TSX Venture Exchange And Gold
The Venture Exchange slipped for the fourth consecutive week, falling 50 points to 1556, but Friday’s 15-point recovery is likely a sign the Index is beginning to work its way out of oversold conditions. This has been a disappointing month for the CDNX (off 7%) and the TSX Gold Index (down 9.3%), both led lower by a 10% plunge in Gold from its late February 2012 high.
The performance of the CDNX in January has always been a very reliable indicator of the trend for the year, so that’s just one of many reasons we continue to be bullish regarding the “big picture” outlook for this market. At this point, the wisest conclusion one can come to concerning the pullback we’ve seen this month is that it has been a normal retracement of the gains experienced since December. The CDNX fell as low as 1399 during the final month of 2011. It rallied from there, closing the year at 1485 and climbing as high as 1696 February 29, a gain of 21% in just over two months. We’ve now seen what should be considered a normal Fibonacci retracement of 50% as John illustrates in the 6-month daily chart below. The support band in yellow is strong. RSI(14) has just bounced off previous support while the daily Slow Stochastics(14) – not displayed here – shows very oversold conditions, nearly identical to what was seen in December. With the end of the first quarter approaching, we expect a decent finish to the month as investors adjust their portfolios and search for bargains. This is not a time to be discouraged.
Gold
Gold rallied Friday to close the week essentially unchanged (up $3 an ounce) at $1,663. The interesting thing is that on a closing basis, Gold managed to hold support at the Fibonacci 50% retracement level of $1,643. For now, Gold will find significant resistance between $1,672, as shown on the chart below, and the $1,690 area which is where the 100 and 200-day moving averages (20 and 40 week SMA’s) currently sit. Notice how the RSI(14) recent overbought condition has completely unwound with a bullish “W” forming below the 40% level. Gold’s rising 300-day moving average, which has provided tremendous support throughout this decade-long bull run, is at $1,614. While we could still see some consolidation in the days ahead, look for continued support in the low $1,640’s or, failing that, right around $1,600.
Silver fell another 32 cents for the week to $32.56. Copper was off a nickel to $3.81. Crude Oil slipped 19 cents to $107.06 ($100 appears to be the new “floor”) while the U.S. Dollar Index lost half a point to 79.30.
After closing up shop for five days over the introduction of an additional tax on Gold imports, bullion traders across India decided to open their shops on Thursday, following late-night developments with government officials to end the impasse. More than 100,000 bullion dealers across the country had shut their shops as a form of protest, and traders estimate they could have suffered a revenue loss of over $700 million in sales
Although India may have increased taxes for Gold, the move could present an opportunity for Silver – the poor man’s Gold – to shine. After escaping India’s budget reforms, investors have shown a keen interest in buying one kilo Silver bars. On Friday, India’s Finance Minister exempted branded Silver jewelry from excise duty. Silver coins of 99.9% purity and above were also exempted from excise duty. However, the excise duty on refined Gold was doubled from 1.5 to 3%. “Silver has clearly been exempted for a reason,” said Prithviraj Kothari, president of the Bombay Bullion Association. “Out of $50 billion worth of imports of precious metals into India, Silver imports were just $4 billion, while that for Gold was the other $46 billion,” he said.
The “Big Picture” View Of Gold
As Frank Holmes so effectively illustrates at www.usfunds.com, Gold is being 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, is having a huge impact on Gold.
The fundamental 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 and negative real interest rates that won’t end anytime soon (inflation is greater than the nominal interest rate even in parts of the world where rates are increasing), money supply growth, massive government debt from the United States to Europe, central bank buying, flat mine supply, physical demand, investment demand, emerging market growth, geopolitical unrest and conflicts, and inflation concerns…the list goes on. It’s hard to imagine Gold not performing well in this environment. The Middle East is being turned on its head and that could ultimately have major positive consequences for Gold.
I would have expect BMR saying something about GBB in this weekend review. They are coming out with their first 43-101 next week. A milestone and rockbottom to the shareprice. Seems at BMR they only have Rainbow in the picture. And many shares in the passed the commented on you won’t hear from anymore. Sometimes it’s also good to commit when you were wrong on your advice. And what about a stock like Sidon ahummm sorry Cameo Resources??? Have a good weekend….
Comment by Arjan — March 25, 2012 @ 5:58 am
Appreciate your feedback, Arjan, and I’m having a great weekend, thank you. We’re looking forward to seeing what GBB comes out with, and then we’ll comment. I remain a huge believer in the potential of the Granada Gold Property. Nothing wrong with the drill results over the last year – the problem has been with execution (or lack thereof) on the ground (i.e., GBB’s problem with GENIVAR which was very unfortunate). Hopefully with SGS, things will be better. I like what they’re currently doing which is drilling deep in the northern part of the Eastern Extension. This could reveal a lot. I doubt the 43-101 resource estimate will be as strong as it could have been, given the fact GBB appears to be missing some data because of the GENIVAR issues. But at least it’ll be a start.
Arjan, this market is not without huge risks. As investors, the risks we face include management mistakes (many CDNX companies are poorly run), government policies, commodity prices, the economy, exploration results, and our own emotions – we are often our worst enemies when we fall victim to fear and greed. I have said this before and it’s a wise strategy – when you are down 15 or 20% on a CDNX play, sell. Minimize your losses. The key to making money in this market is keeping your losses to a minimum and letting your winners run (but don’t get greedy in the process). I remember, in late 2010, I took a lot of heat for saying investors shouldn’t fall in love with Sidon. At the time it was trading in the mid-to-upper teens. There were many people who had tripled their money but that wasn’t good enough (greed factor).
I make no apologies for highlighting Rainbow, but it’s not fair to say we only have RBW in the picture. That just isn’t the case. However, it’s always best to focus on quality, not quantity. It only takes one stock to build a fortune. In the last half of last year, I was so frustrated with so many companies on the CDNX I decided to invest as much time as necessary to search for just one company that was extremely well-run and met a whole series of conditions which would give it the best chance possible of huge success in 2012. And lo and behold, RBW is up 64% this year. How many CDNX stocks are up 64% in the first quarter of 2012? Not very many.
Comment by Jon - BMR — March 25, 2012 @ 7:34 am
Hi Jon,
Thank you for commenting. I expect that GBB wil form with the 43-101 coming out this week a hard rock bottom to the shareprice. My guess is tuesday at the start of the week. Fingers crossed. Have a good evening.
Cheers,
Arjan
Comment by Arjan — March 25, 2012 @ 9:23 am
RBW shaping up to take out 30 cents early next week. Broke out last week from a flag and now on the way to 35-40 cents! Some news from the International and we will be flying.
Keep up BMR!
Comment by Steve — March 25, 2012 @ 9:36 am
Won’t be long before these guys sell their position in RBW and move on to the next big thing. Go back and look what the daily pump was over the past several months and see what they say about them now. This site is appropriately priced, that’s for sure.
Comment by mike — March 25, 2012 @ 12:53 pm
Jon, I would have to dissagree with you. Rainbow is pumped daily just like gbb was in 2010. Also, there are hundreds of stocks that have gained more than 60% since Jan. 1st. some such as mdx have come down and doubled again. Just my opinion.
Comment by dave — March 26, 2012 @ 7:11 am