TSX Venture Exchange and Gold
It was another rough week for the Venture Exchange which declined for the eighth consecutive week to 1398, a 62-point drop from the previous Friday. The old adage, “Sell In May And Go Away”, could become “Buy In May And Stay” in 2012 as oversold conditions as well as strong support levels suggest the Index is very close to a bottom. A turnaround or rally in May should be expected. Below is an updated CDNX chart from John.
Gold
Gold lost $17 for the week to close at $1,659. Silver was up 20 cents an ounce to $31.70. Copper gained 8 pennies to $3.83. Crude Oil jumped just over $1 a barrel to $102.83 while the U.S. Dollar Index fell three-quarters of a point to 79.14.
For what it’s worth, since late February, hedge funds, pension funds and other money managers have slashed by 39% their futures-market wagers that Gold will rise. In the same period, they increased by 87% their bets that prices will fall.
However, according to the median estimate of the top five precious-metals analysts in Bloomberg Rankings in the past two years, the Gold price will average $1,900 an ounce in the fourth quarter, a 16% increase over the current price. The analysts noted that central banks are joining investors in buying Gold, adding 439.7 tons in 2011, the most in almost five decades. Citigroup and Deutsche Bank predict purchases of 400 tons and 500 tons, respectively, in 2012 by central banks. Retail buying should continue as many individuals are worried about currency debasement. With real interest rates essentially at zero, any rise in long-term bond yields would destroy capital.
John’s 1-year weekly Gold chart shows the yellow metal resting comfortably at the top end of a strong support band.
The TSX Gold Index hit a new 52-week closing low last week of 310.71, a whopping 32% drop from last summer’s record high. That’s the biggest correction since a 25% haircut over a two- month period between early December, 2009, and February, 2010. History shows that the best time to be a buyer of Gold stocks is during a major but normal and healthy pullback (approx. 25-30%) like we’re seeing now or like what occurred in 2006, 2007, 2009 and 2010. Yes, a correction of this sort is almost an annual event.
CIBC commented last week on the extreme disparity between the current Gold price and Gold stocks by saying the minor drop in bullion compared with the huge drop in stocks suggests that “a massive oversold position for the equities has occurred in the last month”. This is an “unprecedented” period for Gold stocks, said CIBC.
Silver
GFMS forecasts a high of just above $40 for Silver this year with a short-term trading range of between $28.70 to $32.90 an ounce in the second quarter. While its research shows that the Silver supply is growing, it is interesting to note that net government sales of Silver fell by a hefty 74% to a 14-year low of 11.5 million ounces, driven by a sharp decline in disposals from Russia. In 2011, hedging in Silver amounted to about 10.7 million ounces or 334 tonnes of supply. New hedging was dominated by companies for whom silver is a by-product.
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.
John and Jon… perception is everything.. and the if the general market public could care less about anything, and just want to sell what ever they have, they will…. wont they??? regardless of value, oversold, newsletter peeps, and government stuff, the market will simply have a slow bleed to it.
Lakeshore gold being an example… and canaco… and GCU.. and of course I could go on… logistics and common sense are not at play here… agree???
if gold in the 4th 1/4 will be higher.. one wonders how much pain one will have to endure on the downside before the ‘probable’ rise happens… and who says it will be higher…??? while it should be doesnt mean it will….
One thing I dont understand is the amount of shares traded that are retail shares vs fund shares… I have seen a share price drop by 15% on 1500 shares because some bozo puts in a sell at market order… and all goes to hell in a hand basket.
Grandich talked about the jr market is possibly toast.. like it will never come back because there is no credibility or support for explorers et al since everyone in the last 4 years has been totally scorched.
and with the seasonality that exists, and the attitude of retail ‘investors’, any rally will be met by market selling yes???? volumes have dropped off to nothing, so are we really at support??? or at a cliff?? and it is just a question… since I wonder who will be there buying these distressed companies especially when the likes of Tony R and Basa spout and dont deliver…
why would anyone HAVE that confidence to support a company like that…
simply asking… I am in a big state of trust denial, and of course have lost 60% in the last 13 months… including over 20% in the last month… I have better companies tho…. and of course wonder what the future holds..
and I fear that the future is bag holding…..
so this isnt a rant, but a dialog… thats all… and hoping that somewhere someone can help put some light on my darkness… I fear the electricity is off….
and I dont really feel any better for the dialog…. I dont need my hand held, or patronization…. am I alone in my darkness:)????? are we just fools playing in the sandbox of a few… if that makes any sense…??? what forces are at work here…. ???
Comment by Jeremy — April 22, 2012 @ 2:59 pm
not justification but more of an infomercial…
Follow the money. When the invisible hand has reversed its positions of control as disclosed by signals in real leases spreads, DI readings in the futures and options markets, and ETF money flows the probability of market rally increases substantially. The public tends to be the only bagholder in the game of control.
from : http://edegrootinsights.blogspot.ca/
Comment by Jeremy — April 22, 2012 @ 3:21 pm
Jeremy
If we sold our shares, you can be sure the market would come back. I did really well in the
market, when i was selling every other day, but all of a sudden, i wanted to hold & now selling,
seems to be a thing of the past, unless one is willing to take huge losses… By the way,
Grandich did state that he thinks the market will come back. Good luck ! R !
Comment by Bert — April 22, 2012 @ 3:45 pm
Jeremy
You have a decision to make.
