Major volatility in precious metals markets since trading for the new week began last night…not surprisingly, there was some knee-jerk reaction to the decision by Swiss voters to overwhelmingly reject a proposal to lift central bank bullion holdings to 20% of its foreign exchange reserves…Gold futures slid more than $25 an ounce to a low of $1,143 before bouncing back in a powerful way…the metal got some help in that regard on the news that Moody’s had cut Japan’s sovereign debt rating…as of 8:00 am Pacific, Gold is up $30 an ounce at $1,198…Silver, which slipped as low as $14.42, has also rebounded sharply…it’s now up 71 cents at $16.29…Copper has added 2 pennies to $2.94…Crude Oil sank briefly below $64 overnight but is now up $1.12 a barrel to $67.26 as it tries to find an equilibrium below $70 a barrel…the U.S. Dollar Index, meanwhile, has retreated nearly half a point to 87.96…
India on Friday removed its current 80:20 import rule which required that 20% of all imported Gold had to be exported before any new shipments could be brought in…that rule was largely ineffective and contributed to a growing smuggling trade…however, the removal of this constraint on the official supply chain should nonetheless be positive for Gold as the inflow of metal into India is freed up a little more…
Holdings of the world’s largest Gold-backed exchange-traded fund, SPDR Gold Shares, fell by 1.2 tonnes on Friday to a 6-year low of 717.6 tonnes.
Net bullish-dollar positions have reached a record of $48 billion with the extension of a sharp rally in the dollar that began early this summer…the last time there was a net-long position to this extent was in 2009 which was followed shortly thereafter by a sharp decline in the dollar and a move higher in Gold…
Gold-Oil Comparative Chart
This 34-year monthly chart from John compares the price of Gold with WTIC over the last 3-and-half decades…the 2 commodities don’t always move exactly in tandem as you can see below but there is often a close correlation…generally, Gold has performed better relative to Oil since the 2008 financial crisis, a trend that seems likely to continue…bullion’s plunge wasn’t nearly as steep as Oil’s was in 2008–2009, and the metal has been holding up impressively well in recent months despite a 40% drop in the Oil price and a surging greenback…
Gold-Oil Long-Term Comparative Monthly Chart
WTIC 2-Year Weekly Chart
Where will Crude Oil find a floor?…market forces will decide that, but keep in mind that markets often take prices to extremes…the world is awash in Oil at the moment, and that’s not going to end anytime soon…the fracking boom has driven U.S. output to the highest in 3 decades, contributing to a global surplus that Venezuela last week estimated at 2 million barrels a day, more than the production of 5 OPEC members…U.S. output is expected to increase further in 2015 (from a current level of about 9.1 million bpd to 9.4 million bpd)…
Based on the oversupply problem, plus long-term charts, it wouldn’t be surprising if WTIC traded as low as $40 to $50 a barrel at some point in 2015 before recovering (nothing cures low prices like low prices)…who will blink first, OPEC or U.S. producers?…it’s possible that OPEC – the Saudis in particular – could be underestimating the resilience of many North American shale producers…
Companies loaded with too much debt or operating in fringe locations face big trouble if U.S. Crude prices remain below $70 for an extended period…but some analysts believe U.S. companies will attempt to outlast OPEC which is facing pressures too…the Saudis are low-cost producers (it’s believed they can break even at $30 a barrel), but current prices are below the level needed by 9 member states to balance their budgets according to data compiled by Bloomberg…
“We are entering a new era for Oil prices, where the market itself will manage supply, no longer Saudi Arabia and OPEC,” said Mike Wittner, the head of Oil research at Societe Generale SA in New York. “It’s huge. This is a signal that they’re throwing in the towel. The markets have changed for many years to come.”
