BullMarketRun.ca

Gold has traded between $1,082 and $1,095 so far today…as of 8:15 am Pacific, bullion is up $6 an ounce at $1,092…Silver has added 13 cents to $14.62…Copper is flat at $2.37…Crude Oil has regained 86 cents to $46.03 after a steep fall yesterday while the U.S. Dollar Index is down one-tenth of a point to 97.38…

One bright spot for the precious metals market – the U.S. Mint reported a whopping 469% increase in July coin sales compared to last year…according to the U.S. Mint’s sales data, 202,000 ounces of Gold, representing a variety of denominations of American Eagle and Buffalo Gold coins, were sold last month, compared to just 35,500 ounce of Gold sold in July 2014…last month’s sales represented the strongest pace for the year…in total, the U.S. mint has sold 571,500 ounces of Gold in the first 7 months of this year, up 38% vs. the same period last year…in a note published yesterday, commodity analysts from Barclays said this level of retail interest has not been seen since early 2013, which suggests this is a price-driven response as 2013 Gold also dropped violently before rallying…

Reuters reported this morning that South Koreans are on course to buy a record amount of Gold in 2015, worried that a meltdown in China’s stock markets will destabilize South Korean equities and keen to replenish a traditional store of value in an era of low interest rates…

The hardest hit among Gold ETPs has been the world’s largest, SPDR Gold Shares (GLD, NYSE)…according to data compiled by GLD, Gold held in trust fell 38.74 tonnes to end July at 672.7 tonnes…the ETF’s Gold reserves are now at their lowest level since March 2008…July was also the worst month for investor redemptions in GLD since December 2014 when its reserves fell by almost 45 tonnes…that month, of course, was followed by a strong rebound in Gold prices…

“If You Don’t Own Gold, You Know Neither History Nor Economics”

Some more words of wisdom from one of our favorite commentators, Frank Holmes, in his regular weekly Investor Alert at www.usfunds.com.  “With so much gloom and doom in the media surrounding Gold right now,” Holmes observed, “you might wonder why coin sales are soaring at multi-year highs. The reason is pretty simple: Gold is on sale.

“High net worth individuals and other savvy investors realize that even now, as herds of people are rushing for the exit, owning Gold is one of the best ways to manage systemic risk. They follow that Greeks had their cash in banks frozen like in Cyprus only a few years ago.  Ray Dalio, founder of Bridgewater Associates, said it best: ‘If you don’t own Gold, you know neither history nor economics.’

“On a final note,” Holmes concluded, “there appears to be a battle between the debt markets and equity markets. The debt market yields suggest rates will not be rising next month or quarter, while equity markets suggest they will. I think the bond market is more accurate. With a struggling global economy and commodity deflation odds favor rates will not rise soon in America, and Gold will revert back to the mean.”

The Costs of Over-Regulation

Another great example of the problem of regulatory over-reach and political correctness in the United States, which helps explain why the economy isn’t performing all on cylinders:  Hundreds of U.S. public companies are coming up short as they face a deadline to reveal whether their supply chains contain even trace amounts of minerals linked to violence in Africa…the Wall Street Journal reported yesterday that companies shelled out roughly $709 million and 6 million staff hours last year to comply with rules to disclose “conflict minerals” in their supply chains, according to recent research by Tulane University and Assent Compliance, a New York consulting firm…next year, they will need to hire auditors to evaluate their results…

This is a disgraceful massive waste of money and time, and it all arises from the infamous 2010 D0dd-Frank Act passed by a Democratic controlled Congress…the Act mandated that companies begin to disclose in reports filed with the U.S. Securities and Exchange Commission whether any Tin, Tantalum, Tungsten or Gold in their supply chains is connected to violent militia groups in the Democratic Republic of the Congo…the conflict-torn country holds vast reserves of these 4 minerals which are widely used in a flurry of products, from electronic devices to engagement rings to auto parts…

Oil Update

Remarks over the weekend by Iran’s oil minister, who said the country could boost output within a week of the lifting of international sanctions, added to Crude Oil’s bearish tone to begin the new month…in an interview with Iranian state television, Oil Minister Bijan Namdar Zangeneh said the country could lift production by 500,000 barrels a day within a week of the lifting of sanctions and by 1 million barrels a day within a month after that, according to Bloomberg…

