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With strategically located properties along the Cadillac Trend, and the recent “steal” of an entire former producing Gold and silver camp in Utah, Cadillac Mining (CQX, TSX-V) is uniquely positioned for its best year ever.  The volume and price surge with this stock late last year was evidence of major accumulation in advance of a new chapter in this company’s history.  Cadillac’s market cap is only $8 million.  CQX has a tight share structure and it’s led by strong management.  After a dramatic run that resulted in a 10-fold increase in its stock price from November 1 to early January (5 cents to 50 cents), Cadillac paused and decided to catch its breath.  It gave back about half of those gains (technically a very normal pullback) before staging a bullish reversal during Friday’s trading, likely marking the end of its January slump.  John examines CQX’s very interesting chart:

John: On Friday, Cadillac Mining opened at 29 cents, dipped to its low of 26 cents and then rose powerfully to a high of 33 cents before closing at 32 cents for a gain of 3 pennies (10.34%) on relatively heavy CDNX volume of 726,000 shares.  This was a bullish hammer reversal which suggests the start of a new uptrend:

Looking at the 6-month daily chart we see that there was a false breakout of the pennant at the beginning of the year which created a divergence between the price and the RSI. This warned investors of impending weakness which we saw until last Friday.  During 2011 the stock has retreated from a high of 50 cents to Friday’s low of 26 cents, almost a 50% retracement (a drop of this magnitude is quite normal after such a huge increase in the stock price).

Friday’s trading signaled a reversal. The candle was a bullish “hammer” supported by the highest trading volume of the year with the stock also gaining 3 cents.  This was the first bullish trading day in the last 6 sessions. There is huge support in the mid-20’s, as we saw Friday, with the Fibonacci 61.8% level at 25 cents and the supporting SMA(50) at 26 cents. Friday was likely the bottom of this decline. The next Fibonacci target is at 56 cents (this is not a BMR price target as we don’t give price targets but a theoretical Fibonacci level based on technical analysis).

Looking at the indicators:

The RSI has bounced up from the RSI 40% support level (horizontal orange line). The previous overbought level has been completely unwound – very bullish.

The Chaikin Money Flow (CMF) indicator shows the buying pressure is now bullish after CQX was under selling pressure for the previous 5 sessions – very bullish.

The ADX trend indicator is directionless as shown by the entwining of the +DI and -DI indicators and the weakening of the ADX (black line) trend strength indicator. This orientation is typical of a reversal after a retracement.

Outlook: The first stage of the reversal process occurred on Friday. The chart pattern and indicators all point to increased upside movement for Cadillac Mining.   Do your DD – this is a very bullish scenario.

Note: Each of the writers (John and Jon) holds a position in CQX.

GoldQuest Mining (GQC, TSX-V)

GoldQuest continues to look very healthy technically and closed the week up half a penny at 37 cents…the stock has been strongly supported by its rising 50-day moving average (SMA), currently at 34.5 cents, since October…it fell just briefly below the 50-day this month before snapping back…that temporary slight weakness may have been caused by the company’s acceleration of the warrant expiry date from a private placement last April to January 24…a total of 9,465,400 warrants were still outstanding as of December 24 (each warrant is exercisable to purchase one common share at a price of 20 cents per share), meaning as much as $1.9 million could be added to the company’s treasury this month as these warrants expire tomorrow…GoldQuest last week elevated director Bill Fisher to executive chairman…he has an impressive 30-year track record of accomplishments in the resource sector…most recently, he was former chairman of Aurelian Resources Inc. (taken over by Kinross) and from 2000 to 2008 he was the chief executive officer of GlobeStar Mining Corp. which, during his tenure, developed, financed and built the Dominican Republic’s first copper mine at Cerro de Maimon (it was also taken over)…with impressive precious and base metal exposure, along with major new discovery potential, we’re very excited about GoldQuest’s prospects for this year which is why it’s one of our favorites for 2011…drilling has commenced at the company’s promising La Esandalosa Project in the Dominican Republic and results could build significantly on the recently released 43-101 inferred resource for that project…all of GoldQuest’s properties in the Dominican Republic and its zinc-lead-silver deposit in Spain have us very bullish on GQC going forward…the company, whose largest shareholder is Gold Fields Ltd., is well established in the DR and its property package there is a geologist’s (and an investor’s) dream…they have spent nearly a decade identifying many highly prospective precious and base metal targets, one of them being La Escandalosa (formerly Las Tres Palmas) where an inferred resource of 400,000 ounces of Gold has already been outlined (announced Nov. 16) based on just 25 drill holes at Escandalosa Sur from 2006 through 2010…it’s important to stress the 43-101 was completed on La Escandalosa  at a very early stage and the possibility of a discovery well in excess of a million ounces is possible as this is such an attractive geological target…the deposit is open at depth as well as to both the south and the north toward another discovery of Gold mineralization by the company at Hondo Valle, approximately 1.2 kilometres away…Gold at La Escandalosa occurs as a flat-lying stratiform zone at shallow depth with mineralization interpreted to be part of a larger intermediate sulphidation replacement-style system which has now been defined intermittently over a strike length of 2,100 metres…the source of the mineralizing fluids remains unknown at La Escandalosa, leaving open the possibility of the discovery of mineralization in structural feeder zones or perhaps in a porphyry copper-Gold type system…GoldQuest has many other targets of considerable merit throughout its large DR land package including Las Animas which has a 43-101 inferred resource of 129,000 ounces of Gold, 2.5 million ounces of silver, 106 million pounds of copper and 130 million pounds of zinc…GQC has more drilling to do there as well…in Spain, Goldquest holds the Toral zinc-lead-silver deposit which has an historical (non-43-101 compliant) resource of 5.4 million tonnes grading 9% zinc, 6% lead and 45 g/t Ag…a 43-101 on Toral is currently being prepared…GoldQuest has also acquired a second polymetallic project in the area (Lago, just a 20-minute drive from Toral), and more details are expected upon approval from the Spanish government of a mineral rights application for the property… GoldQuest is up 90% since we added it to our readers near the end of September…

