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August 24, 2016

BMR Morning Market Musings…

Gold has traded between $1,324 and $1,341 so far today…as of 10:30 am Pacific, bullion is down $11 an ounce at $1,326…Silver is off 23 cents to $18.55…Copper has slid 4 pennies to $2.09…Crude Oil has fallen $1.40 a barrel to $46.70 on an unexpected jump in inventories, while the U.S. Dollar Index has added one-fifth of a point to 94.77

Commerzbank on Gold, which makes sense to us:  “Apart from this short-term factor (Fed), the environment for Gold and Silver remains positive.  The monetary policy pursued by the major central banks is and will for the foreseeable future remain ultra-expansionary. Even a 25-basis-point rate hike by the Fed would do little to change this. Around the world, bonds worth $12 trillion are meanwhile showing negative yields – something that has never happened before to this extent. Then there are the numerous political and geopolitical uncertainties, so any falls in the prices of Gold and Silver should prove short-lived.”

Recent hawkish comments from Fed policymakers have raised investors’ expectations that Yellen might adopt a less cautious tone on rates when she speaks at Jackson Hole Friday morning, and that’s a reason the TSX Gold Index has declined in 9 out of the last 10 sessions and below its 50-day moving average (SMA) for the first time since the late spring…the total decline (so far) has been 13.7%…the current swoon is similar to the drop in May under similar circumstances (bullish rhetoric from Fed officials) that totaled 14% and represented a tremendous buying opportunity in Gold shares…RSI(2) is at oversold levels on the Gold Index not seen at any point since late 2015 during Gold’s bottom…inexperienced, fearful investors are throwing high-quality Gold producers and exploration stocks overboard at precisely the wrong time, but that’s what makes a market…the next couple of trading sessions should prove extremely interesting…

According to the CME FedWatch tool, markets are pricing in a 21% chance (way too high) of a rate increase in September, and a 50% chance (also too high) of one in December…

Even in the very unlikely event the Fed were to hike rates next month, Gold would almost certainly push strongly to the upside afterward (just like it did in December, counter to what the so-called experts were predicting)…Daniel expands on this in today’s Daniel’s Den

So what’s to fear?…

Tax Me, I’m Canadian!

The Fraser Institute is out with a new study that has found taxes, and not basic necessities like food, clothing, and housing, make up the largest expense for the average Canadian household…it found the average family paid over $34,000 in taxes of all sorts last year, including what it calls “hidden” business taxes that are passed along in the price of goods and services purchased…

That’s 42% of the average family income – going straight to governments…by comparison, the family paid almost 38% for food, clothing, and housing…

Alberta – Another Example Of The Perils of Socialism

Wow – Alberta, once the bastion of capitalism, economic opportunity and good governance, has fallen down the slippery slope of Big Government and socialism, as predicted…if millennials so enamored with Bernie Sanders, who has also pulled the Democratic Party even further to the left, would like an example of a North American jurisdiction that is going downhill faster than the speed of light through the types of policies that he and his ilk shamelessly peddle, look no further than Alberta…liberals (the former PC’s under Allison Redford) quietly started the process, and now the socialists under current Premier Rachel Notley have driven the nail into the coffin – they have turned this once dynamic engine of Canadian growth into “Albertastan”…a have-not province!…

Red ink was everywhere in the government’s first-quarter fiscal update for 2016-2017 yesterday with the province’s projected deficit expected to swell to $10.9 billion, despite higher than expected revenues due mostly to an uptick in Oil prices – how ironic…the NDP has also benefited from the largesse of the Liberals in Ottawa, with transfers nearly $650 million higher than forecast, but money is going out faster than it’s coming in…

And isn’t it interesting how Oil royalties in Albertastan are up but corporate tax revenues have plummeted by a staggering $900 million, contributing to the wider than anticipated deficit…astute economists warned the naïve NDP that hiking corporate taxes by 20% would give companies an incentive to relocate profits outside of Alberta to lower-taxed jurisdictions, and that’s exactly what has occurred – along with other negative impacts that have hurt, and will continue to degrade, investment and jobs…

