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Gold has hovered between $1,302 and $1,320 so far today…as of 7:30 am Pacific, bullion is down $3 an ounce at $1,313 after posting its best day in 2 weeks yesterday…a big sell order rattled the bullion market Tuesday, driving it very close to important support in the $1,270’s, but sub-$1,300 Gold was too tempting to resist for some traders and investors yesterday…we’ll see if the yellow metal can consolidate at $1,300 and slightly above…yesterday’s rebound was encouraging…Silver is off 14 cents at $21.59…Copper is down 3 cents at $3.26…Crude Oil is off slightly at $103.89 while the struggling U.S. Dollar Index is relatively unchanged at 79.82…

It often takes a crisis to get something difficult and unpopular done, particularly in Washington which is so often in gridlock as it is now…that’s why we see a growing likelihood of the first-ever U.S. debt default in a couple of weeks…there were no breakthroughs during a midweek meeting at the White House between congressional leaders and President Obama late yesterday, and it seems that certain members of Congress just don’t fear the possibility of a default – they welcome it (or at least the imminent prospect of it) as a negotiating tool…as unpopular as Congress is, the Republicans should be able to get the public on their side in terms of the importance of Washington getting its fiscal house in order…it’ll be fascinating to see how this all plays out…one thing’s for sure – October is going to be a volatile month for Gold – the first 3 days of this 4th quarter have already demonstrated that…a dramatic move to the upside in Gold this month has to be considered a possibility…

The U.S. Treasury Department warned today that the economy could plunge into a downturn worse than the Great Recession if Congress fails to raise the federal borrowing limit and the country defaults on its debt obligations – a default could cause the nation’s credit markets to freeze, the value of the dollar to plummet and U.S. interest rates to skyrocket, according to the Treasury report released this morning…“As we saw two years ago, prolonged uncertainty over whether our nation will pay its bills in full and on time hurts our economy,” Treasury Secretary Jack Lew said in a statement. “Postponing a debt ceiling increase to the very last minute is exactly what our economy does not need – a self-inflicted wound harming families and businesses.”

Another excellent article by Mineweb’s Lawrence Williams this morning (“Gold Trading Or Gold Hoarding – Which Will Win Out?) at www.MineWeb.com…here’s just 1 paragraph of his argument…“China’s policy on this is not wholly transparent – it likes to keep the world guessing as to its true position.  There is a strong body of opinion that believes that China has been building its official Gold reserves substantially, but without announcing this.  What we do know for sure is that Chinese banks have been actively encouraging Chinese citizens to buy precious metals for some years now – and the Chinese banks are effectively arms of the state.  And the belief is that the Chinese state, which invented paper money and has a long history of reliance on Gold as the principal recognition of wealth, believes that the more Gold the state and its citizens can accumulate, the stronger its position will become in the world order.”

No COT Data During Partial U.S. Government Shutdown

The U.S. Commodity Futures Trading Commission will not produce its weekly COT report (Commitment of Traders) or other public reports while the U.S. government is in the midst of a partial shutdown, the agency says on its web site…the COT report is normally released on Friday afternoons…the CFTC is now operating with a skeleton staff of 28 out of 680 employees, it says…the remaining employees “are necessary to address an imminent risk to the safety of human life or the protection of property.”

Updated Gold Chart

Below is the 3-month daily Gold chart showing how bullion has found strong support at the Fib. 38.2% level ($1,277) with RSI(14) also bouncing off support…a test of resistance in the mid-$1,360’s should be expected…the key for Gold will be to overcome that barrier and then push through critical resistance at $1,400…

Accommodative Monetary Policy Needed For “Years To Come” – Top U.S. Central Banker

Slow growth and a weak jobs market suggest the U.S. economy will continue to need support from accommodative monetary policy for years to come, making reductions in stimulus inappropriate at this point, a top U.S. central banker said yesterday…Boston Federal Reserve Bank President Eric Rosengren said he “strongly and unequivocally” supported the Fed’s unexpected decision last month to maintain its $85-billion-a-month bond-buying stimulus, adding that reducing the program “would have been premature”…the Fed, which has kept short-term rates near zero since December 2008, has been buying Treasurys and mortgage-backed securities to push down long-term borrowing costs and encourage investment and hiring…“If the economy evolves as expected, policy should in my view include only a very slow removal of accommodation over the next several years – and that should only occur when the data ratify our forecast for an improvement in real GDP and employment,” Rosengren said in remarks to the Lake Champlain Regional Chamber in South Burlington, Vermont…