Greencastle Resources (VGN, TSX-V)

Greencastle closed Friday at 28.5 cents, a loss of 2.5 cents for the week but volume over the trading period was was relatively very low at just under 350,000 shares…the market is waiting for news from Greencastle which made it clear in November that it’s in the process of getting more active in the Gold exploration space…President and CEO Tony Roodenburg is no doubt evaluating some advanced projects and when the right opportunity comes along, we’re sure he’ll pull the trigger…in the meantime he also has three Gold properties – two  in Nevada and one recent acquisition in British Columbia near Richfield’s Blackwater deposit – that are each worthy of major exploration programs…the company has at least $6 million in working capital and receives more than $100,000 each month in oil royalties…so the outlook for this company is extremely positive and it’s one of those stocks you can hold and not worry about as the assets are solid…the long-term chart is also very bullish with rising 100, 200 and 300-day moving averages (SMA) that are in no danger of reversing…it’s also interesting to note that Roodenburg, a large shareholder in VGN, has refrained from selling any of his holdings in recent months despite the fact the stock price more than tripled in value on high volume…this is different from past runs in the stock and adds further credence to our view that we haven’t seen the highs in this cycle yet from Greencastle – it’s poised for what we believe could be a massive breakout sometime during the first half of this year…Pinetree Capital has also accumulated more shares in Greencastle, so there’s every reason to be very optimistic regarding this company’s prospects in the days, weeks and months to come…Greencastle has doubled in value since we added it back in to the BMR model portfolio about three months ago…

Adventure Gold (AGE, TSX-V)

