Gold has traded between $1,205 and $1,215 so far today…as of 8:00 am Pacific, bullion is up $4 an ounce at $1,209…Silver has pushed 11 cents higher to $16.31…Copper is flat at $2.81…Crude Oil remains weak after yesterday’s big sell-off…WTIC is now under $50 a barrel, down $1.23 at $48.82…the U.S. Dollar Index, meanwhile, has jumped one-tenth of a point to 91.51…
An observation from HSBS analysts: “The ability of Gold to track higher in the face of ostensibly bearish moves in currencies and Oil may mean that bullion investors are beginning to view EUR-USD and/or Oil declines as disorderly and therefore prompting safe haven buying in Gold, or that the Gold market is becoming inured to currency and commodity declines,” they say. “Another explanation is that the equity price declines were significant enough to promote more than offsetting flight to quality buying in Gold. The explanations tend to favor further Gold gains.”
Gold For Canada At World Juniors
Congratulations to our Canadian junior hockey stars who re-captured the Gold medal for Canada with a dramatic 5–4 victory over Russia at the Air Canada Center in Toronto last night…things just aren’t going well for Putin’s Russia these days, and the ruble is tumbling again this morning like it slipped on a patch of Canadian ice…
Today’s Equity Markets
Asia
China’s Shanghai Composite posted a small gain overnight but Japan’s Nikkei average fell 526 points or 3%, putting it near a 3-week low, as trading sentiment was hit by a combination of declining Oil prices and a stronger yen…
Europe
European markets are moderately higher in late trading overseas…on the data front, Markit’s final composite PMI for the euro zone came in at 51.4 – lower than the earlier estimate of 51.7…this is one of the most important forward indicators for the euro zone economy and suggests that the region’s economy grew by just 0.1% in the final quarter of 2014, according to Chris Williamson, chief economist at survey compiler Markit…
North America
The Dow is down another 32 points as of 8:00 am Pacific after yesterday’s steep decline to kick off the first full trading week of 2015…
Below is an interesting chart from www.cross-currents.net that shows the strong (some would say “alarming”) buildup of margin debt in the U.S. stock market in recent years…historically, excessive margin debt has preceded substantial market drops, but “timing” is an issue…analysts have been warning about this for a while now but indices have continued to push higher, thanks in large part to momentum and a very accommodating Federal Reserve…
In Toronto, the TSX is down 106 points as of 8:00 am Pacific while the Venture is off 6 points at 688…
Yesterday, the TSX recorded its biggest single-day percentage drop in about 20 months, tumbling nearly 2.5% as the energy sector shed another 6.5%…it has lost about a third of its value in the last 6 months…
Crude Oil Update
The huge drop in Oil prices since last summer is no barrel of fun for many, but there are certainly some offsetting benefits…
Canadian drivers could save as much as $12 billion at the pumps in 2015, according to a new report, if Oil prices stay low throughout the year…if Canadians continue to pay about 98 cents a litre, which was the average gas price in Canada at the close of 2014, that could mean weekly savings of approximately $25 per household…
That adds up to $100 per month, or $1,200 per year, multiplied by more than 8 million Canadian households with cars…
Putting Governments On A Forced Diet
A CIBC World Markets report released last month estimated that the federal and provincial governments in Canada stand to lose a combined $13 billion on plummeting Oil prices…
But is that such a bad thing?…governments at the provincial and federal levels are losing out on money, forcing them to live more within their means, manufacturers are benefiting from a lower Canadian dollar because of the Oil price plunge, while consumers across the country are receiving what amounts to a significant tax cut…while there are certainly some negatives for Canada in the new world order for Oil prices, including of course the loss of investment and jobs directly and indirectly related to the energy sector, as a whole this dramatic event could turn out to be a net positive…it certainly is for the United States, Canada’s largest trading partner, and a healthy U.S. is essential for a growing Canadian economy…
WTIC Long-Term Weekly Chart
Based on a major chart breakdown in the fall and weak fundamentals (oversupply and the apparent determination of the Saudis to encourage lower prices to achieve certain objectives including the weakening of Iran and the U.S. shale industry), we’ve consistently maintained that Crude Oil would drop into the $35 to $50 range – and that time has arrived, perhaps even sooner that many observers expected…
Technical support is the strongest between $35 and $40, and it was the $40 level where Oil topped out between 2000 and 2004…
This long-term weekly chart shows extremely oversold conditions that are unprecedented going back 2 decades…keep in mind, markets often do go to extremes – more so in today’s media and information saturated world driven so much by the Internet…
Given the extreme nature of this chart (RSI-14 at 10%, ADX indicator has gone crazy), it’s safe to assume we’re going to see continued volatility…at some point fairly soon, we’re likely going to see a sharp rebound but that could be followed later by new lows…
Bottom line – $40 Crude appears to be a virtual certainty, and at that point some incredible bargains will open up in the energy sector…
TSX Gold Index-Crude Oil Comparative Chart
