Gold has traded between $1,139 and $1,149 so far today…as of 10:10 am Pacific, bullion is up $7 an ounce at $1,141 as it climbs back toward resistance around $1,150…Silver is 2 cents higher at $14.65…Copper has shed 4 pennies to $2.29…Crude Oil has fallen $3.48 a barrel to $45.72 while the U.S. Dollar Index has retreated nearly half a point to 95.43…
Short-covering has played a key role in driving Gold higher recently…in a research note published yesterday, commodity analysts at Commerzbank said that Gold’s gross short positions have fallen to their lowest level in 12 weeks…indeed, for the week ending August 25, the disaggregated Commitment of Traders Report (COT) showed that gross shorts fell more than 3 times as much as gross longs increased…
According to UBS, the fact that “expectations for a September rate hike have come down considerably from the peak in early August keeps the Gold market supported for now.”
Morgan Stanley looks for more weakness in Gold before the year is out, listing an average price forecast of $1,080 in Q4 before improvement to $1,100 and $1,165 in the first 2 quarters of 2016…
Gold and other metal coins in the hands of pure evil – ISIS touted “the return of the Gold dinar” in an hour-long video released over the weekend…ISIS first announced its intention to issue its own money late last year and tasked its Beit al Mal, or treasury, with minting the coins, which come in several denominations made of Gold, Silver and Copper…Goldsmiths in Mosul imported machines from Italy in recent years, each one able to produce about 5,000 coins a day…the metals, of course, come largely from banks the group seized, ransoms, the homes of Christians and other minorities who fled the terrorist group…each coin bears an inscription that reads, “The Islamic State, a caliphate based on the doctrine of prophecy”…Oil, the group said in the video, will now only be sold for Gold…
Gold Seasonality Chart
Gold has entered what’s traditionally its strongest month of the year as you can see in this seasonality chart going back to 1996…no month has a higher success rate for Gold than September with a price increase over August occurring more than two-thirds (68%) of the time…September’s average price gain of 2.6% exceeds that of January (2.3%) and November (2.2%)…this month is also followed, however, by one of the worst months of the year for Gold – October…
More China Concerns
More evidence of an economic slowdown in China…the country’s official manufacturing PMI fell to 49.7 in August from 50.0 a month ago, as reported this morning by China’s National Bureau of Statistics…that number fell slightly short of most economists’ forecasts…China’s official non-manufacturing PMI, also released today, fell to 53.4 from 53.9 in July…meanwhile, the preliminary Caixin China manufacturing PMI, a competing gauge of nationwide manufacturing activity, declined to 47.1 in August, its lowest level in 77 months…
“There is insufficient growth momentum in the country’s manufacturing sector,” said Zhao Qinghe, an economist with the National Bureau of Statistics, in a statement accompanying the release of the official economic data…
China has slashed interest rates 5 times since November and made repeated moves to let banks lend more of their deposits…it has also offered tax breaks for businesses and accelerated approvals for infrastructure projects, in addition to recently devaluing the yuan to give the manufacturing sector a boost…
Canada Officially In Recession Despite June Recovery
Despite an encouraging rebound in June, Canada’s economy contracted by 0.5% in the 2nd quarter, Statistics Canada revealed this morning, officially putting the Canadian economy in recession for the 1st half of the year…Statscan also revised its Q1 GDP reading down to –0.8% from an earlier report of –0.6%…a technical recession, of course, is defined as back-to-back quarters of economic contraction…Q2 ended on a positive note, however, with GDP growing by 0.5% – its strongest reading in quite a while, and beating expectations of a 0.2% jump…the Ministry of Finance also reported a $5 billion surplus for the April-May-June quarter…
Alberta’s Growing Economic Mess
Alberta’s first fiscal update under the new NDP government paints a bleak picture of the once-booming Oil province: a deficit of nearly $6-billion, and growing, despite higher income and corporate taxes; soaring unemployment; slumping manufacturing; and an expected 0.6% GDP contraction in 2015 (likely will be worse than that)…Alberta’s recent Progressive Conservative governments (liberals, not true conservatives) overspent and mishandled the wealth that was generated from the Oil industry, and now Albertans have an even more incompetent group of economic managers in control who are also increasing government spending while jacking up taxes on corporations and individuals as well…brain power and capital will definitely be flowing out of this province to other jurisdictions over the next few years, just like in B.C. and Ontario when NDP regimes last held the reigns of power in those provinces…
Crude Oil Update
The strong rally in Crude Oil that started last week, after it touched a low just above $35 support, was given some fresh impetus yesterday when OPEC said it’s ready to talk to other global producers to achieve “fair prices”, while the U.S. government reduced its Crude Oil output estimates…the Department of Energy said domestic production was 130,000 barrels per day lower than initially reported in the first 5 months of the year…
Technically, Crude faces strong resistance between $45, a level it’s grappling with right now, and the downtrend line shown on this 2-year weekly chart which currently intersects around $55…given those facts, one must be cautious regarding this Oil rally – there’s no confirmed indication at this point that Crude has necessarily found a final bottom…what it is doing, for sure, is swinging within a well-defined trading range with clear support and resistance levels…fundamentally, there still needs to be a better balance between supply and demand – that will hinge on numerous factors that play out over the coming weeks and months…
CRB Index Updated Chart
