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Gold has hovered between $1,6438 and $1,661 so far today…as of 6:10 am Pacific, the yellow metal is up $1 an ounce at $1,652…Silver is off a nickel at $32.11…Copper is a penny higher at $3.84…Crude Oil is 16 cents higher at $106.23 while the U.S. Dollar Index is ahead slightly at 79.62…

Gold is so far holding important Fibonacci support in the low 1,640’s which it has tested a few times since last week…this is a 50% retracement of the rally off the December low…a close below this level would likely mean a test of the next support area which is $1,615…the weekly and monthly charts for Gold continue to show a clear primary uptrend, so what we’re dealing with at the moment has to put into proper perspective – this is one of many brief periods of weakness and consolidation we’ve seen in Gold over the last number of years…Gold has also proven to be a great buy throughout its bull market run over the last decade anytime it has fallen below its 200-day moving average (SMA) which it has done again now…the 200-day currently sits at $1,686…

The strike by Gold dealers in India is into its fourth day…Gold dealers have shut their premises in protest at last week’s government decision to double Gold import duties…India imported 969 tonnes of Gold bullion in 2011, according to World Gold Council data…”The import of Gold of such magnitude strains balance of payments and affects the exchange rate of the Rupee through impacting the supply-demand balance of foreign exchange,” finance minister Pranab Mukherjee, who announced the duty hike, stated today…

Copper Outlook Positive

Copper futures are expected to make another leg up in the coming months on improving signs for the global economy, expectations that China will undertake additional monetary easing, continuing supply constraints and declining London Metal Exchange inventories, analysts say…“We think prices are going to continue to pick up in the second quarter and even into the third quarter,” said Catherine Virga, director of research for the consultancy CPM Group…“That is based on our outlook for copper demand in construction materials, as well as infrastructure development”…

Fed “Ready To Act” If Europe Falters Again

Fed Chairman Ben Bernanke said Europe’s financial troubles have eased but added the U.S. central bank would be ready to act if conditions worsened again, according to written testimony to Congress released last night…”In the past few months, financial stresses in Europe have lessened, which has contributed to an improved tone of financial markets around the world, including in the United States,” Bernanke said in testimony prepared for a House hearing today…Bernanke stresses, however, that a full resolution of the crisis “will require a further strengthening of the European banking system; a significant expansion of financial backstops, or ‘firewalls’, to guard against contagion in sovereign debt markets”…Bernanke also said that the exposure of U.S. banks and money market funds to Europe remains a worry…”Although U.S. banks have limited exposure to peripheral European countries, their exposures to European banks and to the larger, ‘core’ countries of Europe are more material,” Bernanke said…”Moreover, European holdings represented 35% of the assets of prime U.S. money market funds in February, and these funds remain structurally vulnerable despite some constructive steps, such as improved liquidity requirements, taken since the recent financial crisis”…Bernanke will also tell the House Committee on Oversight and Government Reform that European policymakers must follow through on fiscal reforms in order for the recent period of relative calm to persist…

Oil Market Intervention

Saudi Arabia’s powerful oil minister, Ali Naimi, made a rare intervention into overheating oil markets yesterday, declaring that high oil prices were “unjustified” and vowing that the kingdom would boost its output by as much as 25% if necessary…his comments, however, have so far had just a muted affect on prices…Brent Crude is edging toward $125 this morning, rebounding from losses yesterday, while light sweet crude is up slightly to $106.23…as the west’s nuclear standoff with Iran escalates, oil prices have rallied this month to a post-2008 with markets bracing for European Union sanctions on Iranian crude that could knock out a chunk of global supply…“I don’t think it’s much of change for the market,” said Mike Wittner, head of oil research at Société Générale in New York, in a Financial Times report…“The problem is the more they produce the less spare capacity they have…if they want to try to bring down prices not only do they have to keep on producing at very high levels, they need to show the world that they are bringing on extra spare capacity”…Christine Lagarde, managing director of the International Monetary Fund, said yesterday that rising energy prices had now overtaken Europe’s sovereign debt crisis as the biggest worry for the global economy…speaking in New Delhi, she said that while the world financial system had strengthened over the past three months, volatile oil prices would have “serious consequences”…many oil market watchers believe that if Saudi Arabia’s actions prove unsuccessful in cooling the market, the U.S. will attempt to bring down prices by releasing strategic oil reserves – a move that is almost a certainty for political reasons with President Obama so vulnerable on the issue of rising gas prices and oil in general during this election year…

Obama, most U.S. Democrats and Canadian lefties continue to drink their green kool-aid and promulgate the myth of “green energy” security and jobs, attacking fossil fuels which is really an effort on their part to engage in social engineering…the reality is that through deepwater drilling, natural gas exploration and development of the oil sands, North America has an incredible opportunity in the coming years to become the next Middle East for energy…Citigroup has just come out with an excellent report that details the potential economic benefits of this strategy which are enormous…

Scary Talk From The Quebec Government

Quebec is an economic basket-case with a massive debt that’s approaching $200 billion, more than 50% of the province’s GDP…it should come as no surprise then that these economic illiterates running the province, who over the last couple of years have increasingly been pandering to radical environmentalists by proposing changes to mining legislation, now want to get into the mining business…yesterday’s Quebec budget, presented by the ruling Liberals, was another excellent example of Big Government run amok…what particularly concerns us are issues related to the mining industry…not only do they have some pie-in-the-sky estimates with regard to future mining royalties, in order to make their budget projections look a little better just before an election, but the Quebec government now wants “a cut of the profits” in this sector…

Below are some facts as well as some quotes from Quebec Finance Minister Raymond Bachand (and they should scare the daylights out of investors…the Liberals aren’t likely to get re-elected but that begs the question, will the new government – possibly an entirely new political party – be better or even worse?)…

According to the budget documents, the Quebec government will negotiate equity positions in all mining projects that call on its help for infrastructure needs or electricity rates…it will also define a similar strategy for future oil and gas projects…

“This is new in what we are going to do in Quebec,” stated Bachand, saying he borrowed the idea from former Parti Quebecois premier Jacques Parizeau (OMG)…”It comes down to what Mr. Parizeau said…we have to make sure we get a share of the business“…

Resources Quebec is the new Crown Corporation that will be set up to manage a $1.2 billion equity portfolio…

Will these politicians ever learn?????  Quebec ‘s new model for the mining industry is borrowed from the separatist and socialist Parizeau?…government needs to get smaller, leaner and more efficient in Quebec, and it also needs to get out of the way of business and the mining sector…it’s responsibility should be to simply create the most favorable conditions and regulatory environment possible to encourage investment, risk-taking, exploration and development…Quebec was doing a much better job at this years ago but seems to be changing direction and it’s not a good sign…if they’re not careful, they will kill the goose that laid the golden egg…

TSX Gold Index Chart

A recovery appears to be underway in the TSX Gold Index which should also translate into support for the Venture Exchange which fell 28 more points yesterday to 1571…below is an updated Gold Index chart from John…the Gold Index may very well have hit bottom – good news for the markets through the remainder of the month…

We’ve had a few readers ask for a chart on Cadillac Mining (CQX, TSX-V) which climbed 6 pennies yesterday to close at 27.5 cents…last month, Cadillac reported very promising initial drill results from its Goldstrike Property in Utah but the company needs to raise money for its proposed next round of drilling (5,000 metres)…we’re concerned they have not yet been able to pull the trigger on this financing, but a conservative group runs Cadillac and they’re not known for their sense of urgency as demonstrated on a few occasions over the past year…

Note: John, Jon and Terry do not hold positions in CQX.

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