Meanwhile, the Oil-rig count in the U.S. rose by 5 to 664 last week, Baker Hughes Inc. reported Friday, undercutting expectations that the country’s Oil production had peaked…

Gold Seasonality Chart

Historically, going back to 1996, there are no 2 better back-to-back months for Gold than August and September…approximately two-thirds of the time, Gold has closed higher each month with a combined gain of 4.1%…

Gold 2.5-Year Weekly Chart

The fear of a continued immediate decline in Gold straight down to $1,000 doesn’t hold water with us given the current technical posture of this very reliable 2.5-year weekly chart, plus the fact that commercial traders have dramatically reduced their short positions to extreme levels…it’s never very wise to go against the “smart money” commercial traders who now appear to be of the opinion that a rally is in the works for bullion…

Gold has been consolidating within a downsloping flag for more than 2 years…consistently, it has tested the top of that flag (resistance) and the bottom of it (support)…late last month, Gold touched the bottom of that flag while RSI(14) has also landed at previous support going back to the end of 2014…perhaps this is why commercial traders have decided now’s not a wise time to be short…

First significant resistance on the upside is around $1,150…Gold could certainly still test the $1,000 level this year, but the immediate path of least resistance is probably a rally to the upside, not a further plunge toward $1,000…even if Gold were to test $1,000 in the near future, a major rally would likely ensue from that level based on the current COT structure and other indicators…

Gold has fallen for 6 consecutive weeks for the 1st time since 1999…

CRB Index 10-Year Monthly Chart  

The Thomson-Reuters CRB Index is up 2 points this morning to 201 after closing yesterday slightly below its post-Crash early 2009 low of 200.16…whether this important support around 200 holds is questionable, especially with Crude Oil expected to come under continued pressure…

If we adjust the CRB Index for inflation, prices are now significantly cheaper relative to the 1986 bottom (197) even though nominally the index is at almost the same level…

This 10-year monthly chart shows a huge gap has opened between the CRB’s current price and its long-term downtrend line going back to 2011…if the 200 support can’t hold, then a test of 180 is likely, a level not seen since late 2001…

A total of 19 components make up the CRB Index, and the largest single one is Crude Oil which represents 23% of the index…

Today’s Equity Markets

Asia

China’s Shanghai Composite soared 134 points or 3.7% overnight to close at 3756, its biggest daily gain since July 10 as the “rescue team” stepped up its crackdown on short-selling…

Yet more disappointing economic news out of China over the weekend and yesterday raises more questions about the government’s ability to steady the economy…the Caixin China manufacturing PMI fell to a final reading of 47.8 in July, a 2-year low…this followed Saturday’s announcement by the government’s National Bureau of Statistics that China’s official PMI slipped to 50.0 in July from 50.2 in June…the trend is not encouraging…

Europe

European markets are mixed in late trading…Greece’s stock market re-opened yesterday and plunged 16%…it was off another 4% today before stabilizing…

North America

The Dow is flat as of 8:15 am Pacific…in Toronto, after yesterday’s holiday, the TSX has added 10 points while the Venture has slipped 1 point to 593…

Pure Energy Minerals (PE, TSX-V) Update

Pure Energy (PE, TSX-V) is surging again this morning on strong volume…it gapped up and hit a Fib. resistance level at 47 cents following news that a wholly-owned subsidiary of the company is now collaborating with SRI International, a research and innovation centre, to develop novel cost-effective methods for Lithium extraction from geothermal brines…funded by the U.S. Department of Energy (DOE), SRI is teaming with Pure Energy’s subsidiary to develop and validate a new generation of highly selective ion exchange resins to separate metals from geothermal fluids more efficiently and at lower cost than current processes…

Refer to our reports and John’s charts last week…as of 8:15 am Pacific, PE is up 11.5 cents at 45 cents…

CDNX Seasonality Chart

Historically, the 4 best months of the year for the Venture are (in order) December, February, January and August…actually, nearly two-thirds of the time, the Index has posted gains in August, September and October…

The worst 4-month stretch for the Venture is the 1 just completed – April, May, June and July that have combined for a total average decline of 7%…

The Venture just experienced its 2nd-worst July ever with a tumble of 11.5%…only July 2008, with a drop of just under 16%, was worse than the just completed July going back to 2002 in this market…

