TSX Venture Exchange and Gold
Editor’s Scheduling Note: Canadian markets are closed Monday for the Victoria Day holiday. We’ll be posting Monday evening with regular BMR Morning Musings returning Wednesday to allow most of our crew an extended long weekend.
The Venture has shown exceptional support through the first 4-and-a-half months of this year, and has managed to stay at or above its gently rising 100-day moving average (SMA) since early April. The question is, what will give this market the “escape velocity” it needs to overcome key resistance just above 700? Some individual company success stories in the junior exploration space would help immensely in terms of restoring investor hope and confidence.
The Venture, which added 4 points for the week to close at 695, has been stuck in a 28-point range between support at 680 and resistance at 708 for the last 31 trading sessions. It seems highly likely that at any point over the coming several weeks, the Venture will take the path of least resistance which we speculate will be a breakout to the upside based on numerous indicators including the bearish trend that has emerged in the U.S. Dollar Index since its mid-March high.
Further gains in the CRB Index are also likely between now and the end of the summer, as John has shown in recent charts, and Copper (a reliable leading indicator) is looking very interesting as well from a broad perspective. Crude Oil likely found its bottom in the low $40’s while strength in Gold producers suggests a 3-year correction in the yellow metal may indeed have ended last November. So the Venture’s upside potential as this quarter progresses exceeds its downside risk, a very different scenario than the one that existed last September when the Index simply fell apart technically, driven largely by the collapse in Crude prices. Yes, the resistance just above 700 is frustrating but the Venture has also been building a strong base over the last 5 months.
Interestingly, sell pressure in this 5-month daily chart is the strongest we’ve seen since late December, yet the Venture has managed to hold key support (the critical Fib. cluster of support is between the 650’s and 680) while RSI(14), SS and other indicators are giving positive signals. A rapid decrease in sell pressure, like we saw at the end of December, would be a strong clue that a Venture breakout is imminent.
Gold
Weaker-than-expected U.S. economic data and global government bond market jitters propelled Gold to a 3-month high last week. Bullion closed Friday at $1,223 for a weekly gain of $35 an ounce or 2.9%.
Gold faces important resistance in the $1,220’s (repeated attempts since late February to push through the $1,220’s have failed) and then at $1,240. The 50-day SMA, currently at $1,189, is now reversing to the upside, and this does increase the odds of additional near-term gains and a locking in of support at $1,200.
Below is a 6-month daily chart that outlines the Fib. levels to keep an eye on. The latest 2.5-year weekly chart, which we posted in Thursday’s Morning Musings, gives a valuable “Big Picture” look at the Gold market and the critical resistance it faces at the top of a downsloping flag which is currently cutting through the $1,270’s. Last week’s move was encouraging but a more difficult test lies ahead.
Indian Gold Demand Picks Up
Gold imports by India, the world’s second-largest consumer, exceeded 100 metric tons for a 2nd month in April as easing of state curbs boosted demand for everything from necklaces to bangles and rings.
Shipments totaled 111 tons last month (a 78% jump in value terms to $3.13 billion) and are about 60 tons so far in May, India’s Revenue Secretary stated on Friday. Imports in March more than doubled to 125 tons from a year earlier because of seasonal demand and a drop in prices.
Shanghai Gold Exchange withdrawals were 857.7 metric tons as of May 8, a sign of steady demand from China, while German investors increased their buying of Gold coins and bars by 20% during the 1st quarter, the highest rate in a year, as a hedge against European Central Bank (ECB) policy and the threat of a Greek default.
Silver, Copper, Crude & Dollar Index
Silver posted its 3rd straight weekly gain, surging more than $1 an ounce to $17.49. The metal broke above a downsloping channel with next major resistance at $18. Copper finished unchanged at $2.90. Crude Oil tested the low $60’s (strong band of resistance between $60 and $65) before closing the week up 50 cents a barrel at $59.96. The U.S. Dollar Index tumbled a point-and-a-half on some weak U.S. economic data, and finished at 93.23. The Dollar trade got very crowded in March and now momentum has clearly reversed. Any bounces higher toward the now declining 50-day SMA will be met with strong resistance.
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 3 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/highly accommodating central banks around the world;
- 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 – these factors should contribute to a noticeable tightening of supply over the next couple of years.
Jon. Have you talked to Regoci lately? I believe if no news this week the sp drops even further. I know that with one hole things can change in the blink of an eye, but management owes it’s shareholders an update with a status and timeline on grizzly drilling. The silence has gone on too long with regards to the grizzly in my opinion.
Comment by Dan — May 18, 2015 @ 4:12 pm
Dan . The silence is deafening , similar to DBV , but both are making progress albeit slow to our liking but have excellent potential Hang in there , if either has progress in good results all in the area will benefit.
Comment by Les — May 18, 2015 @ 6:57 pm