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TSX Venture Exchange and Gold

After declining in 10 of the first 12 trading sessions this month through last Tuesday, the Venture showed signs Wednesday of turning a corner following a more dovish than expected Fed statement that drove the U.S. Dollar Index down sharply.  Confirmation of this short-term trend change occurred over the final 2 trading days of the week, and the Venture closed Friday at 671.  That snapped a 3-week losing skid and represented a modest 6-point gain over the previous Friday.

For now at least, the red-hot greenback, which has been a major negative influence on commodities and the Venture Exchange, has entered a “cooling off” or consolidation period that should see it test strong support around 96 after its recent very brief attempted breakout above 100.  The possibility of a more substantial dollar correction exists but that will hinge on economic data to be released over the next couple of weeks.

For the third time already this year, the Venture has successfully tested Fib. support in the 650’s.  The first challenge for the Index now will be to overcome resistance at the declining 50-day moving average (SMA), currently 683.

RSI(14) on this 4-month daily chart has bounced off the 30% level and is gaining momentum, while weak buy pressure has replaced the sell pressure evident since early this month.  Be patient – it could take several more days for a potential rally in the Venture to become more obvious to most investors.

Venture 6-Month Daily Chart

This 6-month Venture chart shows how the Index was able to break above 2 important resistance levels over the last few months – the downtrend line (in December) and the 50-day SMA (in early February) – before some March mayhem took the Index down 7.2%.   The immediate technical picture is looking better now, however, and that includes a bullish “W” in the RSI(14).

What this market could really use is some exceptional news on the drilling front, a discovery of magnitude that injects fresh money and new hope into the sector.  There are certainly possibilities in that regard – not a lot, but some.  They often tend to occur near the bottom of a cycle, catching many participants by surprise.

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 in 2013 is that it forced producers (at least most of them) to start to become much more lean in terms of their cost structures. Producers, big and small, have started to make hard decisions in terms of costs, projects, and rationalizing their their overall operations. 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 carry out exploration or put Gold (or other) deposits into production, thanks to the ignorance of many politicians and the impact of radical and vocal environmentalists (technology has made it easier for groups opposing mining projects to organize and disseminate information, even in remote areas around the globe). Ultimately, all of these factors are going to eventually create a supply problem and therefore great opportunities in Gold and quality Gold stocks.  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.

6-Month Daily Gold – 10-Yr. Treasury Note Yield Comparative

The U.S. 10-Year Treasury note yield is declining again, after meeting resistance at its falling 200-day SMA early this month, and that’s positive for Gold which jumped $26 an ounce last week to break out of a slump and finish at $1,182.  The 12.7% drop in the price of bullion between late January and last week came after a 16% swing to the upside that started immediately following the early November low of $1,130.

Gold will likely attempt to test the $1,200 level again soon, given its current momentum, and how it behaves around that area will be interesting.

Silver surged by 7% last week, gaining $1.09 an ounce, to close at $16.73.  Copper strengthened again, adding 8 cents to finish at $2.74.  Crude Oil fell to new multi-year lows early in the week but recovered to close at $46.57, snapping a 4-week losing skid.  The Dollar Index, meanwhile, got hurt by Wednesday’s Fed statement and Janet Yellen’s comments, and fell more than 2 points to close at 97.80.   The 100 level is clearly critical near-term resistance while strong support exists at 96.

The “Big Picture” View Of Gold