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TSX Venture Exchange and Gold

9:00 am Eastern 

Good day from the PDAC International Convention, Trade Show & Investors Exchange, the world’s leading Convention for people, companies and organizations in, or connected with, mineral exploration.  BMR continues its eastern trip after a visit to the historic mining community of Rouyn-Noranda, Quebec, and we’ll have more on developments in northwest Quebec, including the Granada Gold Property, in tomorrow’s morning Musings posted directly from PDAC.  We’re here through Wednesday.

Venture Finishes February On Strong Note

The Venture concluded February on a very positive note by closing at its highest level since January 2.  Over the last 2 sessions the Index broke out of its recent trading range between 678 and 700, and now begins March exactly at chart and Fib. resistance – 707.  This resistance must be overcome in order for the Venture to take a run higher with the next major critical level being 750.

The Venture’s 6-month daily chart shows several important developments:

1.  A confirmed breakout above the 50-day SMA (this moving average is currently at 683) which significantly has now reversed to the upside – historically, this is typically accompanied by bullish behavior;

2.  A confirmed breakout (during the second half of January) above the downtrend line in place since September;

3.  RSI(14) has formed a bullish “W” and at 64% still has plenty of room to move higher;

4.  Increasing buy pressure (CMF indicator) and a weak bullish trend that’s gaining strength (ADX indicator).

Bollinger Band Width remains low.  If we’re going to see increased volatility, it could certainly be to the upside.

The Venture gained 4.4% in February despite a drop in the price of Gold.  Crude Oil, however, posted its first monthly gain since June.  The Index continues to correlate more closely with Oil than bullion.

Historically, we all know the Venture has a history of some stumbles in March and the month is also not usually favorable for Gold.  Could this time be different?  There’s no reason why not, especially if Oil can hold up and gain further traction (let’s hope the “PDAC Curse” doesn’t return in 2015).

We Need A Discovery, Some Excitement

If there was ever a time the Venture could use a major new discovery, it’s now.  But that’s made more difficult by the fact that there has been a continuing reduction in the number of companies actually drilling and carrying out significant exploration.  Some possibilities do exist, however, in various jurisdictions, and we’ll be following those situations closely.

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 6-Month Daily Chart

It was an important week for Gold to hold support, especially being month-end, and it managed to do that as well as snap a 4-week losing skid.  Chinese buyers returned to the market after the week-long Lunar New Year holiday break and renewed physical buying kept bullion from falling below the critical support band between $1,180 and $1,200.  It dropped as low as $1,190 but rebounded to close the week at $1,214, a $10 jump from the previous Friday.

For the month, Gold was off $70 an ounce or 5.5% after a $100 advance in January.

This 6-month chart shows RSI(14) now on the upswing and the next Fib. resistance at $1,217.  Look at the pattern of higher levels since early November – $1,130, $1,142, $1,167 and $1,190.  This is clearly encouraging, and Gold stocks held up well during February’s price drop and are looking quite bullish entering March.

The “Big Picture” View Of Gold