TSX Venture Exchange and Gold
The Venture shrugged off a bad week for Gold and overcame 680 resistance, a fact that demonstrates how the Oil and gas sector has a greater influence than ever before on the Index. WTIC rallied more than 7% last week, posting its biggest weekly gain since February 2011.
The Venture added 16 points or 2.4% to close at 693 which compares to a 2.8% push by the TSX and a 3.8% advance by the Dow. Equities overall were strong last week, one reason why Gold backed off $50 an ounce or 3.9%.
This 2-month daily Venture chart shows the gradual climb beginning in mid-December out of extreme oversold conditions, with RSI(14) now above 50%. After a confirmed breakout through 680, which should now act as new support, next resistance for the Venture rests at 707 (the January high and Fib. resistance).
Venture 6-Month Daily Chart
For the first time since September, the Venture is now trading above its 50-day moving average (SMA). What would be particularly significant is if this SMA were to reverse to the upside. It’s possible such an event could occur later this month. Meanwhile, something to keep an eye on immediately is the Bollinger Band Width which has been at low levels the last few weeks. If it starts to gain traction to the upside, this would mean a period of increased Venture volatility (either up or down).
The breakdown during the last half of January above the downtrend line in place since September was an important development, but the Index since then has been moving higher only in a very gradual, hesitating manner. It’ll be interesting to see if the pace of that advance starts to pick up. Historically, February is the Venture’s 4th best month of the year and usually ends on a strong note.
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
After a powerful finish to the previous week, Gold disappointed to the downside as it tumbled $50 an ounce to close at $1,233. Typically, bullion has been moving in tandem with the Dollar Index since November but that trend wasn’t evident Friday as Gold fell sharply while the Dollar Index surged by more than a full point on a better-than-expected U.S. jobs report, increasing the market’s expectations of a Fed interest rate hike by as early as June (we believe the Fed will be forced to hold off until 2016).
The fresh 6-month daily chart for Gold gives us some concerns. Monday’s trading will be important as bullion on Friday closed below what should have been an exceptionally strong support band between $1,240 and $1,260. This is an “unconfirmed” breakdown that requires confirmation Monday. In addition, RSI(14) has broken below an uptrend line (and the 50% support level) and that’s almost always a red flag, while a bearish -DI/+DI crossover has also occurred. At the very least, these indicators suggest an increasing likelihood of a near-term test of the $1,200 area – particularly if there isn’t a sharp recovery on Monday that would make Friday’s move a fake out. We’ll examine a couple of other Gold charts in Monday’s Morning Musings for a broader perspective on this market.
Silver closed below support at $17 an ounce Friday, losing 54 cents for the week to finish at $16.68 (updated Silver charts Monday). Copper added 5 cents to close at $2.55. Crude Oil rallied strongly for the second straight week, gaining $3.45 a barrel to finish at $51.69. The U.S. Dollar Index, despite Friday’s surge, was down one-fifth of a point for the week, closing at 94.65.
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.
Jon
It looks like BLO may turn out to be the star of 2015, you can just feel the momentum building, does not matter what happens to gold or silver, BLO could really BLOW!! sort of reminds me of the tech stocks back in 1999 and 2000, people just went nuts over the possibilities and I can see BLO being that kind of stock. Do you see any possibility of this tracing back under 20 cents U.S. anytime soon? as usual kicking myself for not buying more when I had the opportunity under 10 cents. Thanks
Comment by Greg — February 7, 2015 @ 10:06 pm
Greg, if you’re kicking yourself for not buying more of BLO when it was under 10 cents last fall, take a look at WRR (Walker River) which is seeing an uptick in volume right now under a nickel, which is one of a few reasons it has caught our attention again. They have a drill permit for a property in Nevada that I like a lot, Lapon Canyon, where they’re targeting potential high-grade gold mineralization in crosscutting shear zones. Completing a financing at the moment, things could move very quickly here. Thomas Shuster, who I respect a lot, joined the board last year, has been on the property and loves it. Tookie Angus is an adviser. Put on watch list, do your DD.
Comment by Jon - BMR — February 8, 2015 @ 6:04 am
John, question: Do you think we will be done with the warrants on BLO this month? We’ve been trading over 13 cents for quite some time now.
Comment by chris — February 8, 2015 @ 8:22 am
Hi Chris, good chance for that.
Comment by Jon - BMR — February 8, 2015 @ 11:04 am
I’d like to find out the story of why the miners at WRR came to quit digging when they sampled 20 OZ per ton gold at the end of their adit.
Maybe they just were a little fatigued.
Comment by Carl — February 8, 2015 @ 2:35 pm
Plenty of near-surface targets there, Carl. I believe the plan is to quickly start to drill and try to generate some promising early results. They have a very good shot.
Comment by Jon - BMR — February 8, 2015 @ 3:07 pm
Jon, it has been too long since GGI released more assay results from Rodadero. Something else has to be in the cards. Also when will you release the details of your Rodadero site visit?
Thanks
Comment by Dan — February 8, 2015 @ 4:04 pm
Dan, it’s safe to assume that GGI management hasn’t been on vacation these last 6 weeks, and silence is golden as another reader stated, so I think it’s reasonable for us to conclude as investors that something significant is brewing behind the scenes. There are few companies on the Venture with the kind of 1-2-3 punch that GGI has in terms of Rodadero, La Patilla and the Grizzly. So they are in an excellent position to leverage that property strength to really enhance shareholder value, and that’s why we like this company so much. I’m expecting upcoming news from GGI, whatever it is, to be very positive as they’ve delivered nothing but positive news on drill results and property developments for the last year-and-a-half. As far as site visits in general go, sometimes we are limited or restricted in what we can say for a certain period of time.
Comment by Jon - BMR — February 8, 2015 @ 4:40 pm
Jon – As far as site visits in general go, sometimes we are limited or restricted in what we can say
for a certain period of time.
Bert – It took awhile, but being reasonable posters, we understand the predicament you find
yourself in. May i add, you would not be limited or restricted, if there was NOTHING
to restrict you from. It may not have been intentional, but these words leave us open
to the wildest of dreams. Whatever, you have my thanks…
Comment by Bert — February 8, 2015 @ 5:10 pm
I agree silence is golden, but it is time for GGI to make some noise. I certainly understand if you are limited to what you can say for a certain period of time, which gives me a good vibe as to what may be coming if in fact Rodadero was your destination.
Comment by Dan — February 8, 2015 @ 5:21 pm
Jon
Question, do you know legally if a company is in talks to be bought out or to sell some assets, can the acquiring company ask while they are in negotiations, for the company that they want to aquire to not release any further news regarding any material facts that would possibly cause the share price to rise and therefore cost the company that wants to acquire more money to do so? Is there any type of process that this would be legal or even prudent to do?
thanks
Comment by Greg — February 8, 2015 @ 5:24 pm
Good question, Greg, as we have not yet heard from the company why drill results that were expected in December have failed to be announced, nor an explanation of that failure.
Comment by terry — February 8, 2015 @ 6:55 pm
I seen on one of the posts that they compared blo with taser because of the customer base, the police. one thing I would like to say that blow also has all of industry that would buy there product also. Every company needing to drug test there employees. Why people are selling this stock now is beyond me, but thank you
Comment by gary thompson — February 9, 2015 @ 12:47 pm