With corporate taxes falling and spending going up and up and up, with no end in sight, Albertastan’s NDP is now accumulating larger per capita deficits than Ontario’s Liberals did in their worst debt-binging days of the last recession…scary!…Alberastan’s per-person budget deficit for 2016-17 is projected to be about $2,557 per person…adjusted for inflation ($2,290 in 2009 dollars), that’s still approximately 55% larger than Ontario’s deficit in 2009-10

The NDP is spending like drunken sailors while tangling the province up in red tape, the same NDP approach that in neighboring British Columbia in the 1990’s created a huge outflow of human and investment capital from B.C. into Alberta (now the outflow is in the other direction – Christy Clark was even bragging recently about the number of Albertans coming to B.C. for jobs)…the Oil downturn that started in late 2014 would have hurt any government in power in Alberta, but the fact is the NDP made the situation far worse by hiking taxes, increasing spending and generally making the province a less friendly place in which to do business…

B.C. is a resource-rich province with many projects in development…it will benefit immensely from capital shifts (people and dollars) from Alberta…remember that!…so too will Saskatchewan where Brad Wall’s Conservatives are in stark contrast to the NDP clowns in Albertastan…

Alberta And Climate Change Fanaticism

Meanwhile, as Albertastan’s NDP rushes ahead with implementation of its “Climate Change Plan”, a new study provides another measure of its massive cost…

A proposed cap on Oil sands emissions would leave Oil worth hundreds of billions of dollars in the ground (why not, when we can simply continue importing Crude from hideous regimes in the Middle East who keep breeding Islamic terrorists?) while doing little to reduce global greenhouse gases…

According to the Fraser Institute study by Ken Green and Taylor Jackson, How Alberta’s Carbon Emission Cap Will Reduce Oil Sands Growth, the provincial government’s proposed cap of 100 megatonnes of emissions annually for the Oil sands sector would reduce its production potential by more than 3 billion barrels between 2025 and 2040, costing the Canadian economy more than $250 billion in lost production and resulting in a “meager” 0.035% reduction in global greenhouse gas emissions by 2040

That’s right, a 0.035% reduction in global greenhouse gas emissions by 2040 at a cost to the Canadian economy of $250 billion – now isn’t that “progressive”!…

How can a government be trusted with a “Climate Change Plan” when its economic policies are so disastrous, the province’s #1 exports have become jobs and investment…

Quite simply, Alberta is yet another unfortunate example of how incompetent governments – calling themselves “progressive” – can quickly destroy wealth…investors beware…

Gold In Canadian Dollars

Gold in loonie terms remains on track to test measured Fib. resistance just below $1,900 by year-end  – yesterday it closed at $1,738, and this morning the metal has dropped a little more below its 50-day SMA…any dips below that SMA have proven to be excellent buying opportunities, and this time will be no exception in our view…

RSI(14) is a modest 59% – support has held at the 50% level throughout the entire year…

At some point we do expect the RSI(14) to reach well into overbought territory above 70% – that will be the time to lock in profits in preparation for a potential major correction…

Gold CDN Dollars Aug 24

In Today’s Morning Musings

1BMR investigation reveals promising overlooked area on Aben Resources‘ (ABN, TSX-V) Forrest Kerr Project…

2. A long-term Richmont Mines‘ (RIC, TSX) chart provides perspective on current dip in Gold stocks…

3. Daniel’s Den games in the Gold market, and if only the Fed would be so kind to hike in September!…

Plus more…click here to read the rest of today’s Morning Musings and all BMR exclusive content, through a risk-free Pro, Gold or Basic package, or login with your username and password…

23 Comments

  1. I have been picking away at CLE at .12, seems like a low risk play at these prices, so many irons in the fire, expect things to pick up in September, these are the dog days of summer.

    Comment by Danny — August 24, 2016 @ 9:59 am

  2. NRN – smack down today. Got filled at 22.5 cents. Now my average cost is dropped. Got a like it. Unless they are not drilling Huckleberry this year this is just a temporary drop.

