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Gold is trying to rebound today after 4 straight days of losses…as of 7:00 am Pacific, bullion is up $8 an ounce at $1,582…Silver has gained 42 cents to $28.96…Copper is up 2 pennies at $3.52…Crude Oil is 52 cents higher at $90.64 while the U.S. Dollar Index is off slightly at 82.04…

Merrill Lynch Cuts Gold Price Forecast

For what it’s worth, Bank of America Merrill Lynch today cut its outlook on Gold prices for this year and next, citing improving economic conditions and a rise in U.S. nominal rates…the bank reduced its 2013 average price forecast for Gold by 6.9% to $1,680 per ounce and its 2014 forecast by 9.8% to $1,838…it now doesn’t expect Gold to break above $2,000 an ounce until 2014, a turnaround from its previous forecast for a move above $2,000 during the second quarter of 2013…”After a multi-year rally, Gold prices have been range-bound for several quarters,” said Michael Widmer, Bank of America Merrill Lynch’s metals strategist…”In our view, headwinds to Gold prices will persist in the near term…a rise in U.S. nominal rates – which raises the cost of storing Gold – is proving a particular drag on investment interest in the metal,” said Widmer…improving economic conditions also raise doubts over the metal’s safe-haven appeal, he added…”At the same time, sizeable output gaps in many nations have prevented a meaningful pick-up of inflation and inflation expectations in the current recovery phase,” he said…longer-term, Widmer is more optimistic regarding bullion…”Most notable, real yields could trend lower in 2014,” he said…”Also, foreign-exchange reserve diversification from emerging market central banks on the back of currency interventions to offset a weaker yen could bring about increased Gold buying later this year…Further out…emerging countries will become more affluent, which should lead to higher jewellery purchases”…

Another Sign The Gold Sector Is Nearing A Bottom

The purpose of the chart below from John is to compare the BPGDM (Gold Miners Bullish %) Index with the price of Gold over the past 4 years, looking for relationships that can give us an indication for a bullish reversal in the Gold markets…we first note that the BPGDM is at its lowest level in this 4-year period…the BPGDM RSI is in the oversold zone at 22% and the -DI is approaching an all-time high and shows the bearishness is starting to wane… this tells us that we MAY be nearing a bottom…also note, the BPGDM has a +98% correlation with the TSX Gold Index…on the comparative chart the vertical red dotted lines identify bullish reversals in the price of Gold which also shows there is a corresponding reversal in the BPGDM but with far more volatility…this chart should be watched…we can conclude then that we may be close to a bullish reversal in the price of Gold…how close we just don’t know, but in previous different charts we’ve already demonstrated powerful support around the $1,500 area while commercial traders have also dramatically scaled back their short positions which is another positive sign that a bottom is quickly approaching…

Copper Outlook

Copper may advance this year as consumption in China, the world’s biggest user of the metal used in wires and pipes, is poised to expand, according to Li Baomin, chairman of Jiangxi Copper Co. (358), China’s largest producer…”Demand growth momentum is strong on expansion of urbanization,” said Li, whose promotion of chairman was announced in Beijing yesterday…”The global Copper market is expected to be in balance,” he said, without giving a forecast for Chinese demand growth…according to Goldman Sachs Group Inc., Copper use in China will jump 8% to a record 8.833 million metric tons this year, boosting global demand and creating a 6,000-ton product deficit compared with a surplus of 216,0000 tons in 2012…nonetheless, the metal tumbled 4.3% last month – erasing this year’s gains…

U.S. Dollar Index Updated Chart

The recent strength of the U.S. Dollar Index has been a surprise given the fact that a head-and-shoulders top that formed over a period of more than a year has been rendered invalid due to last week’s powerful climb above the left shoulder and through strong resistance at 81.50…what this might mean for the balance of 2013, we’re not sure…typically, the Venture Exchange performs best when the greenback is weak which helps explain why the Venture just experienced its worst February ever…over the near-term, the Dollar Index faces a strong resistance band between 83 and 84 as John’s 5-year weekly chart outlines below…the 81.50 area has obviously become new support…

