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Gold is hurting for the second straight day and has fallen below the $1,440 level that has provided strong support recently…as of 7:15 am Pacific, bullion is off $30 an ounce at $1,428…it has been as low as $1,424…Silver is up 38 cents lower at $23.37…Copper is up a penny at $3.34…Crude Oil is off $2.33 a barrel to $94.06 while the U.S. Dollar Index has climbed another one-third of a point to 83.10…

Commodity-based exchange traded products (ETP’s) suffered record outflows of $9.3 billion in April, data showed yesterday, as institutional investors dumped Gold holdings…Global outflows from commodity ETP’s tripled month-on-month, according to Blackrock Inc., the world’s largest asset manager, while redemptions from the precious metals segment quadrupled after Gold’s largest spot-price decline in 30 years…investors pulled $8.7 billion from Gold ETPs globally, Blackrock’s data showed, after the yellow metal plunged to $1,321.35 an ounce…lower U.S. inflation expectations, a weak Chinese GDP report and rumors of potential Gold reserve sales by distressed European countries such as Cyprus also contributed to investor outflows, Dodd Kittsley, global head of ETP research at BlackRock, said…the previous record for outflows was set in February when Gold ETP’s lost $5.7 billion…outflows from Gold ETP’s now amount to $17.9 billion year-to-date…by the way, Blackrock has nearly $4 trillion in assets under management and Street Authority reported that, “If the company were a country, then its assets under management would put it at the fourth largest in terms of gross domestic product, higher than Germany or France”…

Deutsche Bank said today that it has lowered its average Gold forecast for 2013 by 6% to $1,533 an ounce in response to the sharp price decline last month and the bank’s upgraded forecast for the greenback…Deutsche Bank looks for the dollar to outperform other currencies in the coming years due to superior U.S. growth prospects coincident with a gradual withdrawal of accommodative monetary policy by the Federal Reserve…dollar strength would create a “powerful counter-weight to Gold“, Deutsche Bank said…

Today’s Markets

Asian investors enjoyed a strong risk-rally today with both Japanese and Australian equities extending their bull run after the yen weakened through the key 100-mark against the U.S. dollar for the first time in four years…Japan’s Nikkei average shot up 416 points overnight to close at 14608, its highest level since January, 2008…for the week, the Nikkei was up an astounding 6.7%…the country’s latest economic data suggest the economy is picking up steadily on the back of aggressive monetary easing by the Bank of Japan and a weaker yen which is helping corporate profits…official figures released today showed bank lending in April was up 2.1% from a year earlier, the largest percentage gain since July, 2009…separate data showed Japan’s current account, the broadest measure of trade with the rest of the world, stood at ¥1.25 trillion ($12.4 billion) in March before seasonal adjustment, the largest surplus in the last 12 months…China’s Shanghai Composite gained 14 points overnight to close the week at 2247…European shares surged to fresh 5-year highs today but investor confidence was trimmed back slightly by industrial output data for Italy which showed a decline for the second consecutive month…the Dow is up 22 points through the first 45 minutes of trading…the TSX has gained 19 points while the Venture is off 4 points at 965…the CDNX has held up reasonably well in light of the $50 drop in the price of Gold over the past 2 days, and that’s encouraging…however, it still needs to overcome resistance at 970 in order to this modest rally since mid-April to continue…

Victory Ventures (VVN, TSX-V) Cashes Up And Goes After Its Own Discovery In Northern B.C.

The hottest play on the exploration front at the moment – and this could easily continue right through the summer – is in northwestern British Columbia where Colorado Resources (CXO, TSX-V) is drilling its North ROK Property where it announced an important Gold-Copper discovery a couple of weeks ago…more on Colorado in a moment…as we’ve been mentioning, a company that’s uniquely positioned to also grab a lot of attention in the immediate future is Victory Ventures (VVN, TSX-V) which is getting ready to commence a drill program of its own – scheduled to commence during the first week of June…this is not a case of a company with some “cow pasture” near a discovery that it’s trying to promote…in fact, in early February, nearly 3 months before Colorado’s announcement that it had drilled 333 metres grading 0.51% Cu and 0.67 g/t Au in its first hole at North ROK, Victory had secured the drill permits for its highly prospective Copau Property and announced its intention to commence a drill program by the middle of the year…a ground magnetic survey located a pronounced northwest-southeast linear-trending anomaly throughout much of the Copau claim area, and this encouraging information was then backed up by an IP survey that located a strong chargeability response underlying the southwestern portion of the property…the chargeability anomaly occurs from depths of approximately 200 metres with increasing response to 450 metres (similar to patterns at North ROK), which was the maximum reading depth of the IP…the present known extent of the anomaly varies between approximately 300 and 400 metres wide (east-west) and over 1,200 metres long (north-south), appearing open to both the west and south and at depth…

