into year-end…the large gap between the downtrend line from the 2011 high and current levels may narrow considerably during the Venture’s December/January “effect”…

Balmoral Resources Ltd. (BAR, TSX) Update

More drill results this morning from Balmoral Resources‘ (BAR, TSX) Grassett Project in Quebec…drilling has now extended the Horizon 3 Ni-Cu-PGE Zone to a depth of 400 m, and confirmed 400 metres of strike extent along Horizon 3 with the zone remaining open to depth and along strike…results were highlighted by hole GR-14-62 which returned 57.11 metres grading 1.03% Ni, 0.13% Cu, 0.20 g/t Pt and 0.55 g/t Pd, including 16.87 m grading 1.42% Ni, 0.21% Cu, 0.29 g/t Pt and 0.90 g/t Pd…this interval also includes a very high grade massive sulphide intercept which yielded 9.88% Ni, 2.33% Cu, 2.45 g/t Pt and 6.13 g/t Pd over 0.41…drilling of the Horizon 3 Discovery is anticipated to resume in January 2015…

BAR will need better results than this to get the stock moving in the right direction, especially considering there are now 110 million shares outstanding…declining 50 and 100-day moving averages (SMA’s) are providing stiff resistance around $1.15 and the high $1.30’s…the company has approved a $4.5 million exploration budget for the first 6 months of 2015 with the majority of that budget focused on expansion of the Horizon 3 discovery and testing of additional targets along the 16-20 kilometre long Grasset Trend…

BAR is off 7 cents at 97 cents as of 8:30 am Pacific…support around 90 cents…

Red Pine Exploration Inc. (RPX, TSX-V) Update

Red Pine Exploration (RPX, TSX-V) is beginning to gain some traction with its newly-acquired Wawa Gold Project in northern Ontario…the company is targeting high-grade quartz veins on the property which already includes an inferred resource…

Technically, RPX has just recently broken above a downtrend line in place throughout 2014, and RSI(14) is climbing steadily higher as it also did late last year…for speculative short-term traders, this is worth your due diligence…

RPX is unchanged at 2 cents on strong volume as of 8:40 am Pacific…

XMET Inc. (XME, TSX-V) Update

XMET Inc. (XME, TSX-V) has found strong technical support at 3 cents, and the company will soon be commencing a drill program at its Blackflake West Graphite Project adjacent to Zenyatta’s (ZEN, TSX-V) deposit…though Zenyatta took a hair cut yesterday, XMET may be able to generate enough excitement to push higher over the near-term within the horizontal trading channel between 3 and 6 cents…

Integra Gold Corp. (ICG, TSX-V) Update

There are several situations in Quebec that we’re monitoring closely at the moment, including one of our old favorites, Gold Bullion Development Corp. (GBB, TSX-V), which is looking more interesting now than it has for quite some time for both fundamental and technical reasons…

Also along the Cadillac Trend is Integra Gold Corp. (ICG, TSX-V) which has made significant progress this year with its high-grade Lamaque Gold Project in Val-d’Or…

Technically, ICG has managed to hold important support in the 15-17 range…this is worth keeping an eye on for 2015, especially in the event we see higher Gold prices…as always, perform your own due diligence…

Note:  Jon holds a share position in GBB.

Gold has traded between $1,190 and $1,204 so far today…as of 8:40 am Pacific, bullion is unchanged at $1,195…the last 2 sessions have witnessed $30 intra-day moves and today may prove volatile as well with a Fed policy decision and statement followed by a Janet Yellen news conference…Silver is up 13 cents at $15.85…Copper is now flat at $2.92 after hitting a low of $2.88 this morning…Crude Oil has reversed higher, now up 64 cents at $56.57, while the U.S. Dollar Index has gained two-thirds of a point to 88.55 in anticipation of a mildly hawkish Fed statement…

The 2-day FOMC meeting wraps up today with the central bank releasing its statement and economic forecasts at 11:00 am Pacific, and Fed Chair Janet Yellen will then brief the media at 11:30 am…the Fed is widely expected to tweak the language in its statement by removing the phrase “considerable time”, a reference to how long it intends to keep rates low…but if they do, they’ll likely come up with some other creative wording (Fedspeak) to reassure the markets that they’re in no great rush to hike rates…any moves will be “data dependent” even though a return to “normalization” is inevitable…