Interestingly, following both previous July swoons in 2008 and 2002, the Venture commenced a new bull market within 5 months…perhaps history will repeat itself…

Doubleview Capital Corp. (DBV, TSX-V) Update

Doubleview Capital (DBV, TSX-V) has stabilized after unnecessary panic drove it as low as 7 cents July 24…controversy has erupted over the Hat and the Sheslay district because there is value there, which long-term holders especially should find encouraging…

Keep in mind, also, that a huge advantage for the Hat Project is that it falls under a very recent (2011) Land Use Plan that had extensive First Nation and other stakeholder involvement…

There is a clear path forward for Doubleview at the Hat given its multi-year exploration and drilling permit, and the power of the Land Use Plan…

Technically, this 2.5-year weekly chart shows how DBV has bounced off RSI(14) support at 40%…the stock has been trading within a bullish downsloping flag since early 2014…a resumption of drilling in the near future could certainly be the catalyst to generate a breakout by pushing DBV through the top of the flag…

DBV is off 2.5 cents at 10 cents as of 8:15 am Pacific…

Claude Resources Inc. (CRJ, TSX) Update

It was a rough July for both Gold producers and explorers, but Gold in Canadian dollars held up reasonably well and this is why we see excellent value in some Canadian-only smaller producers…

One excellent example is Claude Resources (CRJ, TSX-V) which fell below an uptrend line but found support, as expected, as its rising 200-day SMA, currently 50 cents…investors over-reacted when the company temporarily suspended underground mining operations at its Seabee Gold mine in northern Saskatchewan due to nearby forest fires…full production quickly recommenced (the surface stockpile was utilized while underground operations were briefly suspended) and the company confirmed that it expects to meet its production guidance for the year…

Like Richmont Mines (RIC, TSX), Claude has been a stellar performer since last year thanks to improving fundamentals…CRJ will be releasing its 2nd quarter financials August 13…

Technically, the rising 200-day remains solid support while Fib. resistance exists at 80 cents…investors, especially those with a long-term perspective, have a chance to do exceptionally well here…

CRJ is off a penny at 64 cents as of 8:15 am Pacific…

Kirkland Lake Gold Inc. (KGI, TSX)

A prudent approach, aided by a weak loonie, has allowed Kirkland Lake Gold (KGI, TSX) to remain profitable and generate free cash flow over the past 12 months…

Kirkland Lake operates Canada’s highest-grade Gold mine and expects production to ramp up to 160,000 to 180,000 ounces per year beginning in 2016 at an average grade of 0.44 ounces per ton (15.1 g/t)…the company reported net income of $19.8 million or 27 cents per share in fiscal 2015…

Technically, strong support was demonstrated last month around $4.50 – a Fib. level which is also in close proximity to the rising 300-day SMA (not shown on this chart)…the EMA(200) at $5.09 is declining and that’s going to provide near-term resistance…there’s little doubt, though, that the primary trend has reversed in KGI after the stock bottomed around $2 in late 2013…

KGI us up a penny at $4.79 as of 8:15 am Pacific…

Silver Short-Term Chart

Silver’s immediate challenge is to get back above the $15 level which was previous support…interestingly, through the recent turmoil, Silver has been able to hold slightly above its $14.15 low late last year…strong chart support around $13.50…

Silver Long-Term Chart

An explosive push higher (eventually) – is this actually a scenario that could unfold in Silver over the next couple of years?…quite possibly, given the look of this 34-year monthly chart, though at the moment it’s hard to understand all the factors that could come into play to generate the kind of “Wave 5” move that could develop…

It seems possible that the bottom of “Wave 4” came late last year when Silver briefly plunged to just above $14 an ounce, though that could be challenged again shortly with the possibility of a new low…RSI(14) has so far managed to hold support which goes back to 2001…

Sell pressure continues to remain very strong, however, as shown by the CMF –  amazingly, at levels not seen in nearly 25 years since the low of $3.51…this intense sell pressure at the moment, which could continue for a while yet, should therefore be viewed in a larger context as a bullish contrarian indicator…this doesn’t necessarily mean that Silver has hit rock bottom yet, however…

Note:  John and Jon both hold share positions in DBV.