WTIC 2-Year Weekly Chart
Oil’s problems began after a drop below a long-term support trendline in August and September…technical pressures have been intense, and important support at $70 has been breached (that level is now new resistance)…Oil’s immediate challenge is to stabilize and then attempt to overcome the current downtrend line…periodic rallies out of temporarily very oversold conditions can certainly be expected, but the biggest risk is still to the downside…
WTIC Long-Term Chart
Interestingly, RSI(14) has plunged to its lowest level ever (15%) on this 19-year weekly WTIC chart… that’s what a 40% sell-off can do…at some point, we’re likely to see a rally out of oversold conditions but this could easily be followed by another plunge that takes Oil to a new low…
Today’s Markets
Asia
China’s red-hot Shanghai Composite took a breather overnight, slipping 2 points to close at 2681…investors digested 2 separate gauges of Chinese November factory activity today…the official PMI for November fell to 50.3, missing estimates for a 50.6 figure and slowing from October’s reading of 50.8…meanwhile, HSBC’s final reading hit a 6-month low of 50, in line with the bank’s preliminary figure but lower than October’s final reading of 50.4…
Japanese shares surged to a new 7-year high as the yen weakened against the dollar…
Europe
European markets are down modestly in late trading overseas…the euro zone’s manufacturing PMI for November came in slightly below expectations at 50.1 after a 50.6 reading in October…
North America
The Dow is down 63 points as of 8:00 am Pacific…surprisingly, Americans spent about 11% less during the long holiday weekend ahead of Cyber Monday’s online sales, according to survey results released yesterday by the National Retail Federation…
The TSX is off 152 points while the Venture has fallen another 11 points to 730 as of 8:00 am Pacific…
Venture 4-Month Daily Chart
The 1 encouraging aspect of the current Venture chart is the RSI(14) divergence with price, clearly evident in this 4-month daily…it’ll be interesting to see if the RSI(14) uptrend line holds over the next week or 2…there should be strong support around the 710 level…
Last year, it was wise to be a buyer when the Index was soft through the first couple weeks of the month…this year will probably be no different, and the current set-up in commodities is such that we could see a tremendous rally going into year-end and the early part of 2015…
Venture 5-Year Weekly Chart
For more than a year, the Venture was riding an upsloping RSI(14) trendline but that all changed in September…however, the good news is that the extent of current oversold conditions tells us that the Index is not far off another important low which means a turnaround is on its way beginning later this month…
For some reason, investors are the most discouraged when RSI(14) levels are at current extremes…likewise, they’re the most bullish when conditions are extremely overbought as they were in late 2010 and early 2011…
This chart is telling us to embrace the current weakness and profit from it in the early part of 2015…
Silver Short-Term Chart
Silver disappointed last week when it couldn’t gain traction after breaking above a downtrend line in place since the summer on the 9-month daily chart…the sudden and sharp sell-off in Oil obviously got in the way of Silver pushing higher…
On a positive note, Silver’s resilience after briefly plunging to nearly $14 an ounce in overnight trading is impressive indeed…the metal is making another attempt to push through the downtrend line – we’ll see if that occurs this week…for now, critical support has again held at $15…
Silver Long-Term Chart
This 34-year monthly chart continues to give hope that Silver could be preparing for a powerful “Wave 5” move to the upside, though we caution that this could take some time to play out (if indeed this theory is correct)…
RSI(14) is at previous long-term support and this will need to hold along with key support in the immediate vicinity of $15…
Fundamentally, Silver has been hurt by a slowdown in global economic growth – if economies in the euro zone, China and Japan can quickly emerge out of a collective slump, the Silver price could accelerate rapidly…
Wow. gold up 50.00 and up 78.00 from low of 1143.
Comment by Tony T — December 1, 2014 @ 9:59 am
Jon, I took a small position in GGI today. Looking at the chart, something is going to happen soon (tax selling and all), she is either going to break up or down but I’m betting up.
Comment by dave — December 1, 2014 @ 10:05 am
An announcement from GGI that the financing is done and that 2 or 3 new rigs will be used soon would help the SP. Also, some results are due out in next couple of weeks.