The Fed can’t ignore this…U.S. consumer prices recorded their biggest drop in nearly 6 years in November as gasoline prices tumbled…the Labor Department said today that its Consumer Price Index fell 0.3% last month, the largest decline since December 2008, after being flat in October…in the 12 months through November, the CPI increased 1.3 percent, the smallest gain since February, after advancing 1.7% in October…

U.S. Gold mine production declined 7% in the first nine months of this year, the U.S. Geological Survey has reported…for the period from January through September of this year, U.S. Gold miners reported a total production of 5,111,929 oz…led by Nevada Gold mining, which yielded 3,633,006 oz during the period, Alaska Gold mines produced 787,687 oz while the combined output of Gold from Arizona, California, Colorado, Idaho, Montana, New Mexico, South Dakota, Utah and Washington totaled 691,236 oz…

Oil Update

Assuming an average price of $70 per barrel next year, CIBC estimates that Canadian governments will lose out on between $10 billion and $13 billion worth of revenue next year.  “The energy sector directly accounts for nearly 10% of Canada’s GDP, but in the oily corners of the country – Alberta, Saskatchewan, and Newfoundland and Labrador – that sector’s weighting is closer to 25 to 30%,” the bank says…

A Barrel Of Fun For Putin

Russia’s ruble strengthened modestly today after dramatic falls against the dollar in the previous 2 days…the ruble, however, remains extremely volatile and there are fears of a prolonged crisis…

The situation poses a major challenge for President Vladimir Putin whose popularity among the Russian people, based partly on providing stability and prosperity, is at risk from a ruble decline that is further damaging the country’s credibility among investors…Putin holds his annual end-of-year news conference tomorrow when he will field questions from a studio audience as well as from television viewers around Russia, and is expected to comment on the ruble’s decline…

Technology giant Apple says it cannot sell products online in Russia because the ruble’s value is too volatile for it to set prices…the company yesterday stopped sales of its iPhones, iPads and other products in the country after a day in which the currency went into free-fall…

Russia’s central bank said today that it had spent almost $2 billion intervening in the currency market on Monday…in total, it has spent around $80 billion this year trying to prop up the ruble…

Today’s Equity Markets

Asia

China’s Shanghai Composite (see updated chart below) was on fire again last night, climbing another 1.3% or 39 points with the banking sector leading the way…the Shanghai closed at 3060…

Japan’s Nikkei, meanwhile, edged up 64 points to 16820…Japan’s exports rose 4.9% in November, falling short of forecasts despite the weakening yen…Japan marked its 29th straight month of trade deficits…

Europe

European markets reversed earlier losses and finished moderately higher today…

North America

The Dow (see updated chart below) is up 145 points as of 8:40 am Pacific…

In Toronto, the TSX has climbed 258 points while the Venture has added 9 points to 651 as of 8:40 am Pacific…

Paramount Gold & Silver (PZG, TSX) is being gobbled up by Coeur Mining Inc. (CDE, NYSE) in a merger of the 2 companies…as a condition to closing the merger, the shares of Paramount’s subsidiary holding its Nevada mining assets will be spun off to holders of the company’s common stock…we wrote about the possibility of this a few weeks ago…PZG is up 23 cents at $1.01 on the TSX as of 8:40 am Pacific…Coeur’s strategy centers around the rich Don Ese structure which is considered to be the most valuable deposit at PZG’s San Miguel Project due to its high grades and continuity along strike and at depth…the Don Ese vein was originally identified by Garibaldi Resources Corp. (GGI, TSX-V) which continues to be a shareholder of PZG…we wouldn’t be surprised if Coeur was closely watching developments at GGI’s Rodadero Project…

The Venture appears to have found its December low intra-day yesterday at 637 – confirmation of this should come by tomorrow…John’s most recent long-term Venture chart showing the -DI indicator at peak levels seen at previous important lows was a good clue that an imminent turnaround was in the works…

Below is a table from John that shows the Venture “December-January Effect” – the average date of the January high over the last 14 years is January 14…

Venture Investor Survey From Stockhouse

Shanghai Composite Long-Term Chart

When the Shanghai is on a run, there’s little that can slow it down…the next measured Fib. resistance level is 3215…

What’s interesting about the Shanghai is that its correlation coefficient with the CRB Index is now at its most negative level in 20 years (-95%)…why both markets have been going in opposite directions throughout all of 2014 breaks the pattern that was in place since late 2008, and what that means is hard to say…