Adventure Gold fell 2 cents last week, closing Friday at 42 cents, but there’s lots happening with this company and our outlook is as bullish as ever…in a case of bad timing, AGE released significant news Thursday morning in the midst of the CDNX’s 65-point plunge…the company got some free drilling on its Granada Eastern Extension Property as it reported that one of Gold Bullion’s holes (#85) was drilled entirely on Adventure Gold property (just inside the boundary) while three other holes (#78, #83 and #98) were collared north of AGE’s property but finished within it…this didn’t surprise us and it’s not an unusual event in the industry…it worked out well for both parties in this case, however – all the core from those holes has been given to AGE who will share results with GBB…this represents at least $100,000 of drilling and all AGE has to do is pick up the assaying costs…given GBB’s “hit ratio” on holes, it’s reasonable to assume that at least one of the holes (or partial holes) on AGE’s property could be of the “stellar” variety…with more results coming from Gold Bullion, we expect Adventure Gold will start to heat up again…they do hold small but strategic parcels of land around Granada (immediately to the south and the west in addition to the east) that could become part of a large open-pit…their claims hold significant potential value and they have drill assay results coming in without even doing their own drilling which they plan to start upon completion of their program at Pascalis-Colombiere…that property in the eastern part of the Val d’Or mining camp is heavily underrated in our view…a 2,500 metre drill program started at Pascalis-Colombiere last month and is testing the former L.C. Beliveau Mine at depth (below 300 metres) as well as near-surface parallel Gold structures to the west…Pascalis-Colombiere is just 1.5 kilometres east of Richmont’s (RIC, TSX) operating Beaufor Gold Mine which has produced over one million ounces in its lifetime…it’s safe to assume Richmont will be watching developments at Pascalis-Colombiere with interest…Adventure Gold’s property has significant upside exploration potential…the geological setting is favorable for the identification of new high-grade Gold bearing veins and structures or bulk-style ore shoots…there are many untested areas and excellent potential at depth…L.C. Beliveau was a very profitable former producer…if AGE can prove up something significant through extensions to this deposit, we see a potential deal with Richmont which would be the natural choice to bring the mine back into production…we first mentioned Adventure Gold to our readers in an article September 29, just a couple of days following the company’s announcement that it had acquired land at Granada, when the stock was trading in the low 20′s…we officially added AGE to the BMR model portfolio at 34 cents October 28, so the gain since then is 24%…Adventure Gold has been around only since late 2007 and we are impressed by the company’s solid portfolio of properties (19 in six strategic areas in Quebec and Ontario)…also of immediate interest is AGE’s partnership with Lake Shore Gold (LSG, TSX) on the Meunier 144 Property where deep drilling is currently testing the down plunge extension of Gold zones located at the Timmins and Thunder Creek deposits…the current initial deep drill hole onto the Meunier JV property is continuing…when completed it’s estimated the hole will provide a deep cut on the projected target area at about a vertical depth of 2,600 metres…this will enable shallower wedge cuts to be considered if significant mineralization is found to be present in this area…the initial deep hole was collared on LSG’s Timmins mine property last August and has now likely passed the 2,000 metre mark in depth…if this deep hole succeeds, AGE could absolutely explode…

Sidon International (SD, TSX-V)

Sidon had a relatively quiet week, trading less than four million shares on the CDNX and closing down 1.5 cents at 17.5 cents…the stock is finding strong technical support at its still-rising 50-day moving average (SMA) of 16.5 cents…we’ll be conducting an interview with President and CEO Kamal Alawas in the near future…we know he’s optimistic about the company’s fortunes…the first six holes have been completed over a strike length of 900 metres at Sidon’s Morogoro East Gold Property…the company reported zones of disseminated sulphides of pyrite and pyrrhotite as well as some chalcopyrite and arsenopyrite throughout all six holes over intervals of 30 to 70 metres…we caution that visuals are not always reliable but there’s reason to be optimistic that Sidon could be on to something…the company is also trying to develop a placer operation at Morogoro and has also acquired ground near Canaco’s discovery…Sidon remains locked in a very strong long-term uptrend as evidenced by the rising 100 and 200-day SMA’s…this company has come a long way since last March when we first introduced it to BMR readers at a nickel, and its new web site is just one more indication of how impressively Sidon has developed and matured…we see exciting possibilities for 2011…the company raised over $1 million through the exercise of options and warrants in November and December…

Seafield Resources (SFF, TSX-V)

Seafield continues to form a nice base in the low-to-mid-50’s in advance of what we believe will be a very strong 2011 for this company as it builds a substantial Gold resource at its Quinchia District properties in Colombia…the stock was off 3 pennies for the week, closing at 53 cents – 6 pennies above its rising 50-day moving average (50)…Seafield has simply refused to close below December’s 50-cent financing price…the trading action since early December has been impressive and the technicals suggest Seafield is at the bottom of a new trading range…on December 3 the company announced a spectacular drill result from its Miraflores Property in Colombia and the stock rocketed to 77 cents…results are pending on nine more holes at Miraflores…given historical results, at least some of these holes should be very good…drilling is also underway at Dos Quebradas, a property we believe gives Seafield its real “blue sky” potential at Quinchia… SFF reported December 8 that the first three holes have been completed at Dos Quebradas which is rich in porphyry targets over a wide area…DQ is just a few kilometres northwest of Miraflores…visual reports indicate that these three holes have similar styles of mineralization to an historical hole drilled by AngloGold that returned an interval of 39.5 metres grading 1.67 g/t Au…the potential of Dos Quebradas is evident from limited historical drilling and was confirmed by Seafield last year through soil geochemical surveys and magnetic surveys which are crucial to discovering hidden porphyries in areas of very little outcrop…Seafield also released results recently from trenching in one location from the southern end of the gold-in-soil anomaly that defines the northern extension of the Dos Quebradas porphyry…1.75 g/t Au was returned over 94 metres…Seafield has an excellent opportunity to develop a multi-million ounce Gold resource at its three major properties at Quinchia (Chuscal is the third property)…with a current market cap of $78 million and approximately $20 in the bank to fund an aggressive program in Colombia, Seafield still has considerable upside potential…

