BullMarketRun.ca

4:00 am Pacific – Updated Version at 8:00 am Pacific

Gold is taking a slight breather in early trading today after climbing $62 an ounce last week and blasting through critical resistance around $1,350…as of 4:00 am Pacific, bullion is down $4 an ounce at $1,373 after touching an overnight high of $1,383…Silver is down 8 cents at $23.18…(see updated Silver charts below)…Copper is off a penny at $3.32…Crude Oil has declined 35 cents to $107.11 but should continue to be underpinned by strong demand and unrest in Egypt…the U.S. Dollar Index, meanwhile, is off slightly at 81.25…

SPDR Gold Trust, the world’s largest Gold-backed ETF, says its holdings rose 0.26% to 915.32 tonnes on Friday…the fund posted a 0.4% climb in holdings last week – the first increase in nearly a year…while western Gold investors have been moving out of ETF’s, with holdings falling by a dramatic 402.2 tons in the 2nd quarter, that selling has been “absorbed” by a 71% rise in demand from India and an 85% jump in demand from China during the same quarter, according to the World Gold Council…the effort by India’s rather incompetent government to convince its citizens not to buy Gold is simply not working, and may even be having the opposite effect…whether legally or illegally, Indians want their Gold and may even desire it more – not just because of a cultural affinity for bullion, but for safe haven purposes as well…

Even though central banks are expected to buy fewer Gold bars than previously expected in 2013 (they are now expected to be net buyers of 300 to 350 tonnes of Gold in 2013, down from an earlier forecast of 400 to 450 tonnes, according to the WGC), demand from China and India should pick up the slack…they were the runaway leaders in Q2, as this chart from www.usfunds.com shows, and indications are that Q3 demand from “Chindia” will also be very impressive…

Today’s Markets

China’s Shanghai Composite led Asian markets higher overnight with a gain of 17 points to close at 2086…Japan’s Nikkei average finished 108 points higher at 13758…

European markets are off slightly, looking for direction from New York where the Dow is coming off its worst week of the year amid uncertainty regarding the Federal Reserve’s policy outlook…futures in New York as of 4:00 am Pacific are pointing toward a flat opening on Wall Street…Fed watchers will be dissecting Wednesday’s release of minutes from the August Federal Open Market Committee meeting for clues on how and when a scaling back of the $85 billion in monthly bond purchases could occur…the annual Kansas City Fed gathering in Jackson Hole starts Thursday, and while Fed Chairman Ben Bernanke will not be there, other officials will be, and they are bound to continue to express their views on Fed policy…

The Venture Exchange posted a 19-point gain last week, thanks to the breakout in Gold prices and continued firmness in Crude Oil and Copper…the CDNX closed Friday at 940, and seems destined to test stiff resistance at 970 – possibly this week…a key technical event that could occur this week is a reversal to the upside in the 50-day moving average (SMA)…investors will be keeping a close eye on possible drill results from several fronts including Colorado Resources (CXO, TSX-V) and GoldQuest Mining (GQC, TSX-V)…

John will have an interesting long-term Venture chart as part of our 8:00 am update…the trend is your friend, and right now the trend is very favorable…

Radius Gold Inc. (RDU, TSX-V)

Simon Ridgway’s Radius Gold (RDU, TSX-V) is beginning to come to life…it gained 2.5 cents last week on increased volume to close at 12 cents…keep in mind, the company holds approximately 4 million shares of B2Gold (BTO, TSX) which reported excellent Q2 results recently with the stock climbing as high as $3.69 last week after trading as low as $2.17 in July…BTO could back off a little, however, after announcing this morning a private offering of $225 million of convertible senior subordinated notes due 2018…Radius has JV’s with B2Gold in Nicaragua and Fortuna Silver Mines (FVI, TSX) in Mexico…

For the quarter ending March 31, Radius reported working capital of $15 million or 17 cents per share, and that was with BTO trading at a lower price than it is now…so RDU is currently trading significantly below its working capital position, and the outlook for BTO appears to be very bright as we mentioned last week…what’s going to be particularly interesting in the coming weeks is whether or not Radius “seizes the moment” and pulls the trigger on a property deal of some sort…the company’s stated objective is to use its treasury “to acquire distressed projects or companies and unlock their potential…the drying up of equity funding for junior explorers is creating a unique window of opportunity”…

In late February, Radius stated the following in a news release:

“Management is conducting an extensive review of precious metal exploration projects that may be available for acquisition or joint venture. A number of projects have been identified internally or submitted to Radius’s management team for review. Radius has signed confidentiality agreements with a number of companies to allow detailed technical and legal/fiscal reviews to be carried out, and its geologists have recently completed site visits to some of the projects.