To sell and hold on to your 40% in cash or hold and believe the market will reverse.
I suggest you look at the history of the stock markets….to date they have ALWAYS recovered, but if you do not have that faith then you must sell to have peace of mind.
Personally I am holding and will weather the storm for I believe the markets will return. When exactly, I do not know, no-one does, but I believe they will reverse.
It is your decision.
Hope this helps.
Sincerely
Comment by John - BMR — April 22, 2012 @ 4:06 pm
Jeremy
I have sold part of my positions in some of my dogs but my strategy is, to keep adding to
my positions in CEV & SGC. If they do what i feel they will do, i will bounce back, along
with some other surprises. I am expecting news on SGC the latter part of next week or the
first part of the following week. As for CEV, they should start drilling the first part of
May, so i have my fingers crossed. I am not about to give up on the market just yet, it’s a
way of business for many & i feel they will find a way. Keep the faith. R !
Comment by Bert — April 22, 2012 @ 4:34 pm
PS
By the way, i really got down on the market sometime ago, but since, have bounced back. R !
Comment by Bert — April 22, 2012 @ 4:36 pm
Jeremy
I felt like that a while back, I was upsaide down big time in CQX but I held on FOR A LONG TIME , then for some stupid reason I sold like the day before
Comment by Greg — April 22, 2012 @ 7:46 pm
it went to 50 cents, I would have doubled my money, I was sick to my stomach, so the right companies can and do bounce back, long term nothing has changed, the dollar is toast, europe is toast, just a matter of time before QE3 if it hasn’t already, I do not trust the US GOVT, MY GOVT AT ALL, gold will sky rocket over 2000 an ounce, in the meantime I am trying to save as much money as I can to buy the good companies at ridiculous low prices because I do think they will be lower before they go higher,John and Jon talk about a once in a lifetime opportuinty to make a fortune, I
Comment by Greg — April 22, 2012 @ 7:54 pm
for some reason it keeps posting my writings before I am finished, anyway this could be the last great opportunity to buy good companies at low prices, The bull likes to buck off as many people as it can, and it is succeeding.
Comment by Greg — April 22, 2012 @ 7:55 pm
We will get our ass kicked today as well on the Venture. Look at the market over in Europe and the metals…… TSXV will slide through this “support” like a hot nife through butter…
RBW 15 cents?
The worst thing is that the Venture has performed soooo bad when the broad stock markets have done really well. What do you think will happen when the S&P rolls over?… Yeah that’s right, it will get crushed….
Forget about the penny juniors. Focus on cash flow. The explorers will go broke or get diluted until nothing is left.
Comment by Marky — April 23, 2012 @ 12:48 am
After looking at the markets this morning, all i can say is, oh my !!! Although i feel
down this a.m., i am not about to predict the demise of anything.. Part of the trouble
this a.m. is conjecture. The markets are concerned in part about a change of Government
in France, for goodness sake, the party is not over yet, why not wait until after the
run off, before panicking…They are also worried about something that happened in
Mexico to Walmart way back. They are also worried about having nothing to worry about.
Anyway, maybe this is what we need, a complete washout. As for the Venture, i will
suggest the extent of the damage will be to lose the gains made Friday, that seems
to be the pattern. Good luck my buddies, keep the faith ! We are still alive aren’t
we ? Until we sell, we haven’t lost a thing. R !
Comment by Bert — April 23, 2012 @ 3:00 am
PS
The big worry in the U.S. for sometime now was Gas prices, now that the prices have
dropped .055 cents per gallon, hardly a mention. Some of the negativity we hear
is compounded by the so called experts, who play the short game. Anyway, we should
talk after the markets end today, maybe we will be feeling a little better. Things
always seem to be better after a storm. R !
Comment by Bert — April 23, 2012 @ 3:09 am
Question mark ???????
Why do WE end sentences with question marks ??? Because we are
unsure of what we state. I am also guilty your Honor, but if we
are unsure, why bring it forward ??? There are folks on this board,
who are concerned about the market, about their cash, about their
wives kicking them in the arse, so why try to remind them of things,
which may never happen. I am trying to be positive, but i have
nothing to base it on, but i do know that things can change. By being
positive, i have a 50-50 chance of being right & if i am right, that
gives the folks out there a 100% boost. R !
Comment by Bert — April 23, 2012 @ 5:05 am
interesting dialog gents and ladies (assumption that there are some ladies here!!)
the storm Bert, is still building I suspect… we hope for a bernanke umbrella yes? capitulation needs volume yes?? peeps in Aug/sept of 2008 were saying the same things as the markets continued to dive, and yes they recovered… but wil it be the same this time?? and of course from what level..
there is no rhyme or reason for the baby out with the bath water scenario, but it is happening and if your neighbor is doing it, then maybe I should too, and thus the herd mentality
there are lessons learned here… and believe me I dont mean to be negative but more realistic.. and sharing my thoughts… as the downward trend builds steam this day… support at 1300ish… this is a 10 year flood…
and yes John.. a decision to be made.. and if the bernanke umbrella shows up this week.. that initial 10-20% rush, shouldnt be missed… but Berts approach is logical.. take your lumps on some, buy into the better stories, and hold on for dear life….:)
control the things you can, accept the things I cant, and the wisdom to know the difference!! Thx Dad!!
Comment by Jeremy — April 23, 2012 @ 6:23 am