Gold Bullion Development (GBB, TSX-V)

Gold Bullion was off 3 cents for the week at 75 cents but the stock is displaying a lot of inherent technical strength…news also came out Friday morning which has potentially bullish implications…for more than a year-and-a-half, GBB has been consistently supported by its rising 100-day moving average (SMA)…we saw another example of that Thursday when the stock suddenly dropped to 68 cents (just one penny above the 100-day) on a 65-point intra-day downside move by the CDNX…bargain hunters stepped in and GBB strengthened and finished the day unchanged at 74 cents…on Friday, GBB opened 4 pennies lower at 70 cents and then rallied on news that drilling had intersected new mineralized structures in the LONG Bars Zone…the stock climbed as high as 77 cents and closed at 75 cents…new assay results from Granada are expected in the “very near future” as stated in GBB’s news release – we take that to mean anytime within the next couple of weeks – and it sounds like results will once again be solid…the consistency of Granada has been impressive – in fact, the overall picture seems to improve to a certain degree each time new results are released…this is reflected nicely in the chart which shows higher highs and higher lows over an extended period but in an orderly, gradual fashion…GBB is successfully bouncing off a support area on the RSI(14) that it also hit in September and July…the Chaikin Money Flow (CMF) indicator is also showing impressive strength with buying pressure intensifying…John will be updating the GBB chart by Monday morning…Gold Bullion has confirmed that mineralization remains open in all directions at Granada…November’s news showed the LONG Bars Zone is widening from north to south…we hope to see additional evidence of this in the coming news along with a better idea of how things are developing inside the Preliminary Block Model where a significant number of areas still need testing…”hot spots” in the Eastern Extension identified in November were the north, northeast and south…Adventure Gold (AGE, TSX-V) has been getting some interesting prospecting results on its claims in the far south of the Eastern Extension along a porphyry intrusive near the contact between the Timiskaming and Pontiac sediments (geologically, the Timiskaming sediments are considered much more favorable for Gold mineralization but AGE has demonstrated the contact area is very prospective)…AGE also found promising surface showings immediately south and west of the Block Model which, combined with historical information, makes us believe the Granada deposit is certain to expand in those directions plus of course northward and eastward…

Cadillac Mining (CQX, TSX-V)

Cadillac fell 4 pennies for the week but bounced back sharply during the day Friday after hitting an area of very strong technical support at 26 cents, right around the 50-day moving average (SMA)…CQX closed at 32 cents Friday on the highest single day volume in a month…this stock has had a huge run-up the past couple of months, surging from a low of 5.5 cents to a high of 50 cents…a pullback to the mid-20’s, in retrospect, was healthy and normal from a technical standpoint and has paved the way for another potential major surge…there are many reasons we like Cadillac so much and why we believe it could absolutely soar in 2011…the tight share structure (25 million outstanding and 27.5 million fully diluted) is highly attractive and the management team is focused and shrewd….Victor Erickson and Andre Audet also have a combined immense amount of geological and engineering expertise…all of this was clearly demonstrated when the company announced last Monday a very significant precious metals property acquisition in the Great Basin of southern Utah near the Nevada border…the market hasn’t quite caught on to this yet but that’s okay – we have and so have some of our readers…what Erickson and Audet skillfully pulled off, through negotiations with individual landholders, was the acquisition of an entire former mining camp (the “Goldstrike District”) with patented claims that cover a dozen former near-surface deposits…in addition, the company staked further ground, contiguous with the patented claims…those mined deposits very likely feature extensions…our research shows this area has been hugely under-explored despite the production of 200,000 ounces of Gold and nearly 200,000 ounces of silver between 1988 and 1996…not only could there be near-surface extensions but there are parallels here to Nevada where some major deposits have been discovered underneath old heap leach operations…Erickson has a lot of successful experience in the Great Basin and wants to aggressively explore this 15 square kilometre area at Goldstrike….we expect Cadillac will employ some sophisticated techniques to help unlock the potential of this mining camp…they have a wealth of historical data at their disposal which will lead directly to numerous drilling targets…the property acquisition came at minimal expense for Cadillac (no stock issued either) which demonstrates this group’s business savvy – you don’t always have to spend a small fortune and issue vast amounts of paper to acquire a quality project…some of the most successful properties were picked up for a song through careful research which is what Cadillac has pulled off with Goldstrike…two other important situations we’ll be expanding on next week concerning Cadillac – Wasamac (Richmont Mines is close to announcing new drill results and an updated resource estimate) and its partnership with Visible Gold on over 7,000 hectares of ground elsewhere along the Cadillac Trend…our recent visit to Rouyn-Noranda has confirmed without a doubt that Cadillac is sitting on some soon-to-be very hot properties…

