TSX Venture Exchange and Gold
The Venture traded within a tight range last week but closed Friday at its weekly high of 699.43 after dipping as low as 690 Monday, just above its rising 50-day moving average (SMA). Particularly encouraging was how the Venture held its ground in the face of Gold’s weakness following Wednesday’s Fed statement. The TSX Gold Index also outperformed the yellow metal and pushed through some important resistance in the process.
The Venture still faces its own stiff resistance, of course, just slightly above 700. An eventual breakout through 707-708 seems inevitable given the bullish indicators showing up in longer-term charts as we pointed out in Friday’s Morning Musings, but exact timing is impossible to predict. Fortunately for the Venture, the greenback is in the midst of a correction – it’s possible the Dollar Index may have hit its yearly high in mid-March after a massive surge from last summer that severely impacted the commodity sector.
The Venture has advanced in 6 out of the last 7 weeks and actually enjoyed its best April since 2010 with a gain of 2.3%. The Index also again confirmed superb support around 680 on the monthly chart. What’s intriguing at the moment is that the Venture’s 100-day SMA, in the mid-680’s, is now just beginning to reverse to the upside. Historically, this has always coincided with a favorable market environment for at least a few months or, in some cases, actually marked the beginning of a very powerful bull phase.
Venture 5-Month Daily Chart
RSI(14) on this 5-month daily chart bounced off the 50% level last week, which is encouraging, though the CMF still shows weak sell pressure. The rising 20-day SMA, currently 697, appears to be providing support. The Index could be gearing up to test resistance again in the coming days.
Venture Seasonality Chart
The Venture’s performance last month ran against the norm which is interesting – traditionally, April and June are the weakest months of the year. The second quarter is typically when the Venture stumbles but 2015 could be different.
The Seeds Have Been Planted (And Continue To Be Planted) For The Next Big Run In Gold Stocks
There’s no better cure for low prices than low prices. The great benefit of the collapse in Gold prices in 2013 is that it forced producers (at least most of them) to start to become much more lean in terms of their cost structures. Producers, big and small, have started to make hard decisions in terms of costs, projects, and rationalizing their their overall operations. Exploration budgets among both producers and juniors have also been cut sharply. In addition, government policies across much of the globe are making it more difficult (sometimes impossible) for mining companies to carry out exploration or put Gold (or other) deposits into production, thanks to the ignorance of many politicians and the impact of radical and vocal environmentalists (technology has made it easier for groups opposing mining projects to organize and disseminate information, even in remote areas around the globe). Ultimately, all of these factors are going to eventually create a supply problem and therefore great opportunities in Gold and quality Gold stocks. Think about it, where are the next major Gold deposits going to come from? On top of that, grades have fallen significantly just over the past decade.
Gold
Gold bounced around last week and finished down $2 an ounce at $1,178 despite a worse than expected U.S. GDP number and a Fed statement that could be interpreted as quite Gold bullish – there’s no indication the central bank will be hiking rates until at least September, and perhaps not even until 2016. April’s jobs report, due this coming Friday, will likely determine if Gold can snap out of a 4-week losing streak.
Gold stocks, however, continue to do better relative to the metal. John has an interesting chart to share tomorrow regarding this.
Below is an update of one of our favorite Gold charts as it gives the “Big Picture” of how Gold has meandered within a downsloping flag for the past two-and-a-half years. Quite simply, resistance is at the top of the flag and support is at the bottom, while RSI(14) – currently at 43% – has moved within a 30% to 60% channel. At some point, bullion will either break out above the flag or crash below it. At the moment it’s trading in the lower half of its range but near very strong support at $1,150.
Silver, which usually moves ahead of Gold, snapped its 4-week losing skid with a gain of 34 cents (updated Silver charts in Monday’s Morning Musings as usual). Copper climbed higher to $2.90. Crude Oil enjoyed another good week, climbing $1.84 a barrel to $59.26 while the U.S. Dollar Index lost more than one-and-a-half points to 95.21.
As Frank Holmes so effectively illustrates at www.usfunds.com, the long-term bull market in Gold has been driven by both the Fear Trade and the Love Trade. The transfer of wealth from west to east, and the accumulation of wealth particularly in China and India, has had a huge impact on bullion and will continue to support prices. Despite Gold’s largest annual drop in three decades in 2013, the fundamental long-term case for the metal remains solidly intact based on the following factors:
- Growing geopolitical tensions, fueled in part by the ISIS and al Qaeda, and a highly dangerous and expansionist Russia under Vladimir Putin, have put world security in the most precarious state since World War II;
- Weak leadership in the United States and Europe is emboldening enemies of the West;
- Currency instability and an overall lack of confidence in fiat currencies, except King Dollar at the moment;
- Historically low interest rates;
- Continued strong accumulation of Gold by China which intends to back up its currency with bullion;
- Massive government debt from the United States to Europe – a “day of reckoning” will come;
- Continued net buying of Gold by central banks around the world;
- The Oil price plunge since last year which may cause destabilization of certain Oil-dependent economies;
- Mine closings, a sharp reduction in exploration and a lack of major new discoveries – these factors should contribute to a noticeable tightening of supply over the next couple of years.