Copau is located approximately 5 km from Colorado’s discovery…it’s actually situated between North ROK and Imperial Metals’ (III, TSX) Red Chris Mine (11 km to the south of Copau) which is expected to go into production next year… meanwhile, Colorado is also currently drilling its optioned Eldorado Property which is just a couple of kilometres from Copau…so there’s plenty of activity in the area…more good results from Colorado (from either North ROK or Eldorado), and speculation regarding drilling at Copau, could give investors a real victory with VVN…and if there’s a hit at Copau, look out…Victory’s property has easy road and water access (this is not helicopter-supported drilling)…we also wouldn’t be surprised if the company were to add to its land position in the area, given its knowledge of the region and its stronger financial position…this is the best time, for a company positioned to do so, to pick up very prospective ground from weak players…it’s reasonable to believe that VVN is on the hunt…

Victory’s share structure has us particularly excited as well…at the moment, VVN has just 17.5 million shares outstanding…the company was first listed in August, 2011, raising about $1 million in its IPO at 15 cents…there are 9 million warrants outstanding, at an average price of 19 cents, and just over a million stock options mostly at 10 cents…the company has been careful in managing its cash (a good sign) and is boosting its current cash reserves of $400,000 with an over-subscribed financing at a nickel and another financing announced yesterday at 6 cents…the two private placements will raise in total approximately another $500,000, arming Victory with nearly $1 million as it proceeds to a drill program with a tight float…of course the shares issued in these two financings are locked up until September or so…

Below is an updated VVN chart, and note the Fib. target…there is very strong technical support at 7 and 8 cents…as always, perform your own due diligence but we like the prospects for VVN as this northern B.C. discovery story in the prolific Iskut River region continues to unfold…

Colorado Resources (CXO, TSX-V)

Colorado Resources (CXO, TSX-V) has an $8 million war chest to determine the potential of North ROK where the mapped Mabon-Edon porphyry body strike (see below) is approximately 2.4 km long, trending NNW-SSE, and 1+ km wide…Imperial Metals’ Red Chris porphyry body trends NE-SW with essentially the same strike length and width…both sub-volcanic intrusives are of the same Jurassic age and occur within the same general volcanic host rock assemblages…Copper-Gold ratios at the two properties are comparable…of course there’s still a lot to learn about North ROK as results from only 1 hole have been released to date…Red Chris is a deep-rooted deposit, and the same could be true at North ROK but we have no way of knowing until more results come in…the Edon portion of the target area (reportedly 250 metres topographically higher than the Mabon discovery drill hole collar site to the north) is going to be critical in terms of the potential size of this possible deposit, and it makes sense that Colorado will carry out more geophysical surveys in this area in advance of a potential major ramp-up in drilling…

Probe Mines (PRB, TSX-V) Announces $15 Million Financing

Probe Mines (PRB, TSX-V), which we’ve liked a lot and even more so given current prices, announced a $15 million bought deal financing (flow-through) this morning at a 75% premium to its share price…the deal is being put together by a group of syndicates led by Cormark Securities Inc. and BMO Capital Markets…7.5 million units at $2.00 per share which includes three-quarters of a share purchase warrant (exercisable at $2.10 per share for 2 years) per unit…Probe already had approximately $30 in cash…at yesterday’s closing price of $1.14, PRB’s market cap (excluding this financing which is expected to close May 28) is only $77.5 million…again, the company will have $45 million in cash and a growing multi-million ounce deposit at Borden Lake in northern Ontario…PRB is up 3 cents at $1.17 in early trading following the news…