China Outlines Reform Plans

Outgoing Chinese Premier Wen Jiabao set out a reform plan during the gathering of lawmakers in Beijing, known as the National People’s Congress, in order to achieve a 2013 growth target of 7.5% (typically, China exceeds its official growth targets)…”We should unswervingly take expanding domestic demand as our long-term strategy for domestic development,” said Jiabao, delivering his final report to the Congress after 10 years at the helm…the key to that change, he said, is to “enhance people’s ability to consume”…Beijing’s broader goal is to shift the economy away from reliance on investment and exports, with a stronger role for domestic consumption, as it kick starts painful reforms to rebalance the country’s economic model…underpinning that is an ambitious plan to raise household income and ensure more equal distribution of national wealth….a stronger social safety net, which frees up money for households to spend, is an important part of the plan…the central government promised a substantial 27% increase in its health-care spending to $41.8 billion, and spending on employment and social welfare is also rising fast…Wen also reiterated commitments to bring China’s 200 million-plus migrant workers into the urban social welfare system and provide stronger protections for farmers’ land rights, both seen as crucial to support higher household income and greater social equity…Wen also reiterated the need to tighten regulations in the property sector…the head of the country’s largest real estate developer, speaking on the CBS program “60 Minutes” over the weekend, is warning of huge risks in the sector which he says is already in a bubble state…China has seen a boom in the property sector recently with some cities seeing a 10-fold increase in prices that have driven the average home buyer out of the market…according to estimates, the cost of a home in Shanghai would be around 45 times the average resident’s annual salary…

Today’s Markets

Asian markets rebounded overnight with China’s Shanghai Composite jumping 53 points or more than 2% after posting its biggest single-day loss yesterday since November, 2010…European shares are up sharply after stronger than expected PMI data was announced…for the euro zone, the figure for February was 47.9 against a forecast of 47.3…this was down from 48.6 in January…the composite data for Germany, which measures both manufacturing and the services sector, was 53.3 against a flash reading of 52.7 but below January’s number of 54.4…ECB policymakers meet in Frankfurt on Thursday as political deadlock in Italy fuels fears the euro zone crisis could reignite…the bank is likely to hold off quick-fire action, but could hint at looser policy in future…North American markets are in the green in early trading…the Dow has gained over 100 points in the first 30 minutes of trading to hit a new all-time high, surpassing the previous high of 14198 set October 9, 2007…the TSX is up nearly 100 points while the Venture Exchange has gained 14 points to 1111 after closing at a new 3.5-year low yesterday of 1097…there’s important Fibonacci support in the immediate vicinity of 1100 while the next major support below that is 1027, a low that occurred during an early summer correction in 2009…

Huldra Silver (HDA, TSX-V) Updated Chart

The weakness in the Venture has taken its toll on many companies, even very promising new high-grade Silver producer Huldra Silver (HDA, TSX-V) which plummeted from a high of $1.39 in January to a low of 62 cents last Thursday…the stock jumped nearly 30% to 78 cents on news Friday that the company has received $2.2 million (U.S.) in smelter payments since it began shipping concentrates last November…Huldra continues to see significant monthly increases in production and shipments of concentrates while continuing to make adjustments to the mill equipment and processes to maximize metallurgical recovery and throughput…the company expects to announce commercial production by the end the month…in addition, a 4,000-metre underground drill program at Treasure Mountain is scheduled to commence within the next couple of weeks…this is well-run company that just recently raised $10 million through the issuance of convertible debentures, and it seems unlikely Huldra will have to raise additional equity this year given the cash flow it’ll be generating as production continues to ramp up (possibly 1.5 million ounces of Silver could be produced by Huldra this year)…its current market cap is a modest $40 million…as always, perform your own due diligence but in our view Huldra has a great opportunity to be a huge success story for patient, long-term investors…John’s 6-month daily chart, completed after last Friday’s close, shows HDA beginning to emerge out of very oversold conditions…HDA is up 2 pennies in early trading at 77 cents…

Note: Jon holds a share position in HDA.