    Comment by Dan1 — August 24, 2016 @ 10:05 am

  3. Sheesh. cdnx down 22pts. Bull mkt done?

    Comment by tony t — August 24, 2016 @ 10:36 am

  4. Yeah, the bull market is all over, Tony t, finished, done, sell everything you have because as it turns out Gold is really nothing more than a pet rock…

    Comment by Jon - BMR — August 24, 2016 @ 10:42 am

  5. As of the low today Gold Miners Index (GDX)is 15% off the high. Time will tell if that’s a healthy pullback or something more. Feels like a wash out to me. Does buying your favorite miners and explorers feel a little scary? In my experience that feeling is typically a buy sign.

    Comment by Daniel — August 24, 2016 @ 11:33 am

  6. My bids for CLE at .115 and .11 got hit, surprised it went this low but then nothing should surprise me anymore. Can’t see it going much lower but who knows.

    Comment by Danny — August 24, 2016 @ 1:07 pm

  7. That’s to bad Jon , thought it was just getting going, ( jus kiddin) think this is all about to change next week, good cleanse, ske maybe a bargain as they start drilling snip? Nr.

    Comment by Laddy — August 24, 2016 @ 3:07 pm

  8. CLE – Merrill Lynch bought 163k of the 212k volume yesterday. That is a lot of shares. I am surprised it went to .11 too.

    Comment by dave — August 24, 2016 @ 3:24 pm

  9. Plain old, panic!

    Comment by Laddy — August 24, 2016 @ 4:22 pm

  10. Hopefully we’ll see a little more fear tomorrow, Laddy, for even better buying opportunities…followed by a late day or Friday reversal. We’ll have some comments and charts in a separate post tonight.

    Comment by Jon - BMR — August 24, 2016 @ 5:05 pm

  11. Hopefully, Jon, its done after a typical reversal in the morning!? Venture fell 28pts! yikes….but great buying opps out there! We probably haven’t seen such a drop in while but the last week of August could get things moving again up soon!

    Comment by STEVEN1 — August 24, 2016 @ 7:48 pm

  12. Follow-thru selling in the am would be great to see, Steven1, and something savvy traders would pounce on. August volatility not unusual. Best example was 2007. Nearly a 25% plunge over 9 sessions followed by an immediate rocket launch (800 points higher or nearly 35%) in September and October on a Nickel-Copper-PGE discovery and a jump in Gold. Bring it on! This washout really helps set the table for September. We’re not looking at a 2007 repeat here in terms of the decline, but a pullback of up to 10% from the 848 high would be an ideal “head fake” in advance of another leg up. Venture has some Fib. support at 784, then much stronger support in the 760’s.

    Comment by Jon - BMR — August 24, 2016 @ 8:43 pm

  13. THANKS…LOOKS LIKE WE WERE DOWN 5 PTS AT ONE TIME AND NOW ONLY 2-3 PTS…..STABILIZING I GUESS?

    Comment by STEVEN1 — August 25, 2016 @ 5:46 am

  14. Looking very good, Steven1, as the sellers may have mostly blown their brains out yesterday, with a final round or two fired this morning…Fridays are always important days as it’s the end of the week, and as John says, Fridays tend to show “commitment”. With Ma Yellen addressing the world tomorrow, this Friday of course takes on added importance. No matter what the Fed does next month, Gold is headed higher so that makes yesterday’s nonsense all the more silly.

    Comment by Jon - BMR — August 25, 2016 @ 5:49 am

  15. Jon, would you and John the Chartist( not to be confused with John the Baptist,although he that is least in the kingdom of heaven is greater than both of them)disagree with the views below expressed yesterday.
    1)For gold and silver, sharply lower into early October.
    2)For the U.S. dollar, sharply higher into the end of the year.
    3)For U.S. and European stock markets, sharply lower into October/November.
    If you disagree are there charts to back up that contrary view. Lastly Jon, as I am sure you are aware not a thing was done to change or improve the world financial system after the 2008 crash( which took all stocks down including gold and silver ones)so when the next infinitely worse crash happens, which many people believe is very imminent, do you think that gold and silver stocks along with the metals will not be taken down along with all the rest this time?