Hi Dan, in reply to your comment late Friday regarding GGI and the Grizzly, etc., I understand your frustration, especially with the stock trading where it is at the moment, but let me shed some light on a few issues that you and others may find helpful.
First, there is no doubt that GGI management will be held accountable by investors, and I can assure you by us at BMR, in terms of how they handle the unique opportunity they have at the Grizzly over the next several months. It is obviously time for them to walk the walk. Having said that, I believe in my heart and in my head that they will excel. This is a very capable, hard-working group with integrity. They have also proven themselves to be good stewards of the financial resources they have been blessed with over the years. Now let’s get to some specifics.
Yes, GGI have kept their cards quite close to their chest regarding the Grizzly, for certain strategic reasons no doubt. They have guided themselves carefully, and I believe very wisely. Do they have targets? Of course they do. They could start drilling right away at Grizzly West, if they wanted to, based on the technical data that has been disclosed to date. Keep in mind, this is a 270 sq. km property – about 7 X the size of the Hat and 4 X the size of the Star. Their goal with the Grizzly is to make a discovery on the first, second or third drill hole (so millions of dollars aren’t wasted and share dilution is kept to a minimum). It’s about cost-effective exploration. That has been their successful strategy in Mexico. By being patient but persistent with the Grizzly, waiting until now to get ready to drill, they have gained the kind of knowledge necessary to achieve that first-hole “hit” like they did at Rodadero.
With Rodadero, GGI also kept their cards close to their chest and essentially said nothing about the property until the spring of last year when they announced they were drilling a “test” hole. They were far further along at Rodadero than anyone knew. And they hit. And on the first hole. And they quickly unveiled nearly a dozen separate mineralized target areas. They’ve had majors on that property in recent months and there’s no question that project has huge potential.
La Patilla – much the same strategy, and successful results.
Do u see a trend here?
GGI was first on the ground in the Sheslay district this year (in February). They will be the first in the district to come out with a comprehensive NI-43-101 technical report since the staking rush in early 2014. They have the most to spend right now than any junior in the district. When the drill bit finally goes into the ground, in the near future, watch out – because many sharp geologists are convinced they will make a discovery. It was no coincidence that Doubleview made an important discovery about 10 km southeast of the Star deposit. This entire district is pregnant. All the geological, geophysical and geochemical evidence points toward multiple deposits throughout this district. No one knows yet where the largest, richest deposit will be – right now, the Hat is in the lead and looking far better than even we first imagined. Farshad and his team have done an amazing job, and they are picking up steam. But the Sheslay is a DISTRICT discovery – for all we know, Ashburton could be sitting on a motherlode. I like Garibaldi’s position, though – they have the largest war chest at the moment, and size does matter here. They hold the biggest chunk of land. The “heat engine” for this district also rests mostly on the Grizzly. We’ll find out how significant that might be soon enough.
The only reason GGI is trading where it is right now is the pressure from the Dec. flow-through PP. But I suspect the stock is going into strong hands. This is the reality of the market – BLO went thru the same thing. Rather than get frustrated at a time like this, investors should open their eyes to the incredible opportunity that has been created. With GGI, we saw it triple from 5 cents to 15 cents very quickly (2 months), 8 cents to 24 cents very quickly (2 months), and another triple from here in 2 months could easily occur. The time to get greedy in the market is when others are fearful or not paying attention, just like with DBV when it was trading lower. That GGI flow-through paper is being gobbled up and soon it will disappear. Then watch what happens.
Keep the faith. Exciting times are ahead. Results from DBV’s hole 23 this week? Let’s hope.
Comment by Jon - BMR — May 3, 2015 @ 6:01 pm
That’s an excellent response to a good question. I have been accumulating GGI recently and there have been times when I have questioned myself for doing that but the thing that gives me comfort is that GGI has 3 excellent projects, can be very dangerous betting on a company with just one good project. GGI is obviously taking a very methodical approach (obviously too slow for some people) and I am betting that it pays off in the end. I really like the risk/reward scenario at these prices. Good luck to everyone on this one, it’s not time to get impatient and sell.
Comment by Danny — May 3, 2015 @ 8:12 pm
I just returned from a long weekend away only to learn of Bert’s passing. I felt something was wrong but was hoping for the best. Some BMR readers may have caught this, but it was about a month ago where Bert put his email address in a post and asked me to contact him. I did, and we grew to be net buds that same day. Some about stocks of coarse, but mostly about each of our lives and how we got to where we are today. I can say that he was honest and genuine. However you found out Jon, thanks for letting all of us know. I did not have his phone number, and when he was not responding back to my emails, I knew something was wrong.
Our last email conversation involved me coming up to Newfoundland and visiting him for a week.
I am deeply saddened by his passing.
Death is a celebration of life for he who parishes joins God in all the glory and grace of everlasting life.
Rest in peace Bert.
Comment by dave — May 3, 2015 @ 9:10 pm
Thanks for the reply to my question Jon. I agree totally with Danny and have bought more GGI in the last week.
Comment by PaulH — May 4, 2015 @ 11:43 am