Gold hit a new 10-month low this morning, falling to $1,539 before recovering slightly…as of 7:15 am Pacific, bullion is down $9 an ounce at $1,549…Silver is off 12 cents at $26.86…Copper is flat at $3.34…Crude Oil is down 63 cents at $93.83 while the U.S. Dollar Index is off its highs but still up one-quarter of a point at 82.98…
There’s clearly a disconnect at the moment between the paper market in Gold (futures, ETF’s, stocks, etc.) and the physical market as many traders and investors have been chasing better returns in other assets, particularly given the 2000+ point climb in the Dow since November…a correction in the equity markets potentially could be the catalyst that lifts Gold out of its doldrums, and we’ve certainly seen examples over the past few years when bullion and Gold stocks have moved counter-cyclical to the equity markets…all reports suggest that strong physical accumulation of the metal continues which no doubt has helped cushion Gold’s price decline and kept it (so far at least) above critical support around $1,500 an ounce…according to UBS, āOur index of physical demand from India yesterday was well above average and one of the best days weāve seen in months”…
Markets in China were closed today due to a public holiday, and will re-open Monday…UBS stated, āIn February, Chinese investors came back from the week-long Lunar New Year holidays eager to take advantage of the much cheaper gold price…this time around, though, seasonal factors are not exactly in Goldās favor…nevertheless, a strong response cannot be ruled out with certainty…after all, the experience of Q1 acts as a reminder that despite disappointments in the past year, the ability of physical demand to help cushion the downside cannot be fully ignored”…
Updated Long-Term Silver Chart
Critical support for Silver is $26 an ounce with the low $26 support zone holding four times since early 2011, even in the face of quite intense pressure and strongly trending markets…below is a long-term monthly chart from John…note that RSI(2) is currently at its lowest level since the Crash…$26 is also trendline support…the chart also suggests that Silver must also make a decision sometime this quarter whether to break above the down trendline in place over the last two years, or collapse below the pitchfork line which would imply a further drop to perhaps even the $20 level…take your pick as to which direction you believe Silver is headed…given the current extreme negative sentiment, our view is that critical support for both Silver and Gold will hold – for now at least – and a spring rally will ensue…what happens later is anyone’s guess…
TSX Gold Index Long-Term Monthly Chart
Gold stocks are being thrown overboard at the moment as evidenced by the action in the TSX Gold Index which has fallen 10% in just the last four sessions…so far this year, the Index is off 23% and it has dropped a whopping 35% since the late 2012 summer high…this compares with a 14% drop in the price of Gold itself during the same period…clearly, investors are trying to price in an ever steeper decline in bullion but what if that doesn’t happen?…throughout the history of this bull market, physical demand has often come to the rescue of Gold and it may do so again…note that there is a strong support band for the Gold Index between 225 and 240…RSI(2) is at an extreme low (1.06%)…on each of the three previous occasions when it has been at these levels, the Index has rallied significantly…the Gold Index is now beginning to recover after hitting a low in early trading of 226.56…
CDNX 5-Year Weekly Chart
Let’s move on now to the Venture Exchange which is in the midst of its 9th consecutive weekly decline, an event that has never occurred before at this time of the year…tracking the Venture over the past couple of years and trying to determine where the bottom might be has been a humbling experience…this has been a very deceiving market at times, but that’s the nature of bear markets…below is a 5-year weekly chart from John, the purpose of which is to try to identify at what point the current bloodletting can be expected to end (at least temporarily)…the evidence shows there’s a strong support area between 1027 and 1041, but the Index could also dip down to the support line of the pennant (the two previous lows did this) which is currently around the 980 level…from there a significantly rally could ensue…RSI(14) is at its lowest level since the Crash…
John: The CDNX 5-year weekly chart shows that it has formed a downsloping pennant since it peaked at 2465 early in 2011…the Index closed yesterday at 1039 which is within a strong technical support area between chart support at 1027 and the Fibonacci 23.6% level at 1041…other chart support levels are shown at 930, 810 and 680…an interesting point to consider here is what happened in Oct/11 and June/12 (thin mauve circles)…the chart shows at these times the Index dipped down to the support line of the pennantĀ and then reversed to the upside…this could happen again if the present support area holds on a weekly basis…note that RSI(14) at 22% is at its lowest level since the Crash…CMF shows selling pressure is dominant and the trend remains strongly bearish…
U.S. Jobless Claims Jump
The number of Americans filing new claims for unemployment benefits rose to its highest level in four months last week, suggesting the labor market recovery lost some steam in March…initial claims for state unemployment benefits increased 28,000 to a seasonally adjusted 385,000, the highest level since November, the Labor Department said on Thursday…it was the third straight week of gains in claims. Coming on the heels of data yesterday showing private employers added the fewest jobs in five months in March, the report implied some weakening in job growth after hiring accelerated in February…the non-farm payrolls report for March is due tomorrow…
Bank Of Japan Moves Aggressively With Stimulus
The Bank of Japan is pulling out all the stops to get the economy out of deflation, its new governor said, after the central bank introduced aggressive easing measures today that will double the monetary base over two years…markets welcomed the news, pushing bond yields to an all-time low and boosting share prices with the Nikkei average climbing more than 2%…at his inaugural policy board meeting, Haruhiko Kuroda convinced the nine-member panel to agree to a major expansion of government bond purchases, including buying longer-term debt, which is designed to drive down longer-term rates…the BOJ also broke free from some self-imposed limits that the previous leadership adhered to…
