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Gold has traded between $1,282 and $1,294 so far today…as of 7:45 am Pacific, bullion is down $3 an ounce at $1,285…Silver is off 29 cents at $19.84 (see updated Silver charts below)…Copper has slid 3 pennies to $3.21…Crude Oil has retreated 40 cents to $97.89 while the U.S. Dollar Index keeps charging higher, adding one-third of a point to 81.61…

August has certainly been kind to Silver over the last decade, particularly the last five years with a staggering average monthly return of 10.4% from 2009 through 2013 (last year’s gain was 19.3%)…Silver has finished up seven times in August over the last decade with an average gain of 3.6%…

Bank of America Merrill Lynch has revised higher its 2014 price targets for Gold, suggesting “the worst may be behind” after the sell-off in prices last year…BAML describes a market with reduced investor interest but steady off-take from emerging market nations. “Put differently, as investors put less ounces onto the market, purchases from countries including China and India were sufficient to absorb mine and scrap supply,” BAML says. “We believe that physical demand from emerging markets will gain further clout in the medium-term as countries get more affluent, suggesting the worst may be behind the Gold market.”  The bank gives a Q3 average forecast of $1,300 an ounce, then $1,350 in each of the next two quarters…for now, however, BAMl says “the unfolding normalization of the global macro economy and the implications this has for rates/inflation should continue to provide some headwinds for Gold.”

Today’s Equity Markets

Asia

After a 1.7% move to the upside Monday, China’s Shanghai Composite eased off 3 points overnight to close at 2220…China’s services sector grew at its slowest pace in nearly nine years in July, according to a survey from HSBC/Markit…the services PMI fell to 50 from June’s 15-month high of 53.1…Japan’s Nikkei average fell 154 points overnight to close at 15320…

Europe

European markets are up modestly in late trading overseas, thanks to some positive earnings reports…

North America

The Dow is off 46 points as of 7:45 am Pacific…it reversed intra-day yesterday, erasing a nearly 50-point decline in early trading to finish up 75 points which snapped a four-session losing skid…

Canadian markets are back in business after yesterday’s holiday…the TSX is unchanged at 15215 while the Venture is down 2 points at 999…

Rick Rule On Current Junior Resource Market

Interesting piece from Sprott Global Resource Investments Ltd. a few days ago – “Three Reasons To Start Buying Resource Juniors” from Rick Rule, Chairman and Founder of Sprott Global Resource Investments Ltd.

“In my experience…bull markets begin when the market as a whole exceeds expectations. Since expectations are currently exceedingly low, it won’t take much to beat them. Moves up from lower bases, discoveries, mergers and acquisitions, and particularly the generally low valuations today relative to market norms for the best companies in the sector, all point to a continued uptrend among resource stocks.

“The sector is already so risky that you should try to minimize those risks, not increase them. Bad management teams make the risks of the sector even worse. My friend Doug Casey often says that ‘when the wind is blowing even turkeys can fly.’ The problem though is that the turkeys need to stay fed long enough that they can last until the wind picks up.

“If you took all the juniors together, merging them into a single entity – they would probably lose around $2 to $5 billion a year. Therefore buying the sector as a whole is an excuse to go broke. Meanwhile, the 5 or 10 percent of the best companies in the sector can create such spectacular increase in shareholder value that they add visibility – and sometimes luster – to the overall sector. Confining your portfolio to the best people, the best projects, and the sturdiest balance sheets is not that constraining, but it is critical to maximizing your returns through both upswings and declines in the resource sector.”