The drop in Oil prices will assist Gold producers’ efforts to trim costs, and the weak Canadian dollar is also a boon for Canadian Gold producers who are now fetching over $1,400 Canadian per ounce…
Historically, the TSX Gold Index has responded bullishly to a drop in Oil prices – not always initially, but soon thereafter…conversely, Gold stocks have consistently run into trouble when Oil has exceeded $100 a barrel…
In this comparative chart going back to 2001, you can see how history is once again repeating itself – the TSX Gold Index is now moving in the opposite direction of Oil…it’s reasonable to expect that Gold producers’ stock prices during 2015 will once again return to a period of relative out-performance vs. Oil…
TSX Gold Index Chart Update
After a couple of months of trying, the TSX Gold Index is finally gaining some traction above its 50-day moving average (SMA), and what to look for now is whether the 50-day will hold as new support and ultimately reverses to the upside…
The Gold Index is looking healthier but still faces some major challenges including a stiff band of Fib. resistance between 158 and 176…it may take some time to work through that, we’ll see…
The Gold Index is up 7 points at 162 as of 8:00 am Pacific…
Richmont Mines (RIC, TSX) Update
In late September/October and into early November, Richmont Mines (RIC, TSX) was a steal as it retreated to strong support at its uptrend line while the company continued to put out robust results from its operations in Ontario (Island Gold mine) and Quebec…Richmont is a classic example of a Canadian producer that’s enjoying a double-whammy benefit – sort of like the icing on a very delicious cake in this case – from a weak loonie and a collapse in Oil prices…
Richmont has both price momentum and earnings momentum as 2015 begins…in addition, the company is starting the process of 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…the company expected to produce between 85,000 and 90,000 ounces of Gold in fiscal 2014 – through Q3, 2014 production stood at 71,354 ounces…with no news since mid-November, an update from the company is probably close at hand and more good news is likely on the way given how things have progressed so well in recent months…
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 hit a new multi-year high of $4.29 in early trading today, and is up 23 cents at $4.21 as of 8:00 am Pacific…this is RIC‘s 7th straight up day, so an imminent small corrective pullback could be in order…
Kiska Metals Inc. (KSK, TSX-V) Update
Last week, we wrote again about the important new Copper-Gold discovery in north central British Columbia reported in mid-December by AuRico Gold at its Kemess East Property, about 1 km from Kemess Underground which is currently in the permitting stage…
While Kemess East is likely going to get even more interesting, given results such as 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, investors should put the “Quesnel Trough” in general on their radar screens because this is a prolific area that just beginning to heat up again given the Kemess East results…
A picture tells a thousand words…check out the map below and look at that trend…(Kemess East is 6.5 km north of the past producing Kemess South mine)…
About 65 km southeast of the AuRico discovery, the Kliyul Project optioned by Teck Resources Ltd. (TCK, TSX) from Kiska Metals Corp. (KSK, TSX-V) could be where the next discovery occurs in this area…Teck is highly bullish on this project, and for good reasons, and the major is planning an extensive initial drill program as part of its option to earn a minimum 51% interest in the property by spending $5.5 million…
Exploration at Kliyul dates back to the 1940‘s when several Gold-bearing quartz veins were discovered on the property and in its immediate vicinity…
There are numerous geological features at Kliyul that have Teck geologists excited, including Cu-Au bedrock mineralization associated with a monzonite/diorite dyke swarm, gypsum-filled fractures, pyritization and elevated Cu-Au-Mo in silts and soils – these are all consistent with the presence of a porphyry hydrothermal system at depth…
But that’s not all…
The Kliyul zone (an 800 x 800 m magnetic high anomaly) was tested with 21 mostly shallow drill holes (less than 125 m) prior to 1995 which returned significant Copper-Gold intercepts in magnetite breccia…meanwhile, the most recent drilling at Kliyul, in 2006, yielded encouraging Copper and Gold intersections from two deeper holes…KL06–30, a 217.8-metre intersection, averaged 0.52 g/t Au and 0.23% Cu…
In other words, Teck definitely has something to chase here…
Kiska Updated Chart
Kiska is one of those Venture exploration companies that has the strength to survive the worst of bear markets…the fact that this stock is near an historical low, at the same time as developments on the ground in the general area near Kliyul have suddenly turned very bullish, probably explains why bargain hunters are starting to nibble at KSK…
This 2.5-year weekly chart shows rapidly declining sell pressure, a bullish +DI/-DI crossover in December, and exceptional support at 4.5 cents…there could be a huge reward for patient investors if Teck makes a discovery at Kliyul, and Kemess East continues to impress…
KSK is up half a penny at 6.5 cents as of 8:00 am Pacific…
XMET Inc. (XME, TSX-V) Update
The Venture’s “December-January Effect” and historical patterns in XMET Inc. (XME, TSX-V) made for a good short-term opportunity as expected a few weeks ago, as XME hit resistance at 6 cents New Year’s Eve and again yesterday after trading as low as 3 pennies Christmas Eve…
XME is unchanged at 5.5 cents as of 8:00 am Pacific…
Note: Jon holds a share position in RIC.