Today’s Markets
The Dow is regaining ground lost during yesterday’s sell-off…as of 7:15 am Pacific, the Dow is up 53 points to 14604…the TSX, after experiencing its worst trading day of the year, is off its early lows this morning but down 16 points at 12406…the Venture has declined 13 points to 1026…in Asia, China and Hong Kong were closed today but the Nikkei, as mentioned, soared 2.2% to a 4.5-year high after unprecedented moves were announced by the Bank of Japan…European shares are mildly lower in late trading after comments made by the ECB President Mario Draghi curbed investor sentiment…Draghi told a press conference that the ECB cannot replace the lack of capital in Europe’s banking system and cannot compensate for any lack of action by governments…monetary policy would remain accommodative, he added…the euro fell sharply against the dollar…the European Central Bank kept its benchmark interest rate unchanged at 0.75%…a Reuters poll of 73 economists had expected the rate to remain unchanged despite record euro zone unemployment of 12%…
Contrarian Call – HXD Updated Chart
We’ve recently highlighted the possible opportunity in the HXD double-short ETF when it was trading in the $7.60’s and $7.70’s as a defensive measure against a possible TSX pullback…indeed, the HXD spiked higher yesterday, climbing 34 cents to $8.18, and it traded as high as $8.29 in early trading today…resistance is strong around $8.40, and a retreat by the HXD to around the $8 level as the TSX recovers some lost ground is highly likely based on chart patterns…
I say venture closes below 1000 pts tomorrow. There is nothing in the news that will, and unfortunately, stop this jugular from spewing more blood. The only bright spot is only the good companies will survive this bleeding and the shaddy one’s will crash and burn.
Comment by Tony T — April 4, 2013 @ 8:33 am
I have never seen so much bearish chatter about gold on the internet before, we could see some more washout on the back off all this, but we are close to a bottom IMHO
Comment by Hugh — April 4, 2013 @ 12:20 pm
BMR what’s the next support for the ventures? I’m thinking 100 based on my technical analysis that it consists of worthless paper and corruption. I just wish I was able to short every stock on the venture exchange.
But I have to admit that you nailed it with RBW – it soared 12% today lol
I figure I’d do this site the courtesy of posting it’s first message of the day.
900 coming up boys and girls – embrace for the more disaster to come. I thought I made a mistake selling RBW at 14.
Comment by rene — April 4, 2013 @ 5:59 pm
The entire venture market is going to move to Hong Kong
http://bullmarketthinking.com/mosher-the-impact-on-commodity-prices-will-be-horrific-setting-up-potential-shortages/
had the opportunity this week to connect with Don Mosher of B&D Capital Partners in Vancouver. For decades Don has helped finance the junior resource exploration market, and has been a key player in raising over $120 million in venture funds over the years.
It was an interesting conversation as Don has recently co-founded an organization representing Canadaās venture industry, called the Venture Funding Crisis Committee (VFCC), with the aim of āimproving the ability of venture companies to finance their activities.ā
According to Don, the ability to efficiently raise capital is becoming harder and harder in Canada due to excessive regulations. The ultimate destination he explained, may be an environment of horrifically higher commodity prices and potential shortages.
Starting with the evolution of Canadian resource exploration, Don explained that, āOver the last 150 yearsā¦weāve become globally acclaimed for resource exploration. Originally [exploration stocks] started out [trading] as a curb exchange, where businessmen were trading certificates and trying to convince each other to buy into start up exploration companies. [But] over the last 150 years itās transformed into the most heavily regulated market in the world, with some of the most severe penalties of any market in the world.ā
With respect to the importance of exploration finance, Don said, āLast year, over 70% of all money raised for exploration expenditures on a global basis was raised in Torontoā¦[and] on the venture exchange there was $6B raised. Of the $6B raised, $4B was raised with non-brokered financingāsā¦There is close to 1,300 companies on the exchange, [and about] 150k jobs in the exploration business. If those companies canāt get funding, the potential is to see 150k people lose their jobs, but in addition to that, the supporting cast of about another seven jobs supported by [each] exploration [job], will also be impacted. So weāre talking about hundreds of thousands of jobs at potential risk here.ā
An environment of tightening regulation, Don added, simply leads to industries moving overseas.āTo mention a famous mine explorer, Robert Friedland, he thinks that the entire venture market is going to move to Hong Kong. What heās pointing at is what happened to U.S. manufacturing. U.S. manufacturing went to a jurisdiction with less regulation, less costs, making it easier for them to do businessā¦[so] the impact on Canada is going to be horrific. The seven jobs created by that one [exploration] job, are going to be transported overseas to Asiaāas opposed to [staying in] Canadaā.
When asked about the long-term impacts of the tight regulations on commodity prices, Don concluded by saying, āI think that the impact on commodity prices will be horrificā¦It might be a ten year transition in terms of the venture exchange slowly choking to death and the Hong Kong market getting up to speed. In the meantime, deposits areā¦dropping [in] grades, getting deeperā¦[and located in] more hostile jurisdictionsā¦The impact on a global basis therefore if this market [is] shutdown, has global repercussionsāpotential commodity shortages.ā
āā-
This was a powerful interview, providing a rare look at the insides of the mineral exploration space. Trends set in this arena have long-term impacts on global commodity supply, and all serious market students and investors should watch these developments closely.
Comment by Paul — April 4, 2013 @ 9:03 pm