BullMarketRun.ca

More tax-loss selling pressure was evident on the Venture last week, but much of that should now be behind this market as it enters the final half of the month and the last 10 trading days of the year.  Importantly, the Venture has managed to weather the usually “choppy seas” of the first couple weeks of December, and has held support at the 2+ year downtrend line that it finally broke above in October (we’ll post the updated 3-year weekly chart tomorrow morning).  So get ready for what we believe will be a strong finish to 2013, and a much brighter-looking 2014.

The Venture fell as low as 884 intra-day Thursday (a 5.5% drop for December) but bounced back to close Friday at 894, a 23-point loss for the week.  RSI(14) on the 3-month daily chart appears to have bottomed around 30 and is now pointing up.  The challenge for the Venture between now and the end of the month is to reverse course, push through the resistance areas noted and at least close above its 100-day SMA, currently at 936.  There’s every reason to believe that will occur.  The consolidation pattern since mid-April has laid the foundation for a coming sustained advance with an important breakout through stiff resistance in the 970′s.

The Seeds Have Been Planted (And Continue To Be Planted) For The Next Big Run In Gold Stocks

There’s no better cure for low prices than low prices.  The great benefit of the collapse in Gold prices this year is that it forced producers (at least most of them) to start to become much more lean and mean in terms of their cost structures. Producers, big and small, have started to make hard decisions in terms of costs, projects, and rationalizing their operating structures.  Exploration budgets among both producers and juniors have also been cut sharply.  In addition, government policies across much of the globe are making it more difficult (sometimes impossible) for mining companies to put Gold (or other) deposits into production, thanks to the ignorance of many politicians and the impact of radical and vocal environmentalists.  Ultimately, all these factors are going to create a supply problem – think about it, where are the next major Gold deposits going to come from? On top of that, grades have fallen significantly just over the past decade.

It doesn’t take a rocket scientist to figure out that the next huge bull market in Gold stocks is just around the corner due to demand-supply dynamics, much leaner producers who will suddenly become earnings machines, and a junior market that will be healthier simply because a lot of the “lifestyle” companies sucking money out of investors will simply disappear or get taken over by individuals or groups who are actually competent and serious about building shareholder value.   A healthy “cleansing” in the market has been taking place.  As this continues, more and more seeds are being planted for an incredible future move in well-managed Gold producers and explorers that could make the dotcom bubble look like a tea party.  As for the juniors, focus on the small universe of companies that have the ability to execute both on the ground and in the market.  Companies that are strong financially, have superior exploration prospects, competent management and clean share structures.

Gold

Gold prices swung in a range of about $40 last week as traders tried to gauge how mixed U.S. economic data and a congressional budget deal would affect the Federal Reserve’s decision on whether to curb its stimulus. Bullion shot higher early in the week, thanks in part to some short-covering, but ran into resistance around $1,260.  It gave up most of those gains, though it still finished up $8 for the week at $1,239.  Gold’s direction this coming week will have a lot to do with the outcome of the FMOC meeting Tuesday and Wednesday.  A potential “taper” has likely already been baked into the Gold price, so we’re looking for an upward bias in bullion prices following the Fed’s policy decision (whatever it is) going into year-end.  The U.S. Dollar Index continues to look weak and vulnerable, technically and fundamentally – a supportive factor for Gold.

Gold has been trading within a downsloping wedge since mid-July – bullion needs to break above this at some point in the near future in order to put the bears on the defensive.  The first significant resistance band is between $1,260 and $1,280.  The current RSI(14) trend in this 9-month daily chart from John is encouraging.

Keep An Eye On India

Gold premiums continue to soar in India – they reached $180 per ounce over London prices last week for immediate delivery, as jewelers argue there is no Gold available anywhere in the country following a severe slowdown in the recycled Gold trade, coupled with the government’s import restrictions.  Meanwhile, the winds of political change are blowing in that country.  Prime Minister Manmohan Singh’s government suffered a resounding setback a week ago as voters handed victories in three state polls to the opposition Hindu nationalist Bharativa Janata party, led by prime ministerial candidate Narendra Modi.  India’s general election is looming early next year.  Many investors are pinning their hopes on Modi who has campaigned as a pro-business, reform-minded leader.  He is not only a staunch Hinduist, where rites and ceremonies are abundant, but he is also the head of India’s most prolific Gujarat province, where he has led economic growth of 10% per year over the last decade on a platform of eliminating red tape and limiting government interference with private enterprise.  About 300,000 jewelers and bullion dealers are demanding the government ease import rules on Gold with many jewelers being forced to shut down shop. The hope for change appears in the form of Modi.

Silver gained 14 cents last week to close at $19.68 (John will have updated Silver charts as usual Monday morning).  Copper climbed 8 cents to finish at $3.29.  Crude Oil fell by about $1 a barrel, after a big jump the previous week, to close at $96.60.  The U.S. Dollar Index lost nearly one-tenth of a point to finish at 80.18.

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 this year’s drop, 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 $3.5 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 (especially from China), emerging market growth, geopolitical unrest and conflicts…the list goes on.  However, deflationary concerns around the globe and the prospect of Fed tapering by the end of the year (not likely now) had a lot to do with Gold’s plunge during the spring below the technically and psychologically important $1,500 level, along with the strong performance of equities which drew money away from bullion.  June’s low of $1,179 may have been the bottom for bullion – time will tell.  We do, however, expect new all-time highs as the decade progresses.  There are many reasons to believe that Gold’s long-term bull market is still intact despite this major correction from the 2011 all-time high of just above $1,900 an ounce.