Abcourt Mines (ABI, TSX-V)

Abcourt was off a penny last week, closing Friday at 18 cents…the technicals remain extremely bullish though and the fundamentals certainly support a much higher valuation potential given the company’s continued exploration success at its Elder-Tagami Gold Project in addition to the reserves and resources that have been outlined at the Abcourt-Barvue Silver-Zinc Property…so this is a situation we like very much and we’ll be following it closely…the company announced Tuesday (Jan. 18) that it has commenced a 10,000 metre drill program at Elder and Tagami, just north of Rouyn-Noranda, in an effort to build on the 43-101 resource estimate from 2009…additional results from last year’s drilling were also announced, showing a growing western extension of the former Elder Mine…one hole intersected 6.07 g/t Au over 10.9 metres…the company’s goal is to put Elder back into production as an underground operation by sometime next year…production potential is likely around 30,000 ounces per year…a substantial amount of infrastructure is already on site…meanwhile, near Val d’Or, Abcourt‘s Silver-Zinc Property has significant 43-101 reserves and resources that could be mined mostly by open-pit…GENIVAR completed a positive feasibility study for Abcourt-Barvue in 2007 and listed proven and probable ore reserves at 6,823,532 tonnes grading 57 g/t Ag and 3.11% zinc…there are also 43-101 measured, indicated and inferred resources with even higher silver grades…the economics for this project are robust based on GENIVAR’s 2007 study at baseline prices of $15 for Silver and 88 cents for zinc…the project’s pre-production capital cost was estimated by GENIVAR to be between $46 million and $60 million…drilling is on-going at Abcourt-Barvue in an effort to upgrade and augment resources and justify an expansion of the proposed mill from 650,000 tonnes per year to 1 million tonnes per day…what first caught our attention with Abcourt was a massive increase in volume in December (record volume for this company)…volume is the best indicator of all that something potentially big is in the works for a stock…Abcourt recently raised $4 million…with 110 million shares outstanding, its market cap currently sits at just $20 million…continued drilling success and even higher prices for Gold, silver and zinc would be extremely bullish for this stock which has a history of major moves…from mid-2005 to early 2006, Abcourt rocketed from 15 cents to nearly $1.40…

Currie Rose Resources (CUI, TSX-V)

Currie Rose was down a further 2 pennies for the week at 16.5 cents but the stock has clearly stabilized after a steep decline the week before…the stock is at its lowest RSI(14) level since 2005 which strongly suggests CUI is at or very near an important bottom…fundamentally, while its Sisu River Gold Property did not deliver great results from a first-pass program, Currie Rose has an overall very attractive land package in northwest Tanzania which is why we view the current weakness as such an attractive opportunity for patient investors…Sisu River will get another look in the spring (initial results were encouraging enough to warrant a follow-up drill program) but it’s only a very small part of the company’s large Mabale Hills Project where numerous new targets are expected to be identified through satellite imagery and geophysics over the coming weeks…the project we like the most, however, is Sekenke which is approximately 200 kilometres southeast of Mabale Hills…we’ve stated repeatedly that Sekenke has huge potential as it surrounds and runs in between two former producing high grade mines…early exploration results from this nearly 300 square kilometre property were outstanding…extensive geophysical work will precede the upcoming 5,000 metre Phase 1 spring drill program at Sekenke…Currie Rose has $2 million in the bank…President and CEO Harold Smith says the company will not do a financing at these lower prices and won’t consider one until later in the year after more drilling…concerns about the company accelerating the warrant expiry date from last summer’s financing are unfounded in our view…a major drill program is underway at Currie Rose’s Scadding Gold Property near Sudbury, Ontario…Trueclaim Exploration (TRM, TSX-V) is absorbing the entire cost of that program as part of its commitment in order to earn a 51% interest in the property…Scadding is a former producer and Trueclaim has been delivering some very good results from that property…

Richfield Ventures (RVC, TSX-V)