Bears Lining Up Against Canada, John Examines Dollar Chart

This story was carried this morning by CNBC…Steve Eisman, the hedge fund manager who famously bet against mortgages in the United States in the run-up to the 2008 financial crash, has recommended investors now bet against Canada’s mortgage lenders and banks…Eisman is the founder and portfolio manager of hedge fund Emrys Partners which rose to prominence with subprime mortgage bets that were chronicled by Michael Lewis in the book “Big Short”…Eisman is wary of Canadian mortgage originator Home Capital Group in particular, according to Reuters…and some investors appear to have taken his advice as the stock was down 4% yesterday…”If housing rolls over, this company is going to have serious problems”, Reuters cited him as saying at the Sohn Investment Conference…the news agency said he added that the housing market is troubled and estimated the domestic funding gap for the six big Canadian banks at roughly $427 billion…house prices in Canada have doubled in the last ten years, according to the Teranet-National Bank Composite House Price Index…the surge in the index, which measures price changes for repeat sales of single-family homes, has stuttered this year, falling back by 0.09 percent in what some believe is a cooling off period…Canadian property prices are among the most expensive in the world relative to income, rents and per-capita GDP, and have been fueled by record levels of consumer debt…

Eisman is certainly not alone in his bearish views on Canada…betting against the Canadian dollar is a popular trade right now among hedge funds, and even TD economists are jumping in…the loonie is set to fly south and soon, say TD economists, who believe the currency will drop as low as 90 cents over the next year…it’s the view of economists Francis Fong and Leslie Preston that “Canada has lost much of its economic growth advantage”, and they expect Canada to lag the United States this year and next…”A depreciation in the currency towards its equillibrium value (80 to 90 cents) would help the competitiveness of Canada’s exporters”, they say…”For several years, observers have stressed that given record levels of household debt and a move towards fiscal restraint, the economy must increasingly be driven by exports and business investment…a lower loonie should help facilitate that shift…if you look at the fundamental factors driving the Canadian dollar, we think the outlook is all down”…

So What Do The Charts Say?

John has 3 charts this morning on the Canadian dollar and they combine to paint a very interesting picture…

First, let’s take a look at the short-term with a 15-month daily chart…the dollar clearly has strong support at 97 cents and a “cup with handle” pattern appears to be forming which has to be considered bullish…note the down trend line in place since last fall, however, which is consistent with weakness in the Venture and the commodities sector in general…the dollar pushed right up against that resistance yesterday before a late sell-off…the “handle”, therefore, is starting to take shape…the interpretation is that after the handle forms, the dollar will make another push higher which will take it through the down trend line to the $1.01 target level…

Long-Term Dollar Chart – 20-Year Monthly

A couple of interesting things regarding the long-term Canadian dollar chart…first, note that only once over the last decade has the RSI(14) in this 20-year monthly chart fallen significantly below the 50 level…that’s unusual in any market…the period of best strength was between 2003 and late 2007 when the dollar surged from the low ’60’s to a $1.10, thanks to a big run in commodity prices…the 2008 Crash sent the dollar tumbling into the upper ’70’s before a recovery set in that took it back to a high of $1.06 in 2011…what has formed since then is a symmetrical triangle as pointed out in the chart below…the move to $1.01 as mentioned above is consistent with this chart as the dollar would be testing resistance…at some point, either later this year or next, the dollar is either going to break out above the triangle or collapse below it…based on fundamentals, which includes a slowdown in growth in China which helped fuel the dollar rise between 2007 and 2007, our guess is that the dollar will break lower…in fact, the 90-cent level postulated yesterday by TD would simply be a normal Fibonacci retracement of the gain since the lows of the Crash…so could we see a 90-cent loonie by next year?…absolutely…

Below is a 12-year monthly Canadian dollar chart in comparison with the Venture…while we do see the strong possibility of a rally in the Venture over the short-term, we don’t believe we’ve yet since the lows in this Index in part because both Gold and the Canadian dollar still have significant downside vulnerabilities…the Venture topped out just before the loonie did in 2007, and in all probability the Venture will finally bottom out just before the dollar does…we can;t be certain, of course, of the exact timing…