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Gold has backed off modestly over the last 45 minutes…as of 6:20 am Pacific, the yellow metal is down $11 an ounce at $1,571…Silver is off 28 cents at $27.03…Crude Oil is 19 cents lower at $89.03…Copper is down 2 pennies at $3.44 while the U.S. Dollar Index (see chart below) has gained one-third of a point to 83.33…

Bernanke’s Testimony

Fed Chairman Ben Bernanke continues his testimony before Congress today…yesterday,  he told the Senate Banking Committee that the Fed stood ready to offer more stimulus as needed but stopped short (as expected) of signaling action in the near term…he also said the U.S. recovery was being held back by anxiety over Europe’s debt crisis and expressed unease over a stagnant jobs market…he set out a list of options for further easing but refused to say which he might prefer…

“The logical range includes different types of purchase programs…that could include Treasuries or include Treasuries and mortgage-backed securities…those are the two things we’re allowed to buy,” he said…

Asset purchases, also known as quantitative easing, are a way of course of driving down long-term interest rates to boost the economy when short-term rates are already at zero…

The Fed’s other options include lending via the Fed’s discount window, communications about future policy, or cutting the interest that the Fed pays banks on excess reserves, Bernanke said…“We haven’t really come to a specific choice at this point, but we are looking for ways to address the weakness in the economy should more action be needed to promote a sustained recovery in the labor market“…

The quote in bold from Bernanke above is a clear indication in our view that the Fed will embark on QE3 if the U.S. employment situation continues to weaken…a .more important factor, however, in kick-starting U.S. growth will be a “course” change at the political level – tax and regulatory policies are suffocating the private sector and holding back U.S. growth opportunities, and only the November elections can change that…

U.S. Dollar Index

One thing Bernanke probably doesn’t want to see is an even stronger U.S. Dollar which could negatively impact the push for growth down south…while the Dollar Index has been meeting resistance, as we expected, around the 83.50 level, it has plenty of support not far below current levels as John’s chart shows…keep a close eye on this Index…another breakout in the greenback could be one of the deciding factors for Bernanke in the timing of QE3…

GoldQuest Mining (GQC, TSX-V) Delivers On First Step-Out Hole At Romero

This market will still reward discoveries which is why GoldQuest, which we began following in the fall of 2010 when it was trading under 20 cents, has jumped more than 15-fold in less than two months…as detailed in our previous post, GQC released assay results pre-market this morning on its first step-out hole at Romero, and the grades and widths are impressive…hole LTP-92, collared 25 metres to the west of the discovery hole, returned a 159-metre section grading 4.45 g/t Au including a sub-interval of 75.5 metres grading 9 g/t Au and 1.06% Cu…the hole was terminated at 399 metres for technical reasons and bottomed in mineralization…three other holes have been completed and two are in progress…the Gold grades from LTP-92 are even better than those encountered in the discovery hole…

While it’s understandable all the attention is focused on Romero at the moment, and will continue to be as the company attempts to prove a major Gold-Copper resource may exist there, it’s also comforting to know (and worth reminding everyone) that GQC has other assets in the DR that are more valuable than ever in our view given the discovery at Romero…

Rainbow Resources (RBW, TSX-V)

It’s quite clear that word on Rainbow Resources (RBW, TSX-V) is slowly beginning to spread in the American market, and an expected acceleration of this with the company’s upcoming OTCQX listing could have a dramatic impact on overall trading volumes and share price action…albeit at a modest 108,000 shares, yesterday nonetheless was the highest volume day ever for Rainbow on the U.S. pink sheets, and the American buying also had an impact on the Canadian exchanges as RBW firmed up to the 18 cent level for the first time since early June…combine this development with an upcoming drill program at the flagship International Silver Property, followed by drilling at Gold Viking and Jewel Ridge in Nevada, and you have the “perfect storm” scenario for Rainbow in the weeks ahead, especially if Gold and Silver and the Venture firm up in August and September as we believe they will…the fundamentals on the ground for a potential discovery by Rainbow are in place, and President David W. Johnston will elaborate on that in Part 2 of our interview with him which we expect to post by this evening…

As we pointed out the other day, RBW’s 200 and 300-day moving averages (SMA’s) continue to rise which technically is very bullish, but the stock has also just recently broken out of a “sub-trend” in place since the spring by pushing through a downtrend line…this is an important development that bodes well for the overall market if it’s repeated in numerous other situations, and we’re beginning to see signs of that…

Below is a chart from John on Orko Silver (OK, TSX-V) which hasn’t yet broken out of its down trendline, but this gives a good example of what John is referring to…in the case of Orko, its 200 and 300-day SMA’s reversed to the downside late last year…it’s currently trading below its flattened-out 1,000 day SMA, sitting at just under $1.60 where resistance can be expected…

Today’s Markets

Futures in New York as of 6:20 am Pacific are pointing toward a slightly lower open on Wall Street…groundbreaking on new U.S. homes rose in June to its fastest pace in over three years, lending a helping hand to an economy that has shown worrisome signs of cooling…the Commerce Department said this morning that housing starts rose 6.9% last month to a seasonally adjusted annual rate of 760,000 units…that was the highest rate since October, 2008, and slightly above expectations…the U.S. housing market, which collapsed six years ago, has been a relative bright spot in the economy this year, although it remains hobbled by a glut of unsold homes…Bernanke commented yesterday that the sector has shown modest improvement…