Richfield held up very well last week despite some weakness in the markets and the fact that stock from last September’s financing also became free-trading…what this shows is that much of this stock is in strong hands…Richfield finished the week at $4, an increase of 2 pennies from the previous Friday…recently, for the first time since July, the stock fell below its 50-day moving average (SMA) but the 100-day SMA just above $3.50 should provide impeccable support…the company released results on five more holes January 12…BW-103 intersected 222 metres grading 1.23 g/t Au and 5.5 g/t Ag…this hole was collared near the western edge of the Gold Zone, 157 metres southeast of previously announced BW-71 which returned a whopping 281 metres grading 1.40 g/t Au…a second higher grade zone at depth was also discovered in BW-103 (30 metres grading 2.52 g/t Au and 12.3 g/t Ag. from 332 to 362 metres)…three other holes reported Jan. 12 (BW-98, BW- 99 and BW-102) returned lower grades and widths and fenced off the western boundary of the Gold zone…exploration drilling in a hole approximately 1500 metres south of the centre of mineralization did not intersect any significant values…results are pending on 13 additional holes…another phase of drilling commences late this month as Richfield continues to define a potential multi-million ounce Gold deposit at Blackwater with silver and copper values as well…the primary trend remains up with Richfield and there’s every reason to expect more excellent drill results in 2011…RVC is ahead 233% since we introduced it to BMR readers just over a year ago at $1.20…we believe the company’s objective is to ultimately find a buyer for its potential multi-million Gold deposit at Blackwater…if good drill results continue, we’re confident that objective will be met and the takeover price could be much higher than the company’s current market cap of approximately $170 million…all indications are that Blackwater is shaping up to be a major deposit…

CDNX and Gold

The CDNX bounced between a high of 2310 and a low of 2220 this past week, closing Friday in between those levels at 2266 for a loss of 5 points for the week.  As John pointed out in a chart yesterday morning, the CDNX is currently trading in a horizontal trend channel between 2200 and 2300 as it continues to digest the 10% or 216 point gain it experienced in December.  With the primary trend still extremely bullish, what we witnessed last week is very healthy market action that is laying the foundation for a decisive move through 2300 and another leg up in the CDNX.

Smart buyers jumped into the market Wednesday when it was down as much as 65 points intra-day, so the key is not to panic in those type of situations and embrace them for what they are – opportunities.  Since July of last year the CDNX has remained in the grips of a powerful move and there’s simply no indication that’s going to end anytime soon.  There are always some jolts along the way (like Wednesday) but fear not – embracing weakness has been the winning strategy with the CDNX consistently ever since this incredible bull market began in late 2008.  The masses haven’t jumped in yet and Gold still has a long way to go.

Wednesday’s CDNX intra-day rebound was encouraging, and so too was yesterday’s action when the Venture posted an 18-point gain despite a 73-point drop in the TSX and continued softness in Gold and commodities in general.  The CDNX has proven to be the most reliable leading indicator there is of the precious metal and commodity markets – the fact this Index has so significantly outperformed Gold and the TSX Gold Index since early December tells us that while Gold could still drop a little lower in the immediate future, the overall trend with the yellow metal is still wildly bullish and a major reversal to the upside is likely near at hand.  A 3-year chart of the TSX Gold Index illustrates this point very well (200-day SMA in light blue, 300-day SMA in dark blue):

The reversal in Gold will come, in our view, when the TSX Gold Index actually touches its rising 300-day moving average (SMA) or actually drops below it (the bottom being in the range of 345-367 and this could be very brief) as has been the case repeatedly over the last two years.   This will be a classic and major buying opportunity, confirmed also by the CDNX which is giving us Gold’s primary direction.  If Gold was on the verge of a major collapse, the CDNX would simply not be performing as it is now – it would in fact be leading Gold to the downside, the opposite of which is occurring now.

Gold was down for the third straight week (dipped briefly below $1,340 and closed Friday at $1,342) and is going through its worst month since last July – all the more reason why a major turnaround is not far off.  This is the third year in a row that Gold has been weak at the beginning of the year but the overall technicals and fundamentals are impeccable.  John’s excellent chart last weekend (“The Big Golden Picture”) draws the line in the sand at $1,300 for Gold with the strong possibility of $1,650 Gold by June.

The main fundamental drivers for Gold remain solidly intact – currency instability, an extended period of negative real interest rates (inflation is greater than the nominal interest rate, even in China and India despite increasing rates there), massive government debt from the United States to Europe, central bank buying, flat mine supply, physical demand, investment demand, emerging market growth, geopolitcal conflicts, and the list goes on.

Gold is currently only 0.3% of total world financial assets.  If that percentage were to rise to 0.6%, still less than half its 1980’s level, the market would see a massive increase in demand.  Gold is becoming a permanently accepted financial asset for money managers around the world, an alternative currency that’s not controlled by a monetary policy board.  More Gold of course cannot be printed, so for the last several thousand years it has been a respected store of value. And it’s a greater challenge than ever now to extract Gold from the ground.

