TSX Venture Exchange and Gold
The 970 area continues to serve as major resistance for the Venture which climbed as high as 971 intra-day Tuesday before finishing the week at 951, an 11-point drop from the previous Friday. Investors must be patient. The overall technical picture is looking better for the Venture with upsloping support forming an ascending triangle as shown in John’s 9-month chart below. Buying pressure also continues to increase. As soon as the Index does push through 970 (assuming it does), this will mark the start of a significant rally that should give the Venture enough momentum to test its 100 and/or 200-day moving averages (SMA’s) which are currently at 1065 and 1160, respectively. Whether that will be just another bear market rally remains to be seen. But even a bear market rally can be extremely profitable if you’re in the right stocks.
Gold
Gold is having a hard time staying above the $1,400 level, and tumbled $29 an ounce Friday to finish $3 lower for the week at $1,385. Again, investors must be patient. Interestingly, a bullish low “W” pattern has formed in the RSI(14) in the 2-year weekly chart. The April-May double bottom, coupled with very strong physical demand in the mid-$1,300’s, has us convinced that for now at least Gold should hold up well with the strong probability of a convincing push through the $1,400 level over the summer. The COT structure is bullish with commercial traders’ net short positions at their lowest levels since the October, 2008, bottom.
In India, the world’s largest bullion market, taxes on Gold imports have been hiked once again in a futile attempt to dampen record imports of the yellow metal…the South Asian nation is battling a record current account deficit at a time when physical demand for jewelry and investment is at very high levels…effective immediately, bullion imports are subject to an 8% levy, up from the previous 6%…it’s worth noticing that the levy stood at 2% at the beginning of last year…the tri-fold increase over the last 15 months has had minimal effects on improving the trade deficit as Indian merchants and buyers find alternative ways to circumvent government measures.
Silver continues to struggle, falling 58 cents for the week to close at $21.69. Copper was off a penny at $3.27. Crude Oil jumped $4.06 a barrel to $96.03 while the U.S. Dollar Index got hit hard, losing 1.5 points to finish at 81.69.
The “Big Picture” View Of Gold
As Frank Holmes so effectively illustrates at www.usfunds.com, the long-term bull market in Gold has been driven by both the Fear Trade and the Love Trade. The transfer of wealth from west to east, and the accumulation of wealth particularly in China and India, has had a huge impact on bullion. Despite its current weakness, the fundamental long-term case for Gold remains incredibly strong – currency instability and an overall lack of confidence in fiat currencies, governments and world leaders in general, an environment of historically low interest rates, a Fed balance sheet now in excess of $3 trillion and expanding at $85 billion a month, money supply growth around the globe, massive government debt from the United States to Europe, central bank buying, flat mine supply, physical demand, emerging market growth, geopolitical unrest and conflicts…the list goes on. However, deflation is prevailing over inflation in the world economy and this had a lot to do with Gold’s recent plunge below the technically and psychologically important $1,500 level, along with the strong performance of equities which are drawing money away from bullion. Where and when Gold bottoms out in this cyclical correction is anyone’s guess, but we do expect new all-time highs later in the decade. There are many reasons to believe that Gold’s long-term bull market is still intact despite a major correction from the 2011 all-time high of just above $1,900 an ounce.