CRB Long-Term Monthly Chart

The CRB Index has now landed in a very strong band of support that stretches from 230 to 240…by every technical measure, the CRB should be putting in at least a short-term bottom with a strong rebound in the early part of 2015…such a move would be consistent with a late December Venture reversal…

Astonishingly, at 29.60%, the CRB’s RSI(14) is at its lowest level since 1999…%K on the SS indicator is also at its lowest level in 20 years… these are extreme oversold conditions that could become more extreme but this is when important bottoms are formed and massive upside moves can begin…

Dow 3-Month Daily Chart

Overbought RSI(14) conditions in late November/early December have unwound with RSI(14) now at previous support at 30% on this 3-month daily chart…the Dow also has strong Fib. support between 16750 and 17000…

IamGold Corp. (IMG, TSX) Chairman & Co-Founder Continues To Dump Stock

The chairman and co-founder of Iamgold Corp. (IMG, TSX) has sold roughly 40% of his shares in the company this year, according to regulatory filings, continuing a long-term trend in which he steadily unloads his stake…what great confidence this shows in the company…William Pugliese has dumped 1,475,000 Iamgold shares in 2014 at ever-decreasing prices, the filings show…he has been a heavy seller even though the stock has plunged 27% in 2014 amid weak Gold prices…IMG shares are down about 75% since the start of 2013…

British Columbia Approves Site C Dam Project

The British Columbia government has approved its most expensive mega project with the construction of an $8.8 billion dam on the Peace River that Premier Christy Clark says marks a historic milestone that will be felt for a century…the controversial Site C dam project, not surprisingly, was immediately denounced by First Nations and environmental groups as “incredibly stupid” (they’re the smartest ones in the room, of course) and a project “that will go down as the most expensive mistake in B.C.’s history.”

The fact of the matter is from a long-term standpoint, B.C. needs new energy and capacity, and the dam on the Peace River would provide a large amount of inexpensive power….

Another volatile day in the Gold market following bullion’s steepest 1-day slide in over a year yesterday…Gold rebounded as high as $1,225 overnight before retreating back to $1,190 …as of 8:15 am Pacific, Gold is up $2 an ounce at $1,196…Silver, after surging above $16.50, is now down 35 cents at $15.84...Copper is off 4 pennies at $2.90…Crude Oil is trying to rebound, now down just slightly at $55.85…the U.S. Dollar Index, meanwhile, has fallen half a point to 87.98…

Investors are waiting to see if the Fed’s final meeting of 2014 today and tomorrow results in a more hawkish tone…a Janet Yellen press conference will immediately follow tomorrow’s statement and forecasts…Wall Street is looking for lower inflation and stronger growth from the plunge in Oil prices but the latest CNBC Fed Survey shows it still sees the Federal Reserve on track to raise interest rates by next summer for the first time in 8 years…

Plunging Oil prices could heighten geopolitical tensions, trigger defaults by U.S. shale Oil and gas firms and destabilize euro zone inflation expectations, the Bank of England warned today…

Gold imports in top consumer India officially reached 151.6 tonnes in November, according to data provided by India’s trade ministry today, a whopping 38% increase from 109.6 tonnes in October…the value of November’s imports was $5.61 billion, a 6-fold increase from the $836 million recorded for the same month a year ago…keep in mind that from a current account deficit point of view, the rise in Gold imports in India is being offset by much lower Oil prices as India is a big importer of Crude…

Oil Update

Almost $1 trillion of spending on future Oil projects is at risk given the brutal plunge in Crude prices, according to Goldman Sachs…any cancellation of these developments would deprive the world of 7.5 million barrels a day of new output over the coming decade, or 8% of current global Oil demand…the findings suggest the supply glut that has sent prices tumbling could eventually vanish as the Oil majors delay big-ticket production projects…

Goldman examined 400 oil and gas fields around the world, many of which are still awaiting a final investment decision…its analysis, based on a $70 Brent Oil price, shows that fields representing 2.3 million b/d of output by 2020 and awaiting a green light have now become uneconomic…that figure rises to 7.5 million b/d of production by 2025…the analysis excluded U.S. shale…

Russian Roulette

Russia doesn’t so much have an economy as it has an Oil-exporting business that subsidizes everything else, so the Russian bear is trapped in a corner…how dangerous of a situation could that be, especially when there’s some evil mixed in with Vladimir Putin?…we’re about to find out…