Encouragingly, the CRB Index held just above the critical 180 level during a challenging August and finished the month within the chart support band beginning at 200 and continuing to 220 (now strong resistance)…the CRB’s recent price low was not confirmed by a new low in the RSI(14) which may have bottomed in extreme oversold conditions at the end of last year/early this year…
Key moves would be a breakout above 220 or a breakdown below 180 – anything within that area is like background noise, but a rally up to 220 would certainly help give the Venture a lift…Oil is a major component of the CRB Index, and how it performs will be critical…
China currently consumes about a quarter of the total global output of Gold…for Nickel, Copper, Zinc, tin and steel, it’s around half of world consumption…for aluminum, it’s more than half…those are huge figures…it’s important for investors to understand that Chinese imports of these important metals and materials still remain strong, as Reuters confirmed with some numbers last week, but the heydays of 10% annual Chinese GDP growth that helped propel the CRB to a record high in 2008 are over and won’t return anytime soon…
Today’s Equity Markets
Asia
China’s Shanghai Composite fell 41 points or just over 1% overnight on weak economic data to close at 3165…Japan’s Nikkei took a harder hit, tumbling nearly 4%…
Europe
European markets were down sharply today to begin a new month, roughly 2.5%…the euro zone got some mixed economic data today…its jobless rate was pegged at 10.9% in July versus 11.1% in June…a rate of 11.1% was forecast…the euro zone August manufacturing PMI came in at 52.3 versus 52.4 in July…
North America
The Dow briefly tumbled by more than 400 points early this morning before stabilizing…now it has headed south again…as of 10:10 am Pacific, it’s down 419 points…the weak economic data out of China and the overnight action in Asia were the triggers for today’s pullback as volatility continues…the Dow has had triple digit gains or losses in 9 out of the last 10 sessions…
The pace of growth in the U.S. manufacturing sector slowed in August to its weakest in over 2 years, according to an industry report today, while construction spending in July climbed to its highest level in more than 7 years…
Stocks in the S&P 500 have dropped 0.5% on average during the month since 1950, according to the The Stock Trader’s Almanac…that makes September the worst month for U.S. stocks on a percentage basis, though there have been some very good Septembers in the past…
In Toronto, the TSX is off 358 points as of 10:10 am Pacific while the Venture has retreated 7 points to 552…
Venture 2-Month Daily Chart
This morning’s pullback in the Venture is healthy and not surprising after 5 consecutive daily advances and a 9.8% climb from last Monday’s 509 low…
John’s 2-month daily chart shows RSI(2) ended at 94% yesterday as the Index finished just 3 points below its EMA(20), so some quick unwinding of those temporarily overbought conditions should set the stage for a successful breakout above the EMA(20) in the near future…
Last Monday’s hammer reversal, the breakouts above the EMA(8) and the downtrend line, and the readings on the Chaikin Oscillator confirm that cash is again flowing into the Venture…strong up momentum in the SS as well…
Venture Seasonality Chart
The August-September-October period is typically significantly stronger for the Venture than April, May, June and July…approximately 60% of the time, the Venture has advanced in each of these 3 months, though the average combined return has been slightly negative at –0.7%…
Biorem Inc. (BRM, TSX-V) Update
A tremendous climb for Biorem Inc. (BRM, TSX-V) over the past 3 trading sessions…this is a non-resource company we’ve been very bullish about about for months, since it was trading around 30 cents, given its business model, earnings momentum and favorable share structure…last week’s strong Q2 financials and yesterday’s news regarding $5.7 million in new orders sent BRM to a multi-year high of 65 cents this morning…it has since pulled back modestly, off a nickel at 53 cents as of 10:10 am Pacific…
Whenever you see a stock break out above a long-term downtrend line, that’s always a bullish sign and that’s when BRM did last week as we pointed out…note the chart resistance and the Fib. support levels below…opportunities on any significant pullback, in our view, for those who may have missed this one when it was available in the 30’s…
Integra Gold Corp. (ICG, TSX-V) Update
We see good things ahead for Integra Gold (ICG, TSX-V) which started a fresh month with some news this morning…the company released final drill results from its winter/spring 2015 Triangle drill program at the Lamaque South Gold Project, Val d’Or…
To company has completed 52,432 m of diamond drilling in 128 holes at Lamaque so far this year…3 drill rigs are currently operating at Triangle with the plan to have 5 drills in full operation on the project shortly…results announced this morning from the last 6 holes of the winter/spring drilling at Triangle included 6 meters grading 13.95 g/t Au in TM-15–22 (239 m to 245 m)…3 high-grade zones were intercepted in that hole…results from ongoing infill and extension drill holes at Triangle will come during the fall and winter…news flow from Integra should be intense with the ramping up in drilling…ICG is up half a penny at 27.5 cents as of 10:15 am Pacific…
Pure Energy Minerals Ltd. (PE, TSX-V) Update
Pure Energy Minerals (PE, TSX-V) has been 1 of our favorites since July and has more than doubled in value since that time, despite challenging overall market conditions…the Lithium space is attractive, and PE has the right address in that regard in Nevada with its advanced Clayton Valley brine project…
Technically, Pure Energy gained momentum as expected on a breakout through Fib. resistance at 47 cents, and that’s where new support should exist…PE is at a nearly 4-year high, clearly out-performing the market…stocks don’t go straight up forever, so it’s always wise to lock in some profits along the way, but Pure Energy has much going for it and we look forward to seeing how this situation develops through the final 4 months of the year…
PE is off 4 cents at 51 cents as of 10:10 am Pacific…
Note: John, Terry and Jon do not hold share positions in ICG, BRM or PE.
