Gold is weaker this morning after showing resiliency Friday and staging an intra-day reversal in the face of a stronger U.S. Dollar and a bullish jobs report…as of 6:00 am Pacific, the yellow metal is down $16 an ounce at $1,697…Silver is 50 cents lower at $33.82…Copper is off 3 pennies at $3.83…Crude Oil is $1.27 lower at $106.13 while the U.S. Dollar Index is up slightly at 80.00…
The Fed’s Open Market Committee meeting tomorrow is expected to be a ho-hum affair with no significant policy changes…the rate-setting decision was reduced from two days to one and there will be no press conference to follow the meeting…
Stock index futures point to a mildly lower open on Wall Street…Asian markets were mixed overnight while European markets are down slightly…
We have a couple of charts this morning that we believe are quite revealing and demonstrate that the Venture Exchange, after a bumpy start this month, should pick up steam as the month progresses…it’s always a positive sign when the Venture is outperforming Gold and the TSX Gold Index (the reverse was true for much of last year, beginning in March)…so there has been a change in trend and this is important to note…year-to-date. the Venture (up 11%) has also out-paced the TSX (4.6%) and the Dow (5.4%)…below is a 2012 comparative chart from John through Friday that features the CDNX, Gold, Silver, Copper, the TSX Gold Index and the U.S. Dollar Index…
What’s also interesting is the chart for the TSX Gold Index which is looking increasingly bullish…it’s at support and may need a bit more time to gear up for a strong move, but the bias appears to be to the upside…a 5% jump by this Index could easily result in the Venture surging through the 1700 resistance area given its out-performance vs. the Gold Index so far this year…
Gold itself has a strong support band between $1,660 and $1,680 and that’s the area that held last week…during periods of technical weakness, physical buying has always held the Gold market up and that has been the case again recently…as John’s 3-month daily chart shows below, near-term resistance is around $1,720…a close above that level would be a bullish development…
China’s “Slowdown”
There was a lot of talk in the mainstream media last week, and more this morning, regarding China’s “slowing” economy and how that could pose a threat to the global economy as reporters seized on comments by Premier Wen Jiabao who gave a 7.5% GDP growth target for 2012…the Chinese, interestingly, seem to have mastered the art of a “soft landing” and the government has consistently under-estimated GDP growth over the last decade as the chart below shows…
China’s annual rate of inflation in February receded to a 20-month low of 3.2%, barely seven months after being twice that at a 3-year peak of 6.5%…”aggressive easing” may not be in the cards for now but moderating inflation will allow for continued smooth liquidity conditions supportive of growth…fresh data this morning showed February exports from China fell 23.6% from the previous month, and rose a slower-than-expected 18.4% from the previous year…the fall in exports, combined with spectacularly strong imports as China bought commodities such as crude oil and iron ore, brought the trade deficit to its highest level in 22 years…on balance, China’s $7.5 trillion economy is bustling along just nicely and that’s bullish for commodities…more and more Chinese of course are also participating in the Gold market…
Arian Silver (AGQ, TSX-V)
We’ve been bullish on Arian Silver (AGQ, TSX-V) since January when the stock was trading in the upper 20’s…on Friday it closed at 44.5 cents, and now the company has come out with results of an updated NI-43-101 resource estimate for its 100%-owned San Jose Property in Mexico…the report shows a 29% increase in resource tonnage with mineralization open along the western and eastern strikes of the San Jose Vein and to depth…almost two kilometres of the structure to the west, and over 1.5 kilometres to the east, remain to be drilled…a significant amount of infill drilling will also allow for upgrading of current resources…indicated resources are 8 million tonnes grading 119 g/t Ag, 0.38% Pb and 0.85% Zn while inferred resources consist of 24.5 million tonnes grading 110 g/t Ag, 0.38% Pb and 0.76% Zn…there are 117.26 total indicated and inferred contained ounces of Silver…stocks often show some weakness when a resource estimate comes out, so don’t be surprised if there’s a pullback in AGQ but the primary trend remains up…
Rainbow Resources (RBW, TSX-V)
Part 2 of our article on Rainbow will be posted to the site around 8:30 am Pacific (it was sent out to our eAlert subscribers earlier this morning)…Rainbow remains our favorite “Strong Play” (“A” Group) with major upside potential looking out over the next several months given its current market cap of only $8.9 million…
GoldQuest Mining (GQC, TSX-V)
GoldQuest is on our “Sleeper” list and historically has always been a smart buy for patient investors around current levels…GQC, which holds an impressive land package in the Dominican Republic, closed Friday at 11.5 cents…below is an updated chart from John that shows the stock has established support after a breakout…this is a nice pattern…
Note: John, Jon and Terry do not hold positions in GQC.