There was no letup in the selling pressure on the Russian ruble overnight despite a steep emergency increase in Russian interest rates…if you think the Venture is having its problems, take a look below at The Wall Street Journal’s inverted chart for the ruble which has essentially fallen off the cliff…

The Central Bank of Russia unexpectedly hiked rates by 650 basis points to 17% overnight after the beleaguered ruble plunged to a fresh record low….the currency initially rebounded to 60.0 to the U.S. dollar following the move but then collapsed to a fresh all-time low…the rate hike will further tighten domestic liquidity, putting a strain on the domestic corporate sector and reinforcing economic weakness…the central bank, according to its First Deputy Governor Sergei Shvetsov, will implement more measures to stabilize domestic markets following the rate hike…Shvetsov called the situation on the Russian foreign exchange and stock markets “critical”…

Today’s Equity Markets

Asia

China’s Shanghai Composite surged past the 3000 level overnight, gaining 68 points or 2.3%…financials did well along with infrastructure plays on news of fresh supportive measures from authorities…Beijing approved infrastructure projects worth $31 billion, which includes a third airport in the capital and 5 roads in the southern and central region…

The flash HSBC/Markit China manufacturing PMI slipped to 49.5 from a final reading of 50 in November, contracting for the first time in 7 months and raising expectations for additional stimulus measures…

Japan’s Nikkei average fell below the 17,000 level to end the day at a 5-week low, down 344 points or 2%, on the back of a stronger yen…

Europe

European markets are up significantly in late trading overseas…activity in Germany’s private sector grew at the weakest pace in 18 months in December, with the PMI falling to 51.4 from 51.7 in November…France’s private sector also continued to decline, albeit at a less sharp pace…

Data firm Markit today said its composite euro zone PMI, a measure of activity in the manufacturing and services sectors, rose to 51.7 in December from 51.1 in November…however, preliminary results from Markit’s survey of 5,000 manufacturers and service providers also showed that a significant pickup in activity is unlikely in the coming months, with new orders up only marginally following November’s decline…

North America

The Dow has reversed earlier losses and is up 88 points as of 8:15 am Pacific…new home construction in the U.S. topped a million on an annualized rate in November, in line with expectations, while housing starts fell 1.6% and building permits declined 5.2% last month…

The TSX has jumped 267 points as of 8:15 am Pacific while the Venture, which has declined in 14 out of the past 16 sessions, is off 4 more points at 640…an important bottom could be forming in the low 600’s according to Fib. analysis…more on that as the week progresses…

Spain’s Repsol has agreed to buy Talisman Energy (TLM, TSX), Canada’s fifth-largest independent Oil producer, for $13 billion, showing how the drop in Oil prices is pushing energy companies to take the plunge on big M&A deals…

U.S. Dollar Index Chart Update

The U.S. Dollar Index staged an important breakout over the summer, and momentum has carried it to levels not seen since early 2009…strong new support exists in the mid-to-upper 80’s…near-term resistance begins at 89…ultimately, over the next year or 2, it’s conceivable the Dollar Index will test the long-term downtrend line which will provide very stiff resistance in the high 90’s…

Interestingly, RSI(14) is at its third-highest level (71%) on this monthly chart since the mid-1980’s…

Volatility Index (VIX) Chart Update

The Volatility Index, known as the “VIX”, hasn’t been so volatile in recent years, climbing above 25 on just 2 occasions since the beginning of 2012…that trend may soon change as we could be entering a period of greater volatility across a broad spectrum of markets…

Stocks are relatively safe when the VIX remains below 25…

Richmont Mines (RIC, TSX) Update

Richmont Mines (RIC, TSX) has more than tripled since this time last year…this price momentum, which in itself encourages interest, is being driven by solid fundamentals including robust earnings and the discovery of a 1 million ounce high-grade resource underneath existing workings at the company’s Island Gold Mine in northern Ontario…

Any pullbacks in Richmont in recent months have represented outstanding buying opportunities, and the drop from a high of $4 last Wednesday to current levels should be no different…

This 4-year weekly chart shows steady buy pressure and 2 key Fib. support levels, $3.48 and $3.01, with the rising 50-day moving average (SMA) just above the lower Fib. level…the next Fib. measured resistance, meanwhile, is at $5…