The greenback hit a fresh two-month low this past week with the U.S. Dollar Index closing at 78.12 Friday.  The U.S. Dollar is likely to remain under pressure for the foreseeable future which is Gold and commodity bullish.  Despite improving economic numbers out of the U.S. recently, massive debt across all levels remains a serious threat to the American economy and will likely force the Fed to keep interest rates at historic lows for an extended period.  Of immediate and growing concern at the moment, as we’ve been pointing out with more frequency recently, is the horrible financial condition of U.S. municipalities, cities and states.  This is a major train wreck in the making and we predict this crisis will evolve into a much bigger news story this year.

No less than 100 major U.S. cities and states are in severe financial stress, and the resulting forced austerity at the state and local level will likely reduce public employment, slash pension benefits for millions of public employees, affect consumer sentiment and ultimately prevent the unemployment rate from falling by any meaningful degree.  Hence the Fed is likely to remain as accommodating as possible which also means “Quantitative Easing” may continue for longer than some expect.

On a lighter note, and just another example of the rising interest in Gold, Space International Limited has announced that it’s now offering Gold and silver to the world’s largest market for vending machines—Japan. These vending machines sell the precious metal in the form of coins and ingots right alongside other consumer products such as food and drinks. The Gold will come in weights from one gram to one-quarter of an ounce.

The inflation-adjusted peak price for Gold was reached in January, 1980, at $2,300 per ounce – a very realistic target over the next couple of years.

Gold has bounced off a low of $1,337 today…as of 8:10 am Pacific, the yellow metal is now down just $2 for the day at $1,346…Silver, which broke below support at $28 yesterday, hit nearly $27 this morning but has since recovered and is now in slightly positive territory for the day at $27.54…the U.S. Dollar Index has hit a fresh two-month low and is currently off more than half a point to 78.27…the CDNX is performing very well, currently ahead 13 points at 2260 despite the shakiness in the precious metals markets and that’s a positive sign…the overall trading action and performance of the CDNX in recent weeks clearly suggests that Gold’s current weakness is temporary and a bottom is likely quite near at hand if one hasn’t been put in already…investors also must keep in mind that big money frequently likes to engage in “chart painting” and sometimes crashes important chart support levels to shake out traders before a sudden reversal to the upside…the fundamentals driving Gold remain solidly intact and the overall long-term technical view also remains extremely bullish…John’s chart last weekend (“The Big Golden Picture”) was very effective in pointing that out…the New York Times is not our favorite source of information but there was an interesting article in it this morning…U.S. policy makers are apparently working behind the scenes to come up with a way to let states declare bankruptcy and get out from their crushing debts, including the pensions they have promised to retired public workers…along with retirees, however, investors in a state’s bonds could suffer, possibly ending up at the back of the line as unsecured creditors…some 100 major U.S. cities and states are in severe financial stress…this will likely become a much more prominent issue as the year progresses and is just another bullish factor for Gold…Gold Bullion Development (GBB, TSX-V) has come out with news this morning with the stock currently ahead 2 pennies at 76 cents…Phase 2 and Phase 3 drilling have intersected new mineralized structures throughout the LONG Bars Zone…an exploration update including fresh assay results are expected in the “very near future”…this is a strong signal from GBB that all’s well at Granada…in a bit of surprising but positive news, Gold Bullion has announced that a 6,000 metre Phase 1 drill program is set to begin shortly at its Castle Silver Mine near Gowganda in northeast Ontario…Castle is a former producer of silver and cobalt and could possibly end up becoming a “dividend” spin-off for GBB shareholders…speaking of spin-offs, the Venture Exchange has approved Kent Exploration’s (KEX, TSX-V) plan of arrangement regarding Archean Star Resources…a date of record has been established (Jan. 28) for Kent shareholders to participate in the spin-off and be able to receive one share in Archean Star for every four shares held in Kent at that time…trading is brisk in Kent today with the stock currently up 2.5 pennies at 17.5 cents…we alerted readers to this situation over a week ago when the stock was sitting at 13 cents…Kent will also own a substantial percentage of Archean which will be developing the Gnaweeda Gold Property in western Australia…Kent is definitely on the rebound after going through some struggles most of last year beginning in the spring…for those who missed the opportunity in December, it has re-surfaced again with Cadillac Mining (CQX, TSX-V) which dropped as low as 26 cents this morning where there is very strong technical support…the recent weakness in CQX has truly been amazing as the fundamentals with this have actually improved significantly recently…some investors, unfortunately, can’t see beyond tomorrow, nor apparently can they read a chart properly…CQX is starting to snap back and is currently unchanged at 29 cents, giving it a market cap of only $7.25 million…this remains one of the best situations we’ve seen in many months…the company holds very strategic and prospective land packages along the Cadillac Trend, mostly west of Rouyn-Noranda, and just recently announced a very astute acquisition in southern Utah as it secured an entire former mining camp by negotiating with individual landholders…Cadillac has a tight share structure and is led by a strong management team that is determined to move this company forward…technically, the stock remains in a powerful long-term uptrend…BMR will be attending the Vancouver Resource Investment Conference January 23 and 24 (Sunday and Monday)…there are numerous companies and opportunities we’ll be checking on, so we’ll be following up on that with our readers next week…

