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TSX Venture Exchange and Gold

After meeting resistance at a downtrend line in place since September, the Venture retreated 20 points last week to close at 687.  Volume was lighter than usual, as it typically is during the first half dozen or so trading days of the New Year, but should pick up in the coming week – especially if Gold continues to trend higher and Crude can at least stabilize.  Overall company news flow in the junior sector should also pick up which may help.

Key near-term resistance for the Venture is just above 700 as you can see in this 2-month daily chart.  As long as the Fib. support band can hold between 654 and 680, the Venture’s gradual recovery from its all-time low December 16 of 637 should continue.  Buy pressure remains steady.

Venture 9-Month Daily Chart

This 9-month chart shows how important it is for the Venture to overcome resistance at the downtrend line.  Above that, the next hurdle will be the still-declining 50-day SMA, currently at 723, followed by the 745, 770 and 800 levels.

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 enjoyed its best week in a month and continues to climb an RSI(14) trendline, suggesting another move higher is likely in the works for the coming week.  On Friday, bullion jumped $14 an ounce to close at $1,223 as the greenback cooled off slightly.

The fact that Gold has performed as well as it has over the past 2 months (an 8% gain from the early November low of $1,130) despite a strong move in the U.S. Dollar Index is a very encouraging sign.  Physical buying out of China, leading up to the Lunar New Year February 19, is providing significant support.  Bullion is also attracting a safe haven bid with Islamist terrorism rocking France and creating more global chaos.

Gold’s breakout Friday above Fib. resistance at $1,216 requires confirmation Monday.  The $1,240 level represents key resistance.  The bears will certainly be put on the defensive if bullion is able to clear $1,240.

Silver closed the week at $16.52 (updated charts tomorrow morning).  Copper remains soft, closing at $2.79.   Crude Oil (WTIC) posted its 7th straight weekly decline, finishing at $48.36, while the U.S. Dollar Index backed off Friday but still closed half a point higher for the week at 91.92.

The “Big Picture” View Of Gold

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;
• 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;
• Mine closings, a sharp reduction in exploration and a lack of major new discoveries – this these factors should contribute to a noticeable tightening of supply over the next couple of years.