NioCorp Developments Ltd. (NB, TSX-V) Update

NioCorp Developments (NB, TSX-V) was one of the biggest movers on the Venture yesterday, gaining 11 cents to finish at 81 cents…the company announced it has entered into an off-take agreement with ThyssenKrupp Metallurgical Products GmbH whereby ThyssenKrupp will purchase approximately 3,750 tonnes or roughly 50% of NioCorp’s planned ferro-niobium production from its Elk Creek deposit for an initial 10-year term, with an option to extend beyond that time frame…the agreement presupposes the company obtaining project financing, obtaining all necessary approvals and constructing a mine at Elk Creek…

The breakout above Fib. resistance at 79 cents yesterday requires confirmation today…as of 8:15 am Pacific, NB is down 4 cents at 77 cents…this 9-month weekly chart shows strong RSI(14) up momentum and increasing buy pressure, so NB could be gearing up for an impressive finish to the year…

Focus Graphite Inc. (FMS, TSX-V) Update

December bottom-fishers may wish to keep an eye on Focus Graphite (FMS, TSX-V) in the event of any additional weakness before this tax-loss selling period ends…

FMS has shown strong support in the mid-30’s since October, and RSI(14) is currently in the low range and near support on this 1-year weekly chart…

Focus, which recently completed and filed an environmental and social impact assessment (ESIA) for its Lac Knife Graphite Project in northeastern Quebec, has made powerful moves during the last half of December in each of the past 4 years…

Note:  Jon holds a share position in RIC.

Gold has traded between $1,206 and $1,222 so far today…as of 8:15 am Pacific, bullion is down $7 an ounce at $1,215…Silver, which surged nearly 5% last week, is off 15 cents at $16.89…Copper down a penny to $2.95…Crude Oil has fallen another $1 a barrel to $56.86 while the U.S. Dollar Index has gained one-third of a point to 88.55…

The Gold market will be paying close attention to the outcome Wednesday of the U.S. Federal Reserve’s policy meeting beginning tomorrow…speculation that the central bank might remove language in its statement saying rates will remain near zero for a “considerable time” has put Gold under some minor pressure in recent days…in addition, bullion is digesting back-to-back weekly gains of $29 and $24, respectively…

A strong support band for Gold currently exists between the $1,180’s and the $1,216 Fib. level as John showed in a chart yesterday…a pattern of higher daily highs and higher daily lows has been seen since the early November low around $1,130…the $1,240 area is key resistance…

Analysts from Barclays noted, “In early January, the demand baton will likely pass from India to China as festival-related buying picks up ahead of the Lunar New Year, which falls on February 19.  Provisional estimates show India imported 200 tonnes of Gold in November following imports of 109.5 tonnes in October; this takes imports for the fiscal year to 640 tonnes, compared with 638 tonnes for the full year ended March 2014.”

U.S. Mint American Eagle Silver coins made history last week, topping 400 million in all-time sales and setting a new annual sales record as sales have surpassed 43 million for 2014…HSBC analyst James Steel noted, “The beauty of coin demand is that it is a very good barometer of retail demand.”

Today’s Equity Markets

Asia

China’s Shanghai Composite bucked the general trend in Asia overnight, climbing 14 points to close at 2954…

Japan’s Nikkei average slipped 272 points on weak manufacturing sentiment…the ruling coalition in Japan won a majority of seats in lower house parliamentary elections yesterday, opening the door for continued economic reforms designed by Prime Minister Shinzo Abe to pull the country out of recession…

A sharp sell-off slammed a few key markets in Southeast Asia overnight as jitters grew over potential U.S. monetary tightening, and fractures in emerging markets started to appear…the Indonesian rupiah plummeted to its weakest level since 1998, while stocks in Thailand dove as much as 9% before recovering…

Europe

European markets are down moderately in late trading overseas…

North America

Wall Street has turned lower after equities started the day on a positive note…as of 8:15 am Pacific, the Dow is down 57 points…

U.S. manufacturing output recorded its largest increase in 9 months in November as production expanded across the board, pointing to underlying strength in the economy…factory production increased 1.1% last month after an upwardly revised 0.4% advance in October, the Federal Reserve reported this morning…economists polled by Reuters had forecast manufacturing output rising by only 0.5% in November after a previously reported 0.2% gain in October…mining output was a laggard, slipping 0.1%…

