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Gold has traded in a narrow range overnight between $1,620 and $1,627…today we’re watching if Gold can confirm a breakout through resistance at $1,620…as of 5:30 am Pacific, the yellow metal is up $1 an ounce at $1,622…Silver, which outperformed Gold last week, is off 9 cents at $28.04…Copper is down 3 pennies at $3.35…Crude Oil is up 69 cents at 93.56 while the U.S. Dollar Index is down one-quarter of a point to 82.37…

We’re now in the midst of a period of seasonal strength for Gold and of course Gold stocks…March to July tends to be not nearly as strong as the August to December period with September and November typically being the best months of the year…below is a chart showing the average monthly returns for Gold over the the decade between 2002 and the end of 2011…

August, meanwhile is the hottest month of the year for Gold stocks – and that’s how this month is shaping up – based on the average monthly returns for the NYSE Arca Gold Bugs Index…

Silver – Beginning Stages Of A Powerful Wave 5 Move?

Regular readers know that we are strong Silver bulls at BMR – in fact Silver could easily outperform Gold in the year ahead even though the yellow metal could surge to a new all-time high, which is one reason we’ve been concentrating a lot on various Silver plays including of course Rainbow Resources (RBW, TSX-V) which is currently drilling for a high-grade, near-surface discovery in a prolific area – the West Kootenay region of British Columbia…

Below is another updated and fascinating long-term Silver chart from John that shows a powerful “Wave 5” move in the metal could now be underway (the $78 an ounce projection is based on Fibonacci analysis and has no time frame at the moment…we remind our readers that John correctly called the surge to $50 last year and the temporary top)…notice how RSI(2) recently bottomed – as predicted – and how support at $26 has been so strong…

Silver has definitely stabilized above key support at its September and December lows, and the Bollinger Bands (not shown in the above chart) have pinched in close in recent weeks (just like with the Venture Exchange) – a development that usually precedes a very significant move…in this case, that could mean an initial surge that carries Silver past important resistance beginning at $29 an ounce ($32 is also a key level)…

Recent COT reports show that big speculators (dumb money) have been exceptionally bearish on Silver recently – at levels reached only four times since the Silver bull market began a decade ago…Silver embarked on an impressive rally each time the big speculators were this bearish in the past – CLIMBING AT LEAST 70% – and there’s no reason to believe that this time should be any different…in addition, the current Gold-Silver ratio (58:1) from an historical perspective makes Silver that much more attractive at the moment…

A few interesting notes about Silver demand and supply (based on figures from the Silver Institute and Thomson Reuters GFMS, a leading research company based in London):  Global Silver mine production in 2011 was only 28% higher than it was in 2002 (761.6 million ounces vs. 594.5 million ounces) while net government sales have decreased from 59.2 million ounces in 2002 to 11.5 million ounces in 2011…fabrication demand is up only 4% from 2002 levels (though new uses for Silver are coming into play) but investment demand has exploded – from under 1 million ounces to 164 million ounces last year…a lot more people want to own Silver, and much of this demand is coming from Asia…this is what will help propel Silver much higher going forward…

It’s also interesting to point out that after a recently subscribed $200 million offering of new units by the Sprott Physical Silver Trust, and with the associated greenshoe being fully taken up by the underwriters, Sprott will be in the market looking to acquire some 8 million plus ounces of physical Silver to fulfill the mandate of the trust…when Sprott launched the Physical Silver Trust, securing 15 million ounces, it took a full three months before delivery of the metal was received and, according to Sprott, some of the delivery had not even been mined when the order was put in…

Venture Exchange – Seller Exhaustion?

Our assumption is – and the chart evidence supports this – that “seller exhaustion” seems to have set in with the Venture Exchange over the last couple of months…everyone who has wanted to sell – out of fear or simply because they’ve given up on this market – has likely sold, which means selling pressure can no longer take the trading to new lows…on the other hand, buyers aren’t exactly tripping over themselves at the moment to scoop up cheap shares but we do believe the “smart money” has been quietly accumulating (and that’s a view shared by some long-time and very successful traders/investors we’ve spoken to in recent weeks)…

A strong clue that a significant move in the Index is about to occur is contained in John’s latest CDNX chart that shows a tightening of the Bollinger Bands…the bear trend is definitely weakening, so a “BB Squeeze” does suggest to us that an upside breakout is imminent…a rising tide will not lift all boats…stick with the companies that have been aggressive this year in their exploration efforts with good results – companies with solid charts that will be in full stride as the turnaround gains traction…we have been following some of them closely over the last couple of months…

Huldra Silver (HDA, TSX-V)