CANACO – CAN on TSX-V.
They raised $120 M dollars @ $5.40 per share through TD/Sinotech their Chinese partner. High-grade near surface gold project in Tanzania, 10+ drilling turning, PEA/43-101 due before Q3 and 43-101 due this month. Likely 2.5 Moz of gold @ 3 g/t au.
214 M shares fully diluted for a market capitalization of $230 M. After $110 M in cash they are worth $120 M dollars roughly.
TD paid $5.40 with a $8 target price and we can buy for 55 cents (after 52 cents in cash).
Steal of the year
Comment by Don — March 12, 2012 @ 6:27 am
I can’t agree with BMR’s outlook on the market especially for the CDNX. Normally what we saw in 2010 when the CDNX was in a bull market was that pull backs on the CDNX would only touch the 20 dma. Here we are seeing 50 dma pull backs and any breach of that would suggest the 200 mda pull back or lower. With oil being high and no QE3 I think there is a high probability of a breach back down to 1600 or lower in CDNX.
This recent rally has been fueled by QE3 expectations and the Greek default. Greek is now fixed, but no QE3, so expect a large pull back 5-10%. I think the CDNX may also be forming a head and shoulders top and seasonality suggests that it is not gold’s time. I think the rally will resume in August/Sept.
Time to raise some cash. Its all a gamble right now.
Comment by Andrew M — March 12, 2012 @ 7:05 am
I agree with you, Andrew M – what I’m seeing reminds me of 2011 – low volume, sell on news etc. CAN virtually at a year low, AGQ sold off at the open (gapped down 10% on decent news).
Comment by Andrew — March 12, 2012 @ 7:47 am
There is no way Greece is fixed. They have piled on more debt to eliminate the old debt. That situation is only pushed to the side for the moment.
Comment by Seamus — March 12, 2012 @ 7:48 am
I tend to agree Andrew. What will kickstart buying would be my question, will learn a lot this week im sure.
Ive moved to a higher cash position the last month, and will look to buy on forced/scared selling if it happens again. No QE3 announcement seemed a nailed on certainty with US showing some tepid growth, so was surprised to see gold rally to $1800. I suspect we may see a drop to around $1600 again. Everything is up in the air right now for me and we need to see some direction first one way or the other.
Lets see what happens with Europe now Greece is starting to take a back stage also, Portugal next anyone?
Comment by Mark — March 12, 2012 @ 7:49 am
Andrew and Mark, not saying I agree or disagree with BMR, but the one thing I do pay attention to is guys like Jim Sinclair and Rick Rule who have been very successful and they have been saying as we get deeper and deeper into this bull market that the volatilty will get crazy, the ones who will make money are the ones who make volatility your friend. The swings up and down will become larger and larger, and they are correct we are starting to see that. I think it is going to become the norm, Sinclair predicts 400.00 moves in gold in one day up or down. Going to have to have a strong stomach for sure…
Comment by Greg — March 12, 2012 @ 9:34 am
I agree Greg, if Gold goes to $2000+ then we will see many more days like the $100 drop the other week.
Right now its start-stop market for small cap stocks…this is why I dont like buying into individual stock rallies even if a chart says so. Id much rather have stink bids set and buy on suitable weakness when no one wants them.
Certainly doesnt work all the time but I had my best Jan/Feb ever from stink bids set in Oct, Nov, Dec on over 15 stocks…which half have been sold. 4 doubled, CQX 300%+, 4 down, 6 around even.
As you say you need a strong stomach to embrace such volatility and timing is very important..all in my opinion of course.
Comment by Mark — March 12, 2012 @ 11:49 am