In Toronto, the TSX is off its highs of the day but still up 9 points, while the Venture has retreated 3 points to 651 as of 8:15 am Pacific…

NioCorp Developments (NB, TSX-V), which has been showing some technical bullishness according to John’s charts, has jumped 6 cents to 76 cents after some positive news this morning…the company has entered into an off-take agreement with ThyssenKrupp Metallurgical Products GmbH whereby ThyssenKrupp will purchase approximately 3,750 tonnes or roughly 50% of NioCorp’s planned ferro-niobium production from its Elk Creek deposit for an initial 10-year term, with an option to extend beyond that time frame…the agreement presupposes the company obtaining project financing, obtaining all necessary approvals and constructing a mine at Elk Creek…

Oil Update

Oil was a key driver in equity markets last week, and that trend may continue…prices stabilized in early trading today, following reports of clashes in Libya over the weekend that disrupted exports, but Crude is once again coming under pressure given the weakening demand outlook and over-supply concerns…

On Friday, the IEA cut its forecast for next year’s Oil demand growth by 230,000 barrels a day to 900,000 barrels a day…OPEC and the U.S. Energy Information Administration also lowered their demand growth forecasts for 2015…the cuts exacerbated last week’s sell-off that saw the U.S. Oil benchmark dropping more than 12% to settle at its lowest level on Friday since May 15, 2009…

The market this week will be looking at data on the health of the major global economies to gauge whether sluggish demand will continue into 2015….the U.S., China and Europe are scheduled to release their PMI’s tomorrow…

While some countries, states and provinces that rely heavily on Oil exports are suffering (Alberta, for example, loses more than $200 million in revenue on every $1 drop in the Oil price), lower Oil prices are giving many consumers the equivalent of an instant tax cut…CNN reported this morning that after a weekend of price cutting at stations, gas for less than $2 a gallon can be found in 13 states across the country…2 weeks ago there was only 1 gas station in the country selling gas that cheap…the average American consumer with a vehicle is now saving approximately $100 a month, and consumer spending accounts for more than two-thirds of U.S. GDP…

The drop in the Oil price is already biting into companies’ capital budgets for 2015…Tourmaline Oil Corp. (TOU, TSX) reported this morning that it will now execute a 16-rig drilling program for 2015, down from the current 20 operated rigs…this will reduce the company’s full-year 2015 capital program to $1.4 billion from the original $1.6 billion budget, which will result in approximately 30 less new wells in 2015…

WTIC Long-Term Monthly Chart

Technically, the next target area for WTIC is around $50 a barrel, though it’s uncertain how quickly that could come about given that very oversold conditions already exist…

WTIC has broken below a long-term uptrend line and will now face very stiff resistance beginning in the low $60’s…we’re looking at a major change in trend here which ultimately may mean that Oil will test long-term support in the $35 to $40 area…

Oil – TSX Gold Index Comparative Chart

Major rallies in the TSX Gold Index have often coincided with falling or weak Oil prices, so investors should be searching for high-quality producers that have the potential to take advantage of the current environment…

Gold mining is an energy-intensive industry, which is why HSBC Securities calculates that a 20% fall in Oil could reduce miners’ overall costs by 2% to 6%…but not all miners will feel the full benefits…around half of Barrick Gord Corp.’s (ABX, TSX) exposure to Oil, for example, is hedged at $86 a barrel…

Another macroeconomic benefit has been the rising U.S. dollar, which lowers costs in countries where miners operate…Yamana Gold Inc. (YRI, TSX), which mines in Canada, Brazil, Argentina and Chile – says that for every 10% devaluation in these countries’ currencies, its mining costs fall by $40 to $50 an ounce…Yamana’s costs averaged $807 an ounce in the third quarter…

Below is a WTIC – TSX Gold comparative chart, and already you can see how the Gold producers and Oil are starting to go in opposite directions…

AuRico Gold Inc. (AUQ, TSX) Finds New Porphyry System At Kemess East

A 19-hole drill program (27,000 meters) has uncovered a new porphyry mineralized system at Kemess East, located just 1 km east of the previously delineated Kemess underground deposit and 6.5 km north of the 50,000 tonne per day Kemess mill facility in north central British Columbia…drill results show a higher grade than Kemess Underground (a Feasibility Study on that project was released by AuRico Gold in March of last year and proposes an underground block caving operation with average annual production of 105,000 ounces of Gold and 44 million pounds of Copper over a 12-year mine life)…