Huldra Silver Inc.’s (HDA, TSX-V) Treasure Mountain Mine 30 kilometres northeast of Hope, British Columbia, could turn out to be a cash cow if Silver performs as expected over the coming months and beyond…we’ve mentioned Huldra on several occasions this year and it has continued to hold up well as it gets set to go into commercial production shortly…this past spring, the company received a mining lease and a B.C. Mines Act permit approving a mine plan and reclamation program for Treasure Mountain, along with an amended permit approving construction and operation of a processing plant (construction is expected to be mostly complete by the end of this month) at the company’s mill site in Merritt…the mine plan is for the removal of 60,000 tonnes per year of silver/lead/zinc from the underground mine and the transfer of mill feed to the Merritt facility, just over an hour’s drive to the north, for processing…the total NI-43-101 indicated resource is 33,000 tonnes grading 24.2 opt Ag, 4.16% Pb and 3.80% Zn, while the inferred resource is estimated to be 120,000 tonnes grading 27 opt Ag, 2.79% Pb and 4.36% Zn (using a 10 opt Ag cut-off) with opportunities for expansion…the tonnage is low but the high Silver grades should allow the company to mine between 1.5 million and 2 million ounces per year plus base metals (1.5-metre mining width)…Huldra currently has approximately 44 million shares outstanding after just completing a nearly $10 million financing…HDA closed last week at $1.34 and is currently testing triangle resistance as shown in John’s chart below…a confirmed break above this triangle would be a very bullish development…

Rainbow Resources (RBW, TSX-V)

In southeastern B.C., Rainbow Resources (RBW, TSX-V) has commenced drilling at its International Silver Property where the company is pursuing a high-grade, near-surface deposit…the province’s next Silver discovery could very easily come from the International which has never been previously drilled despite strong historical data and highly encouraging prospecting results from Rainbow and Braveheart Resources Canada Inc. (the private company acquired by Rainbow last fall) since 2007…what really jumped out at us late last week, however, was Fugro airborne survey information released by Rainbow that shows excellent potential for a huge expansion of the mineralized trend (from 1.2 kilometres to 7 kilometres)…while drilling is underway, at a known high-grade exposed structure, RBW prospectors and geologists will be checking out half a dozen high-priority areas well beyond the area that is currently being drilled…it seems others are now waking up to the opportunity in Rainbow as a respected U.S. newsletter writer (Jeb Handwerger) picked up on the story at the end of last week…RBW has a lot going for it (Silver, Gold and flake graphite) but everyone’s attention at the moment is squarely focused on the International, and for good reason – drilling into massive galena is typically a recipe for success…below is an updated RBW chart from John which now shows a “Wave 5” Fibonacci level (RBW is currently in Wave 3)…

Cap-Ex Ventures (CEV, TSX-V)

Cap-Ex Ventures (CEV, TSX-V) reported solid initial results this morning from a minimum 15,000-metre drill program within the Greenbush Zone at its Block 103 iron ore property in Labrador…twelve holes intersected intervals ranging from 64.0 to 216.4 metres of 26.7% to 30.2% total iron all on a single, 2,050-metre-long drill line (located just over 1 kilometre southeast of line one)…consistent grades and thicknesses of iron ore bode well for the first NI-43-101 resource estimate for a portion of the Greenbush Zone expected by the end of the year…

Copper Market Holding Up, Thanks To China

Copper bulls waiting for a magic bullet from China to shore up the metal’s price have been left disappointed…recent data from China – specifically industrial production and import data – continue to point to sluggish demand in a market dogged by high inventories…but analysts say the high stockpiles – about one to two million metric tons of Copper are estimated to be sitting in China’s warehouses – pale in comparison to China’s continued appetite for the metal widely used in the production of electrical wires, roofing and plumbing and industrial machinery…“That has to be put in context that over the next 5 years, China will probably consume 50 million tons of copper,” Andrew Keen, Head of Metals and Mining Equity Research for Europe, the Middle East and Africa with HSBC, told CNBC Asia’s “Squawk Box” this morning…“So there is a major strategic shortfall in the copper market from a Chinese perspective and those warehouses are really part of that longer-term solution…we don’t think it’s a big problem for the copper market going forward”…China consumes about 45 to 50% of global Copper demand and makes up only 8% of supply, Keen added, meaning that the market for the metal is “structurally” tight…

Today’s Markets

Mainland China stocks tumbled this morning, with the Shanghai Composite Index off 33 points or 1.5% to 2136, leading Asia markets lower, on some investor disappointment Beijing officials didn’t ease monetary policy over the weekend…adding to pressure on the downside, Bank of America Merrill Lynch this morning cut its 2012 growth estimate for China to 7.7% from 8%, which comes on the heels of similar moves by other brokerages…the investment bank also cut estimates for third and fourth quarter expansion, citing constraints to further policy easing…European shares are mixed this morning while stock index futures in New York as of 5:30 am Pacific are pointing toward a flat to slightly positive open on Wall Street…

Japan GDP Growth Slows

Japan’s economy grew by just 0.3% in the second quarter, much lower than expected, as weak exports and industrial production dragged down a surge in public investment in the areas affected by the March 2011 earthquake disaster…preliminary data today indicated annualized growth of 1.4 per% between April and June, a significant fall from the upwardly revised 5.5% between January and March, and well short of the 2.3% growth rate anticipated by economists…while quarterly growth of 0.3% in the second quarter is better than many other developed nations around the world, it shows that the world’s third-largest economy has struggled to shake off the effects of a high yen and faltering growth in key export partners such as China and the European Union…although few foresee any Japanese recession for now, the findings may put additional pressure on the already hard-pressed government and central bank to do more to bolster the recovery…solid growth is considered essential for the nation’s policy priority of raising taxes to mend its battered public finances…