TSX Venture Exchange and Gold
It was a bad week for North American markets but the Venture Exchange fared much better than the TSX, the Nasdaq and the S&P 500 which all tumbled between 2.44% and 3.68%. The Venture lost just 8 points or less than 1% for the week, finishing at 1405 and just above its rising 10-day moving average (SMA). There’s a very good chance that the 1363 low April 23/24 was the bottom of a 20% correction that began February 29 and spanned 38 sessions.
The Venture almost seemed to step back reluctantly Wednesday, Thursday and Friday – volume declined each day and the Index bounced back intra-day Friday from a low of 1394 – as the broader markets got hit much harder. The TSX, in fact, shed 462 points or 4% over those three days – twice the percentage loss posted by the Venture.
Take a look below at the latest CDNX chart from John. There are several encouraging signs including a very pronounced reversal in the CDNX relative to the price of Gold. This kind of development typically signals an imminent or near-term bullish move in Gold.
The TSX Gold Index hit a new 52-week low last week of 293, a whopping 36% correction from last summer’s high of 455. Meanwhile, the TSX itself is now down 0.7% for the year which makes it the worst-performing index on the global major market leaderboard – worse even than France, which now has its first Socialist president in nearly two decades, and the U.K. which has stumbled into a double-dip recession.
Gold
The Gold chart continues to look strong with support holding in the low $1,600’s and an inverted head-and-shoulders pattern very much intact. For the week, bullion was off $21 an ounce as it closed at $1,642. Silver dipped briefly below $30 an ounce and closed down 93 cents for the week at $30.34. Copper lost 11 cents to $3.86 while Crude Oil tumbled $6.44 a barrel to $98.49 on demand concerns and new hope for a possible negotiated settlement with Iran over its nuclear program (the Iranian regime cannot be trusted but naive politicians will continue to pursue a “peaceful” solution). The U.S. Dollar Index rose nearly a point for the week to 79.51.
Below is John’s updated Gold chart which shows strong support and increasing weekly buying pressure.
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.
We now wait to see how the markets interprets the elections in France & Greece.. It is my
humble opinion that a change was in order. Governments were trying to make dramatic changes
on the backs of, in particular, the poor, especially in Greece.. When you get riots & a
majority of the people in the streets, something has to be radically wrong. Also, lets not
forget the Greek senior, who, because of cuts to his pension, had to resort to the garbage
dumpster & sadly shot himself. It’s okay for the 1%, they don’t give a darn, but we can’t
forget the poor & the poorest of the poor. They are the lowly folk, they are the salt of
the Earth, they must never be forgotten.. Let the shagging market go down, let it show it’s
disapproval, but the poor are having their day & it’s looking good on them. R !
Comment by Bert — May 6, 2012 @ 11:22 am
I think “we ain’t seen nothing yet” and 1300 is coming and then sentiment will take the Venture much lower. Opportunities will arise to trade on the swings. What seems like good value today may not be the case in the Summer the precious metals stocks will likely continue their decline. The only hope will be QE3. We don’t hear much about Iceland, I wonder how they are fairing and if okay how they resolved their economic catastrophe.
Comment by Andrew — May 6, 2012 @ 1:55 pm
Iceland – doing very well.
google.com/hostednews/afp/article/ALeqM5h7j7lLEV2m95csq64W04DjwG9lHw?docId=CNG.f07951d248e08c101c9eefe7c8769715.1e1
bloomberg.com/news/2012-05-04/iceland-plans-corporate-eurobond-comeback-as-default-legacy-dims.html
reuters.com/article/2012/05/03/us-iceland-economy-idUSBRE8420RY20120503
Comment by kent parker — May 6, 2012 @ 2:59 pm
An interesting article:-
El-Erian: European Elections Complicate Outlook
Published: Sunday, 6 May 2012 | 3:56 PM ET
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Mohamed El-Erian
CEO of PIMCO
Sunday’s elections in Europe occurred in three countries with diverse economic circumstances (France, Germany, and Greece); and they were for different parts of government (presidential, regional, and parliamentary respectively). Yet the common message from the electorate is undeniable, reminiscent of a famous line in the 1976 movie Network: “I’m as mad as hell, and I’m not going to take this anymore!”
Much will be written about these elections, and rightly so as they could well mark a further evolution in Europe’s regional integration efforts. They unambiguously show that the electorate is angry and has lost confidence in the ability of traditional politicians to solve the region’s crisis. Indeed, many citizens are yearning for alternatives but, as yet, are not coalescing around a common view of what these should be. As a result, political realities will complicate even more what is an already delicate economic and financial outlook for Europe, the world’s largest economic area.
The first thing that Sunday’s elections scream out is anti-incumbency. French president Sarkozy joined the growing list of leaders that have been thrown out of office by disgruntled citizens. In Greece, exit polls suggest that the combination of the two usually dominant parties failed to secure even 50% of the votes. And in Germany, the ruling coalition seems to have experienced another setback.
The elections also show that an unusually large number of Europeans are opting for fringe parties, some of which are yet to define their vision beyond the need to dismantle the past. In Germany, exit polls imply that the Pirate party may have secured 8 percent of the vote in Schleswig-Holstein, giving it a voice in a third regional parliament after similar success in Saarland and Berlin.
In Greece, both extreme left and extreme right parties are celebrating a surge in their popularity. And all this follows France’s extreme right wing presidential candidate getting almost 20 percent of the votes in the first round a couple of weeks ago.
RELATED LINKS
Will Greek Elections Inflame the Debt Crisis?
At a Glance: European Leaders Booted From Office
Simply put, this translates into more fragmented European politics, at least in the short run. A politically more disparate Europe will find it even more challenging to reach common ground on a range of important issues.
Do not expect the sudden appearance of the type of decisive leadership that is needed at the national level to overcome long-standing impediments to growth, jobs and financial stability. And look for more fragmented regional interactions as cross-border coordination and collaboration become an even greater nightmare.
Markets will likely price in a larger risk premium following Sunday’s election outcomes – on account of political uncertainty and the related range of specific risk factors, including greater concerns about creditworthiness and eurozone exit. This speaks, first and foremost, to the spreads of certain European sovereigns, with negative spillover effects on equities and other risk assets.
Fortunately, there is a silver lining, though it will take some time. It comes in the form of a hope that the electorate’s message on Sunday will be interpreted by Europe’s leaders as a call for bold action.
According to PIMCO’s research, Europe needs to iterate simultaneously and on a timely basis to the following: a better policy mix at the national level that delivers both growth and solvency over the medium-term; stronger regional firewalls to act as circuit breakers to counter technical contagion; enhanced capital adequacy and asset quality for certain banks; and better institutional underpinnings.
And all this will only materialize properly in the context of a clearer vision of what Europe should look like in three years’ time.
Europe’s election results sound an alarm for European integration and, consequently, the wellbeing of both the region and the global economy. Let us hope that the inevitable short-term volatility is a precursor to a more decisive effort to deal with the continent’s festering problems.
Dr. Mohamed El-Erian is CEO and Co-CIO of PIMCO, the global investment manager.
Comment by Bert — May 6, 2012 @ 3:03 pm
Kent – thanks for posting those links, I’ll take the time to read through them. 🙂
Comment by Andrew — May 6, 2012 @ 3:34 pm
I WONDER IF WE SEE SOME News from RBW
Comment by BRIAN — May 6, 2012 @ 4:43 pm
Looks like a smackdown tomorrow.
Comment by Clint — May 6, 2012 @ 5:34 pm