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Gold is up modestly this morning after yesterday’s “Bernanke Blow-Up” that took bullion to its lowest level in 2.5 years…it went through support between $1,350 and $1,320 like a knife through butter…as of 7:30 am Pacific, the yellow metal is up $18 an ounce at $1,296…Fed Chairman Ben Bernanke strongly hinted at a new conference Wednesday that the Fed will begin scaling back its bond buying program in the coming months…as the Fed takes away that liquidity, longer-term interest rates (10-year yields shot up significantly yesterday to a 2-year high) are pressured to the upside which is bullish for the greenback and negative for Gold...the prospect of weaker demand from India due to fresh government measures to curb Gold imports there has also hurt bullion this week, in addition to the overall global deflationary environment…it’s not all doom-and-gloom for Gold and Gold stocks. however (aren’t governments around the world still facing major debt problems, and carrying out poor policy decisions?), and we’ll review the big picture in detail in our Week In Review and A Look Ahead on Sunday…Silver hit the top of a strong support band ($17.50 to $19.50) overnight and is currently up 30 cents an ounce at $19.92…Copper is 3 pennies higher at $3.09…Crude Oil is down $1.05 a barrel to $94.09 while the U.S. Dollar Index is up another half a point to 82.28…

Bullion holdings in the world’s biggest Gold exchange-traded fund, SPDR Gold Trust, fell 0.2% to their lowest level in four years yesterday…as of Tuesday this week, Gold bullion held by ETF’s had slumped 20% to 67.9 million ounces from a record of 84.6 million ounces in December, 2012, according to data from TD Securities…investors of all stripes, including hedge funds and individual investors, had piled into Gold following the financial crisis on a bet that years of these Fed bond purchases would fuel inflation…Gold historically had held its value better than stocks or bonds during times of rapid inflation…but inflation in the U.S. has remained tame, and the threat of deflation on a global scale now probably more of a concern…meanwhile, Gold’s attraction has dimmed further as investors in the past year have been focusing on grabbing higher-yielding investments than having exposure to havens…after the close of trading on Thursday, CME Group Inc., which operates Comex, said it would require investors to put up 25% more collateral to trade Gold as of Monday, a move that could put further pressure on prices…Gold below $1,300 spells trouble for many producers whose all-in costs of production are between $1,200 and $1,300 per ounce…the lower price environment, however, will force all producers to become “lean and mean” and focus on “quality ounces” as opposed to production increases which will help set the stage for the next bull market in Gold stocks once the Gold price finds a bottom and starts heading north again…this is a normal steep correction (Gold is off about 33% from its all-time high in September, 2011, and not the end of the metal’s long-term bull market which we’ll elaborate on this weekend…bullion could ultimately drop to $1,000 – $1,100 an ounce with the secular bull market since 2000 remaining intact…

Today’s Markets

Japan’s Nikkei average reversed from a nearly 2% sell-off overnight to finish with a 1.7% gain, closing up 216 points at 13230…China’s Shanghai Composite fell 11 points, however, to 2073…some chart damage has been inflicted on the Shanghai and that’s clearly a concern…European shares are mixed in late trading overseas…EU finance ministers are meeting in Luxemburg today to discuss the principles and rules for how and when Europe’s bailout fund will be able to directly recapitalize banks…the Dow is up 24 points through the first hour of trading after yesterday’s 354-point plunge (560 points or 3.7% in 2 trading sessions)…in Toronto, the TSX has added 82 points as of 7:30 am Pacific after a 2-day plunge of 399 points…

Updated Dow Chart

Despite today’s bounce, there’s every reason to believe the Dow will test support at the 14500 level as a corrective phase continues…below is a look at the 3-month daily chart…

VIX Moves Above May High

The VIX (Volatility Index) has broken above the May high and settled at 20.49 yesterday which lends support to the view that the sell-off in stocks has not completely run its course just yet…the VIX will face a stiff resistance band between 22 and 23…

Venture Update

Over the last couple of months, John’s charts have shown clearly defined resistance at 970 on the Venture, support at the April low of 917 (broken yesterday) followed by strong secondary support around 860…yesterday, the Index fell 32 points on relatively normal volume to close at 893…in early trading today, it’s up 4 points at 897…as rough as this market is, there will continue to be immediate opportunities on a very selective basis (which we’ll be focusing on) and of course some outstanding opportunities for investors with a longer-term time horizon…discovery situations (that’s why we’re so bullish on the Iskut and Telegraph Creek areas in northern B.C., plus the Saskatchewan uranium play) and select companies outside of the Gold and Silver space (Zenyatta Ventures, Pacific Potash, Macro Enterprises are just 3 examples) should continue to outperform and do very well…short-term trading opportunities will of course appear in a broad range of stocks with decent liquidity that get into extreme oversold territory and are ready for a bounce up, and those are situations to always watch for in the current market environment…

It has been a long week after our visit to Iskut, so this is a shortened version of Morning Musings and we’ll have much more on the Iskut-Telegraph Creek “area play” beginning Monday…