Gold Mountain Mining Corp. (GUM, TSX-V)

Interesting news from Gold Mountain Mining Corp. (GUM, TSX-V) late last week regarding its advanced 100%-owned Elk Gold Property near Merritt, a potential open-pit operation…the company resumed a bulk sample test in mid-June, and more than 3,000 tonnes of mineralized material have already been mined and are being trucked on a 24-hour basis to a processing facility…the average grade of the 3,000 tonnes of mined material is approximately 19.1 g/t Au, representing 1,840 ounces of Gold with an attributed gross value of approximately $2.4-million (U.S.) at $1,300 per ounce…the average Gold grade for the bulk sample material immediately adjacent to the exploration drill holes exceeded the average Gold grade for the 13 drill holes by 4.28 times…

The company stated that the higher Gold grades in the mined bulk sample are believed to be due to the significant amount of pyritic gouge material recovered in many areas of the bulk sample pit that may have been lost during diamond drilling…pyritic gouge material can be washed away with drilling mud, and the Gold associated with the pyrite lost in the core sampling process…this hypothesis will be further tested with continued mining, additional sampling and testing of the mineralized bulk sample material…

Gold Mountain acquired a 100% interest in the 16,700 hectare Elk Project from Almaden Minerals (AMM, TSX) three years ago…at the time, a NI-43-101 Technical Report prepared by SRK Consulting gave a resource calculation of 563,000 ounces in the measured, indicated and inferred categories (200,000 tonnes measured at 8.77 g/t Au; 2,000,000 tonnes indicated at 3.82 g/t Au; 1,150,000 tonnes inferred at 7.13 g/t Au) using a 0.5 g/t and 5.0 g/t Au cut-off for in pit and below pit resources, respectively…exploration drilling by GUM since then has added strike length and depth to the known zones, and new Gold-bearing veins have also been discovered…

Below is an encouraging 2-year weekly GUM chart…after declining throughout 2012 and 2013, the 200-day moving average (SMA) flattened out at the beginning of this year and has finally reversed to the upside…chart support at 18 cents…this one has a good chance for a near-term breakout above resistance at 21 cents…GUM is up a penny at 20 cents as of 7:45 am Pacific…

Imperial Metals Corp. (III, TSX) Suffers Tailings Pond Breach

Oops, not good…Imperial Metals Corp.’s (III, TSX) tailings storage facility at its Mount Polley mine in central B.C. has been breached, releasing an undetermined amount of water and tailings in the early morning yesterday (news reports are stating “millions of cubic meters of toxic wastewater” came gushing out)…the cause of the breach is unknown at this time but it has affected hundreds of people living and camping in a small community southeast of Quesnel…

Imperial issued two news releases this morning…the latest one stated that the breach has stabilized…exact quantities of water and tailings discharged have yet to be determined…the tailings are alkaline with an average pH of 8.5 and are not acid generating…the Mount Polley mine has been placed on care and maintenance for now…while the damaged area is relatively small compared with the overall size of the dam, it is not known how long it will take to restore operations…

The accident has also caused a breach in Imperial Metals’ stock price, not surprising since the “fear” factor comes into play in situations like this and panicked investors run for the hills…III is off just over $7 a share at $9.67 as of 7:45 am Pacific (it fell as low as $9.06)…has to be an opportunity there in our view, but Imperial is going to face some challenges from this…

Anyway, below is a link to a video showing the tailings breach…

http://www.mining.com/amazing-aerial-video-of-mount-polley-tailings-breach-76060/

Crude Oil Updated Chart

On this 1-year weekly chart, you can see how WTIC broke below an RSI(14) trendline at the end of June…that was a sign of things to come in the following weeks with Crude now trying to recover from a 6-month low…the good news is, WTIC has plenty of Fib. support in the low-to-mid-$90’s – support it needs to hold…

Short-Term Silver Chart

This 6-month daily chart shows how extreme RSI(2) conditions in Silver persisted for most of June with a healthy unwinding of that overbought situation in recent weeks…in fact, RSI(2) is now in extreme oversold territory at just 4%…a strong Fib. support band between $19.50 and $20.00 is expected to hold…more near-term consolidation is likely before a reversal to the upside this month…

Silver Long-Term Chart

Silver has broken out above one important downtrend line which should now provide strong support…RSI(2) closed last week at 48% – could unwind a little more…

Note how the SS is moving up from a low bullish “W” while the ADX indicator shows the growing potential for a bullish +DI/-DI crossover this quarter…bottom line – Silver looks highly attractive around the $20 level…

Note:  Jon holds a share position in GUM.