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Gold has traded between $1,391 and $1,403 so far today…as of 7:00 am Pacific, bullion is up $7 an ounce at $1,395…Silver is 14 cents higher at $22.40…Copper is up a penny to $3.29…Crude Oil has added 38 cents to $92.43 while the U.S. Dollar Index has reversed and is now up one-tenth of a point at 83.35…

The latest COT report (May 28) shows the lowest collective net short position for the smart-money commercial traders since May, 2005…that means that over the last 8 years they have never been less fearful of a near-term fall in the price of Gold…meanwhile, massive amounts of short covering firepower remain in this market thanks to other participants such as large speculators…the bottom line is that the largest, best funded and best informed traders of Gold futures (commercial traders) have positioned for higher, not lower Gold prices. over the immediate to short-term at least…

Sovereign buyers like Russia are not the only ones benefiting from the price action created by Gold’s excessive sell-off in April…in Singapore, home to large communities of Chinese and Indian immigrants, unprecedented physical demand for the metal has drawn down inventories and made supply scarce…premiums for immediate delivery last week rose to $7 per ounce, setting new highs…premiums in other Asian countries have eased after Gold prices bounced off the two-year lows but remain well above their averages…

India, the world’s largest bullion consumer, plans to review import policy after shipments surged in the past two months, threatening to widen a record current-account deficit…the country can’t afford high levels of imports and policies will be reassessed if needed to curb purchases, Finance Minister Palaniappan Chidambaram told reporters in New Delhi today…he didn’t specify what changes could be made…imports may have been as high as 262 metric tons in May, he said…India tripled tax on imports since January last year to 6% and placed curbs on purchases by banks after bullion slumped the most in three decades in April, sparking a buying frenzy for jewelry, coins and bars…the Reserve Bank of India may ban all importers from shipping the metal on a consignment basis, a finance ministry official told reporters in New Delhi today, asking not to be identified (citing government rules)…the World Gold Council stated last week that India is poised for a quarterly demand record as imports reach 300 to 400 metric tons…that’s equal to almost half of last year’s total purchases…

China PMI At Lowest Level Since October

China’s factory activity shrank for the first time in 7 months in May as both domestic and external demand softened, a private survey showed, adding to concerns that the world’s second largest economy is losing momentum…the HSBC/Markit Purchasing Managers’ Index (PMI) for May slipped to 49.2, the lowest level since October, 2012, and down from April’s final reading of 50.4…the figure also was slightly lower than a preliminary reading of 49.6 released May 23…the reading adds to evidence in recent weeks that China’s economy is losing growth momentum, although the Chinese government’s official PMI, released on Saturday, ticked up to 50.8 in May from April’s 50.6…the official survey, however, focuses on bigger and state-owned firms…the IMF and OECD last week cut their forecasts for China’s 2013 economic growth to 7.75% and 7.8%, respectively…

Euro Zone Contraction Slows

The pace at which eurozone economies are contracting slowed in May, according to a leading manufacturing business survey, although the bloc is likely to remain in recession in the second quarter…the final Markit manufacturing PMI for the euro zone rose to 48.3 in May, up from 46.7 in April and an improvement on Markit’s initial estimate…any reading below 50 indicates a contraction in activity but the index suggested the contraction had hit its slowest pace since February, 2012…the data are watched as early indicators for gross domestic product readings…the firmer economic readings increased expectations that the ECB would likely refrain from acting at its rate-setting meeting later in the week…

S&P 500 P/E Ratios

Through the first 5 months of the year, the S&P 500 has climbed 14.3%…stock prices are not wildly out of line against earnings, however…P/E ratios are at 3-year highs but generally in line with historical averages…the S&P 500 currently trades at 14.4 x its earnings over the next year, and 15.8 x profits of the past year…below is a chart from this morning’s Wall Street Journal showing P/E ratios vs. trailing earnings since 2008…

The average P/E ratio since the 1870’s has been about 15…the S&P 500 currently sports a dividend yield of about 2.1%, below the 2.16% yield on 10-year Treasurys…until recently, stocks carried a higher dividend, encouraging investors to shift to stocks…

Today’s Markets

Japan’s Nikkei average extended its correction to hit a new 6-week low today as worries of a slowdown in China returned to the spotlight…the Nikkei slipped another 3.7% (513 points) to 13262…Japanese companies are still not heeding the political plea to raise their capital spendingg as a new reading today showed a spending drop of 3.9% in the first quarter…China’s Shanghai Composite, meanwhile, was relatively flat at 2299…European shares are modestly higher, thanks to the better-than-expected manufacturing data…the Dow is up 46 points at 15162 through the first 30 minutes of trading after Friday’s 200-point sell-off…the TSX is off 5 points while the Venture has gained 3 points to 965, putting it within shouting distance of the important 970 resistance level…Victory Ventures (VVN, TSX-V) has hit a new 52-week high of 14.5 cents this morning as drilling gets set to begin at the company’s Copau Property in the Iskut River area…

Colorado Resources (CXO, TSX-V) Updated Chart

John’s latest chart for Colorado Resources (CXO, TSX-V) shows a gradual unwinding of the stock’s recently overbought technical condition…the market is in a “waiting for news” mode with assay results for 3 of 4 holes still pending…since the announcement of the discovery at North ROK in late April, CXO has not traded below its 20-day moving average (SMA) which currently sits at $1.30…volume has tapered off recently but the bullish trend remains strong…CXO is up 6 cents at $1.43 in early trading…

Alpha Minerals (AMW, TSX-V)

Alpha Minerals (AMW, TSX-V) and 50% partner Fission Uranium Corp. (FCU, TSX-V) are both looking very strong as a major drill program continues at their Patterson Lake South Property…below is a chart for Alpha which shows a breakout Friday that needs to be confirmed, ideally today…the stock gained 19 cents Friday to close at $4.34 after a 27-cent jump the day before…

Aldrin Resource Corp. (ALN, TSX-V) Update

As we’ve mentioned, a stock to put on your radar screen is Aldrin Resource Corp. (ALN, TSX-V) which has just commenced an airborne magnetic and electromagnetic geophysical survey covering its Triple M Property 9 km south and 11 km west of the Alpha/Fission PLS discovery… ALN is currently sitting at strong resistance (note the down trendline in John’s 3-year weekly chart) but it’s reasonable to expect a breakout over the summer…

Updated Silver Charts – Short-Term & Long-Term

Little has changed technically in Silver over the last week as it continues to establish a base around $22…RSI(2) on both charts is certainly overdue to move out of oversold territory and perhaps that’s what we’ll see happen over the summer…the recently rising Gold to Silver ratio has been somewhat puzzling…it’s at odds with growth as it normally rises when U.S. business confidence is below 50 and indicating a contraction in the U.S. manufacturing sector…as Deutsche Bank has stated, a continued rise in the ratio “would be incompatible for an acceleration in U.S. growth during the second half of the year”…

Silver 3-Year Weekly Chart

Silver 11-Year Monthly Chart