Comment by Tom UK — December 1, 2014 @ 6:32 pm
Jon
what do you consider to be a small position or a large position in a stock with a cap like GGI. This question is in no way reflected at anyone on this board, I just wonder for myself. Actually anyone who wants to weigh in on this please go ahead. Thanks
Comment by Greg — December 1, 2014 @ 7:08 pm
Hi Greg, depends of course on the perspective of who’s being asked the question…a “large” position in this case could mean a few hundred thousand shares and more…small position, less than 100,000…big leap from small to large so you’d have to add a “medium” category…other people would break those numbers down differently I’m sure…
Comment by Jon - BMR — December 1, 2014 @ 7:32 pm
Thanks Jon
another question, who do you speculate to be the International silver producer that has been looking at GGI??
thanks again
Comment by Greg — December 1, 2014 @ 8:33 pm
Greg, the list of possibles I suspect would include any large producer who’s already operating in Mexico. That narrows the field down quite considerably. Mexico is certainly attracting increased attention, and Reuters is now reporting that Coeur Mining Inc. is in advanced negotiations to acquire Paramount Gold & Silver. It’s Paramount’s San Miguel Project – the best part of which (the Don Ese vein) was identified originally by GGI – that Coeur apparently has the greatest interest in, as it’s contiguous to their Palmarejo Silver-Gold Mine. Don Ese would extend the life of Palmarejo by several years as one of the largest and highest grade silver and gold mines in the world. GGI’s credibility in Mexico is strong, which is another reason why the Rodadero discovery is being taken very seriously at this early stage.
Comment by Jon - BMR — December 1, 2014 @ 9:04 pm
Hi Jon,
many readers here have bougt shares in different plays at Sheslay valley. What happened there? We want an answer! Is there no gold, is it the goldprice, bad management or
what? I would like to have your opinionon on this, should we sell there and buy other companies?
Yvonne!
Comment by Yvonne Kindström — December 1, 2014 @ 10:09 pm
Yvonne, geologically, the Sheslay district is full of tremendous opportunity. We saw an important drilling discovery by Doubleview this year which requires additional follow-up obviously, and other properties such as the Star, the Grizzly, the Hackett and more require additional aggressive exploration as more deposits are going to be found. Two things set the area back temporarily – the inability of Prosper Gold to communicate the Star Project effectively (in this business, if you can’t communicate that’s a major problem), and of course the slide in the markets since September. The Sheslay area will get back on its feet and the leaders in that regard will be Doubleview and Garibaldi, and GGI still has lots to say about the Grizzly. Prosper has a great project in the Star but they’re about the only ones who know it’s a great project. They failed hugely in telling their story. The PGX stock price confirms that (and they spent $5 million in the ground without even putting a single drill hole into the North Star target, unbelievable). As a whole, the market overall (because of metal prices) is more interested at the moment in higher grade situations. That’s the reality. The Sheslay district will rise again but all participants in the district would be wise to recognize that they are part of a single brand, not competitors with each other. Greed and ego in certain cases got in the way of huge opportunities for all players in the Sheslay district this year.
Comment by Jon - BMR — December 2, 2014 @ 4:33 am
Good question Yvonne. I’m having my doubts about DBV, both with management and the deposit. I know it is early days given the number of holes, but the grades at the Hat are pretty average and do not start from surface. The area around the last hole drilled looks promising, but I’m not sure that it will lead to an economic deposit. They still have other targets to drill but raising financing appears to be a slow process.
Prosper blew it as per Jon’s comments, but their deposit appears to be a more likely candidate to be economical to mine. I would rather buy prosper shares than DBV share at the moment.
GGI’s management is the only one that I have any real confidence in out of the 3. Promises of drilling the Sheslay area have not come to fruition, but I assume this is due to their exciting discovery in Mexico. The Grizzly will still be there next year. GGI have the largest area and they have done much ground work. They could hit big with just a few holes when they do drill. They are my biggest holding out of the 3.
Comment by Tom UK — December 2, 2014 @ 5:16 am
Jon I Didn’t know GGI was holding PZG shares. How many approx.? thanks in adv!!!
Comment by Greg J. — December 2, 2014 @ 5:22 am
JON: any update on the ABR financing at 2 cents?? Also, AIX plans to rollback, so, what is happening with these in the Shesleay?? Thanks for your responses.
Comment by STEVEN1 — December 2, 2014 @ 5:30 am
Hi Steven, I haven’t heard…will check into it.
Comment by Jon - BMR — December 2, 2014 @ 6:25 am
Greg J. When the deal was done on 2011 GGI received 6 million shares.
Comment by Robert — December 2, 2014 @ 10:42 am
Thanks Robert!! close to $6mil….if GGI still holds.
Comment by Greg J. — December 2, 2014 @ 11:38 am