“Management is optimistic that the company will be able to acquire significant stakes in one or more projects within the next six months. Further news on the acquisition effort will be reported as and when the terms of any deals are negotiated”…

That 6-month window is closing rapidly, and given improving market conditions Radius would probably be wise to pull the trigger sooner rather than later…we’ll see what happens…

Below is a 2.5-year weekly RDU chart that shows 3 critical developments: 1) Strong up momentum in RSI(14); 2) A bullish +DI/-DI crossover; and 3) A prolonged period of sell pressure has been replaced with buy pressure which is increasing…RDU has 87 million shares O/S (no warrants outstanding which is positive)…as always, perform your own due diligence…

Castle Resources Inc. (CRI, TSX-V)

As the junior resource market continues to heal, a situation to watch closely in northwest British Columbia is how the high-grade Granduc Copper Project near Stewart plays out…just over a month ago, Castle Resources (CRI, TSX-V) engaged KPMG Corporate Finance to identify, analyze and execute a transaction that will fast-track the development of Granduc…the company is considering a range of transaction structures, including a joint venture, off-take agreement, earn-in or some form of business amalgamation or merger…since that announcement, the stock has traded between a low of 2.5 cents and a high of 6 cents on total volume (all exchanges) of 54.1 million shares (27 trading sessions)…this huge spike in volume included a 22 million share day July 29…volume spikes typically precede big share price moves…

In February, Castle issued a Granduc PEA using a measured/indicated resource of 11.3 million tonnes grading 1.47% Cu, 0.17 g/t Au and 12.4 g/t Ag, and an inferred resource of 44.6 million tonnes grading 1.43% Cu, 0.19 g/t Au and 10.7 g/t Ag…the capex is estimated at $494 million…the payback period is 4 years with annual production averaging 70 million pounds of payable Copper equivalent over a 15-year mine life…resources are open for expansion, and excellent infrastructure is in place…the PEA envisions an underground mining operation similar in scope to the historic mining operations at Granduc in the 1970’s and 1980’s…

Below is an 8-month weekly CRI chart from John…a bullish reversal pattern has formed in the last 3 weeks, RSI(14) is beginning to show strong momentum and the overall bearish trend is clearly weakening…CRI collapsed from a high of nearly $1 in early 2011 to a multi-year low of 2.5 cents…as the saying goes, you sell high and buy low…there is significant value in Castle’s Granduc Project, especially considering the high-grade nature of it…with nearly 200 million shares outstanding, CRI’s market cap is just under $10 million based on Friday’s 5-cent close…

Contact Exploration Inc. (CEX, TSX-V)

A junior oil and gas company we’re watching closely, for technical and fundamental reasons, is Contact Exploration (CEX, TSX-V) which is currently producing at a rate of 450 Boe/d (vs. 66 Boe/d in Q1 2013)…CEX is positioned in the heart of the Montney trend and tripled its reserves in fiscal 2013 (ending March 31), thanks in large part to its East Kakwa discovery, a liquids-rich natural gas play, in the Deep basin in Alberta…on August 8, Contact announced the closing of an over-subscribed $6.5 million financing…the company has no debt and is poised to continue to grow its reserves and production (it has assets in Alberta and New Brunswick)…since late last year, CEX has traded in a horizontal channel between 18 and 28 cents…it closed Friday at 26 cents, and a breakout above that horizontal channel at some point in the near future appears quite possible given the progress this company is making…CEX has 250 million shares outstanding, following this latest financing, for a total market cap of $65 million…as always, perform your own due diligence…

Updated Silver Charts

Silver has been out-performing Gold recently with the Gold-Silver ratio (GSR) beginning to decline…this typically indicates positive money flow into precious metals and a bullish trend…Silver gained a whopping 13% last week to close at $23.26 while bullion jumped 4.7%…sales of American Eagle Silver coins by the U.S. Mint rose to 31 million ounces year to date, closing in on the 33.7 million ounces sold in all 2012…

Silver Long-Term Chart – 11-Year Monthly

The long-term chart, which we’ll start with this morning, shows very stiff and critical resistance at $26 which will take time to overcome…notice that the RSI(2), which is coming off historical lows, is now at 73.98%…it will likely push higher and remain in the overbought zone for a modest period of time before correcting – similar to previous patterns in 2008-2009 and 2012…

Short-Term Silver Chart -6-Month Daily

The Silver-Gold ratio has broken decisively above its downtrend line, an interesting development…RSI(14) is showing strong momentum and is now at 77%…it’s in the overbought zone but still has room to move higher…looking for conifrmation of a breakout above the $22-$23 resistance band…next significant resistance would be at $24…

Note: John, Jon and Terry do not currently hold share positions in RDU or CEX.  Jon holds a share position in CRI.