Highlights of the drilling at Kemess East include 768 m of 0.44 g/t Au and 0.39% Cu including 132 m of 0.75 g/t Au and 0.50% Cu in KH-14–04; 304 m of 0.56 g/t Au and 0.42% Cu including 76 m of 1.2 g/t Au and 0.66% Cu in KH-14–09; while KH-13–08 intersected 601 m grading 0.50 g/t Au and 0.39 % Cu including 278 m of 0.71 g/t Au and 0.48% Cu in KH-13–08…estimated true thickness of the mineralized intercepts is 70% of the reported lengths…

AUQ is up 16 cents at $3.98 as of 8:15 am Pacific…

Venture 10-Year Monthly Chart

The encouraging aspect of this long-term monthly Venture chart is that the -DI indicator is now at previous peak levels witnessed during the 2008 Crash and the spring of 2013…in other words, especially with the tax-loss season winding down, extreme bearishness should soon give way to a significant rebound but it seems every investor wants the “other guy” to move first…some terrific bargains have opened up in this market, and “first-movers” will reap the biggest rewards…when the Venture turns, it will turn quickly…

ARHT Media Inc. (ART, TSX-V)

If you’re for something different to perhaps add some sizzle to your beaten-up mining stock portfolio, you may wish to consider ARHT Media (ART, TSX-V, formerly Vast Exploration) which has a growing list of Who’s Who on its advisory board as the company trumps its ARHT Platform enabling all forms of human to HumaGram interaction…last week, Mexico’s Carlos Slim, one of the richest men in the world, joined the company’s advisory board that also includes Paul Anka, Larry King, Jason Bateman, Richard “Skip” Bronson, and Michael Buble…

ARHT designs and creates HumaGrams of living, deceased and fictional celebrities…the company also produces HumaGrams of everyday ordinary people and displays them doing extraordinary things…each HumaGram is a digital copy capable of being adapted to virtually any scenario imaginable…the stock started trading in October and has 60 million shares outstanding…technically, it’s looking strong in the early going with support around 40 cents and resistance in the mid-50’s…there could be enough hype and big names behind this to give speculative investors some bang for their buck over the short term at least…ultimately, ART will be driven (into the the stratosphere or into the ground) by the extent of the success (or failure) of its business model…as always, perform your own due diligence…

ART is off half a penny at 49.5 cents as of 8:15 am Pacific…

Silver Short-Term Chart

Silver has finally staged a definitive breakout above a downtrend line that was in place since the summer on this 9-month daily chart…the December 1st dramatic move from an intra-day low of $14.15 to a close above $16 was technically highly significant…as expected, superb support has been demonstrated around $15 and Silver is now consolidating in advance of what could be a near-term test of resistance at $17.50…

Silver Long-Term Chart

This 34-year monthly chart continues to give hope that Silver could be preparing for a powerful “Wave 5” move to the upside, though we caution that this could take some time to play out (if indeed this theory is correct)…

RSI(14) has bounced off previous long-term support which will need to hold along with key price support in the immediate vicinity of $15…

Fundamentally, Silver has been hurt by a slowdown in global economic growth…if economies in the euro zone, China and Japan can show some fresh strength in 2015 (and that’s a big “if”),  Silver could begin to appreciate rapidly…

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

TSX Venture Exchange and Gold

It was another rough week for the Venture which declined 48 points or 6.8% after previous weekly losses of 5.4% and 6.0%.  During that time, the Index has fallen in 13 out of 15 sessions or 17.1%.  For the month, it is down 11.9%.  Keep in mind, December historically is the Venture’s best month of the year with an average gain of 4.6%, though these gains typically occur during the last 7 to 10 trading days of the year.

Oil has been the driving force of the Venture’s slide, and Crude’s downside momentum accelerated last week.  Gold has been holding up remarkably well – in fact, bullion is showing signs of finishing the year on a powerful note with a breakout last week through key resistance at $1,220.  So while a general high degree of negativity has been cast over the entire Venture due to the collapse in Oil prices, with Crude perhaps gearing up for a test of $50 support in the days ahead as the “fear factor” ramps up, investors should be keeping a close eye on quality Gold and Silver stocks.   Some outstanding bargains in that space exist, particularly if you subscribe to the theory that Gold will soon surprise to the upside and lift Silver with it.  As far as producers go, they actually stand to benefit significantly on the cost side in 2015 with Oil prices now well below levels that were anticipated.