    Comment by DAVID — August 25, 2016 @ 5:54 am

  16. What exactly is going to take the U.S. dollar “sharply higher” into the end of the year, David?

    Of course we disagree with that point of view because not only is it fundamentally flawed, but it just doesn’t hold water technically – we’ve stated that case very clearly repeatedly in recent months. The set-up in Silver, by the way, is extremely bullish at the moment, and it’s a great indicator for Gold, so I’m expecting a strong September for the metals.

    The world financial system will implode at some point but that’s not imminent – central banks and governments will keep delaying the inevitable. The Venture is behaving in the OPPOSITE manner in which it traded in the few months prior to the 2008 Crash, by the way, which it predicted through serious technical breakdowns…the Venture is the best indicator there is, David, and it’s telling us a lot of good things (despite the 7.5% pullback we’ve just seen).

    Comment by Jon - BMR — August 25, 2016 @ 6:06 am

  17. Thanks for your affirmative reply Jon. I don’t necessarily subscribe to the opinions I put forward but I think it was worth airing the contrary point of view by way of debate and provoking your refuting broadside. I think the idea behind the U.S. dollar moving “sharply higher” into the end of the year” is the movement of capital by investors to the US as it being the safest house, temporarily, in a bad neighbourhood compared to Europe and other areas as they may worsen. You probably heard about the problems the Italian banks were having recently but the real elephant in the room recently has been Deutschebank. The fear was that if it collapsed this would provoke a financial collapse far greater than 2008,which was sparked off by

    Comment by DAVID — August 25, 2016 @ 8:16 am

  18. You’re correct in the sense that the U.S. dollar is the best apple out of a rotten bunch of apples, David, but the problem with the dollar is that its Fed-inspired momentum from 2014 is over, and technically the 200-day is now in decline which has created a great deal of overhead resistance…the U.S. economy isn’t as strong as it’s being made out to be, and a recession can’t be ruled out starting in 2017 (this slow expansionary period is long in the tooth by historical standards)…the economy certainly can’t afford a runaway dollar at this point…Fed has very little wiggle room to move rates higher…government fiscal policy is broken, no economic leadership in Washington…the run-up in the dollar beginning in 2014 was on the assumption there would be a series of rate hikes in a new rate hike cycle…that just isn’t happening…the political dynamics are also negative re: the dollar no matter who wins the election in November…also, the long-term relationship (inverse correlation) between the Venture and the dollar cannot be ignored – the Venture is saying the dollar is going lower and Gold is going higher…that’s the trend, despite the silly blips like this week…

    Comment by Jon - BMR — August 25, 2016 @ 8:29 am

  19. Fed lineup tomorrow (oh, what fun!):

    4:30 am Pacific (7:30 am eastern): James Bullard (St. Louis Fed President) on CNBC
    5:30 am Pacific (8:30 am eastern): Loretta Mester (Cleveland Fed President) on CNBC
    7:00 am Pacific (10:00 am eastern): Ma Yellen, Jackson Hole

    Gold price prediction contest for tomorrow: Closest to the actual gain (or loss) wins bragging rights!

    Comment by Jon - BMR — August 25, 2016 @ 4:31 pm

  20. Will finish up $45 tomorrow

    Comment by Matt — August 25, 2016 @ 4:45 pm

  21. Bold call, Matt!

    Ma Yellen’s speech is titled, “The Federal Reserve’s Monetary Policy Toolkit.” (serious)

    Gold needs a lift, Ma won’t disappoint with what she has tucked away in her toolkit – I’m calling for $37 to the upside.

    Comment by Jon - BMR — August 25, 2016 @ 4:57 pm

  22. My prediction, gold closes up $23US/oz tomorrow

    Comment by vepper — August 25, 2016 @ 6:11 pm

  23. $1355

    Comment by STEVEN1 — August 25, 2016 @ 6:49 pm

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