U.S. Dollar Index Updated Chart

As we pointed out recently, the U.S. Dollar Index broke below an up trendline in place for two-and-a-half years (that 2.5-year uptrend coincided of course with the Venture bear market) – a rather ominous development…the Dollar Index has very strong support at 79, but the trendline has now become major resistance and future rallies will have a very difficult time penetrating that…the Index peaked in late June/early July, right around the time Gold touched $1,179 and the Venture hit a low of 859…

Today’s Markets

Japan’s Nikkei average was relatively unchanged overnight, slipping just 13 points…Chinese markets remain closed for National Day holidays…however, China’s official services purchasing manager’s index (PMI) for September came out today…it jumped to a 6-month high, lifting optimism that the world’s 2nd-largest economy is on a path to recovery…the data follows the mainland’s official manufacturing PMI report earlier this week, which showed a rise in September factory activity…European shares are mostly higher in late trading overseas…

In New York, the Dow is down 125 points as of 7:30 am Pacific…the TSX is 52 points lower while the Venture is bucking the trend, up a point to 948…

Venture Company Notes

Fission Uranium Inc. (FCU, TSX-V) has announced a $10 million bought-deal financing (closing date on or about October 24)…a syndicate of underwriters, led by Dundee Securities, has agreed to purchase 6.67 million subscription receipts, exchangeable into flow-through common shares of the company, by way of a private placement on a bought-deal basis, subject to all required regulatory approvals, at a price per subscription receipt of $1.50, for total gross proceeds of $10,005,000…the gross proceeds of the offering shall be deposited in escrow on the closing date and will be released from escrow to the Company immediately following the closing of the Alpha Minerals Inc. (AMW, TSX-V) transaction and after the spinout of the company’s non-Patterson Lake South assets…

Pine Cliff Energy Inc. (PNE, TSX-V) plans to raise approximately $20 million at $1.10 per share with the offering being conducted by a syndicate of underwriters and scheduled to close in about 3 weeks…

Caribou King Resources (CKR, TSX-V) is one of the most active Venture companies this morning…CKR reported that a prospecting team located a massive graphite zone exposed at surface at its TAC Property in Quebec…it was sampled by a portable drill and recovered 34 cm of graphite schist followed by 30 cm of mostly graphite…drilling was stopped for mechanical reasons, terminating in graphite at 74 cm…core samples have been submitted for analysis…the massive graphite sample correlates with a conductor identified from ground geophysical surveys…CKR is up a penny at 8.5 cents on volume of over 400,00 shares as of 7:30 am Pacific…

CDNX Updated Chart

The Venture has held up extremely well on some significant down days for Gold over the past month or so, and Tuesday was the latest example when bullion plunged by nearly $40 an ounce yet the Venture held steady…that’s usually a very positive sign for both the Venture and Gold…

Below is an updated 3-month daily Venture chart from John…notice the recent pattern with the Venture rebounding quickly anytime it has fallen below its EMA-20…the trend remains bullish, and RSI(14) has started to climb again after touching support…this is like a slow-moving train but at least it’s going in the right direction…patience should pay off…

Madalena Energy Inc. (MVN, TSX-V) Updated Chart

Madalena Energy (MVN, TSX-V) continues to look strong with the mid-40’s now providing solid technical support…excellent support as well at the weekly EMA(20)…this is definitely a play to watch closely in the coming weeks and beyond, as we’ve pointed out previously…through the first hour of trading, MVN is down a penny at 48 cents…

True Gold Mining Inc. (TGM, TSX-V) Updated Chart

True Gold Mining (TGM, TSX-V) has many factors in its favor and appears destined at some point to bust through resistance at 40 cents…below is an updated 2.5-year weekly chart from John…watch TGM closely as well…solid situation that certainly will react very positively to any jump in the Gold price…as of 7:30 am Pacific, TGM is off half a penny at 37.5 cents…

Mason Graphite Inc. (LLG, TSX-V) Updated Chart

This is a follow-up to a very recent chart from John after he picked up on a “hammer reversal” in Mason Graphite (LLG, TSX-V) at 29 cents in mid-September…what’s significant at the moment is that LLG is on the verge of breaking out above a downsloping channel in place since the beginning of the year…this needs to be confirmed on a closing basis…as of 7:30 am Pacific, LLG is up 3 pennies at 48 cents…

Note: John, Terry and Jon do not hold share positions in FCU, PNE, CKR, TGM, MVN or LLG.