What we’re witnessing at the moment with the Venture is an “extreme” event, and extreme Venture moves – especially with the benefit of hindsight – have always provided investors enormous profit opportunities.  This will be easy to see on the updated 10-year monthly chart we’ll be posting tomorrow.

Below is a chart that focuses on the current situation.  Not surprisingly, sell pressure has been steadily increasing this month due to the Oil price decline and tax-loss selling.  Oil and gas juniors also issued a lot of paper earlier in the year and it’s now coming back to haunt them (Contact Exploration – CEX, TSX-V – is 1 of many examples).  On the positive side, there continues to be a divergence between RSI(14) and price, with RSI(14) holding above its October low while the Index itself has continued to fall and last week slipped below the 2008 Crash bottom.  The next obvious support level is in the 620‘s.

Historical December trading patterns strongly suggest an important low is imminent, within a matter of days if 650 on Friday wasn’t it.  In our view it’s best to approach the next several days with the strategy of embracing any potential additional weakness in high quality issues as the turnaround will start no later than the week of the 22nd.

Venture Historical December Trading

It might not feel like it right now, but December is indeed the Venture’s best month of the year.  The first 2 weeks of December tend to be weak followed by the start of a significant uptrend during the last half of the month.  This momentum typically carries into January and February before a spring thaw and then a summer rally.

Over the last 3 years, the December low has occurred on the 15th, 13th and 19th, respectively, meaning the odds are extremely high that we’ll see at least a temporary bottom in this market during 1 of the upcoming 5 trading days.  Only once over the past 14 years has the December low been put in after December 19.   If you pick away at the best opportunities in the days ahead, it’s almost impossible NOT to make money looking out over the next couple of months.  Ultimately, the Venture may decide to re-test its December low at some point during 2015, but first we should see a significant rebound out of very oversold conditions.

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 eventually create a supply problem and therefore great opportunities in Gold and quality Gold stocks.  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

As we pointed out in this space a week ago, if the best the bears could do was knock Gold down $13 an ounce on a blowout U.S. jobs report and an exploding Dollar Index (Friday, Dec. 5), then clearly they’re losing their grip on this market.  Something is underpinning Gold, and that likely includes buying from China, India and Russia.

Gold gained more ground last week and pushed above key resistance at $1,220.  HSBC made a good point the other day when it commented, “Should Oil prices move below $60 (per barrel) and the broader financial markets become worried about the impact of lower energy prices globally, then Gold may receive some ‘safe-haven’ inspired buying.”

Certain countries are in serious financial trouble with Oil dropping into the $50’s, and keep in mind that nearly 20% of the U.S. high-yield market is related to the energy sector.  There are some global economic benefits to lower Oil prices but there are destabilization risks as well.

For the week, Gold finished at $1,222 for a gain of $29 after jumping $24 the previous week.   Bullion enjoyed a spectacular turnaround December 1 when it plunged into the low $1,140’s and then immediately rallied almost $80 an ounce on short-covering and a variety of fundamental factors.

Gold 6-Month Daily Chart

This 6-month daily chart shows Gold climbing an RSI(14) trendline since the $1,130 low November 5.  The next key level for Gold to overcome is $1,240.

Gold 5-Year Weekly Chart

Over the next couple of months, we believe Gold has a greater chance of moving toward the top of the downsloping flag than breaking below it.  This suggests a move as high as about $1,300, at which point Gold will have to make a critical decision.

Silver outperformed Gold last week, a positive sign, as it climbed 75 cents or 4.6% to finish at $17.04 (updated Silver charts Monday morning).  Copper gained a penny to $2.96.  Crude Oil fell below $58 a barrel for the first time since May 2009.  It was down 12% on the week, closing at $57.81.  WTIC is on track for its biggest quarterly drop since the 4th quarter of 2008 (we’ll have an updated Oil chart tomorrow morning with $50 as a minimum downside target).  The U.S. Dollar Index fell a full point to 88.32. 

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 the ISIS terrorist group (air strikes won’t stop them) and 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;
• 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 – a “day of reckoning” will come;
• 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 – 2014 could be “Peak” Gold in terms of supply.