John: Yesterday, the CDNX gapped down at the open to 2264, hit a low of 2220, and then rallied late in the day to close at 2248 for a loss of 37 points (1.34%) on strong volume. Precious metals and commodities across the board were weak.

Looking at the 3-month daily chart we see that during January and prior to yesterday’s trading the CDNX had formed an ascending triangle with the top resistance (blue line) at the 2300 level and the upsloping trendline (green line) providing support. We can also see that it was decision time yesterday because the trading was almost at the apex of the triangle. Thus with yesterday’s trading the CDNX either had to get through the resistance at 2300 or break below the supporting trendline.

The expectation of an ascending triangle is that it will usually break out to the upside but that didn’t happen this time with the CDNX.   On several occasions this month the bulls have tried to break through resistance at 2300 but the bears have repulsed their attacks.  A divergence between the RSI and the 2300 level is a strong indication of the bears’ power at the moment.  Another factor in the bears’ favor is the declining buying pressure as denoted by the CMF indicator. So the big question for yesterday was, would the CDNX break to the upside or the downside?  The answer was quite clear right from the opening bell with the CDNX gapping down 20 points. The CDNX fought for most of the day to stay above strong support around the 2200 level and managed to do so.

Yesterday’s action has changed the chart picture completely. We can now draw the pattern for January as a horizontal trend channel between a low of 2200 (horizontal green line) and a high of 2300 (horizontal blue). What all this indicates is that the Index needs more time to unwind December’s overbought condition. This formation is not a consolidation because the average volume has remained constant.

Looking at the Indicators:

The RSI is unwinding from the overbought condition in December and is currently at the 57% level. As stated above there is a negative divergence with the Index level. The previous RSI support level was at 50% so there is probably more unwinding to be done.

The Chaikin Money Flow (CMF) indicator shows the buying pressure peaked on Jan. 17 but Wednesday and yesterday it fell to a still bullish 0.302 due to the overall down market effect as buyers backed off and waited for lower stock prices.

The ADX trend indicator is in a very bullish orientation with the +DI (green line) at 42 and above the-DI (red line) at 31. The ADX trend strength (black line) is high at 46 showing that the CDNX trend is still very bullish, very strong and steady.

Outlook: It’s expected that there will be more softness in the CDNX for the immediate future to completely unwind the previous overbought condition.  However,  this is not a bad thing for it will prepare the bulls for a stronger attempt at breaking through the 2300 resistance. The primary bullish trend is still very strong.

Gold is taking a hit today and commodities in general are weak across the board after economic data came out of China this morning…that country’s GDP rose a sharp 9.8% in the fourth quarter on a year-over-year basis, fueling speculation that China will once again tighten its monetary policy…we’ve seen this show before and we encourage readers not to get caught up in these day-to-day events that day traders zero in on…we’re staying focused on the big picture which remains solidly positive for precious metals and commodities in general…as John outlined in his Gold chart last weekend, the possibility of Gold falling as low as $1,300 in a “wash out” move certainly exists (would not alter the bullish trend) and any such event would have to be viewed as one of those classic opportunities that have occasionally occurred in Gold throughout this bull market…as of 8:30 am Pacific, the yellow metal is off $22 an ounce at $1,349…Silver has dropped below strong support at $28 (it’ll be interesting to see if it moves back up above $28 by day’s end) and is currently off $1.16 at $27.59…a mini-correction appears to have set in with the CDNX which has failed on three occasions since early this month to move past the low 2300’s…the first major area of support on the CDNX is 2200…below that, the 50-day moving average (2150) provides very strong secondary support…and then another major support level is a trend channel between 2100 and about 2135…as of 8:30 am Pacific, the CDNX has shed 62 points and is currently sitting at 2223…this reminds us a lot of last November’s mini-correction which ended very abruptly…it’s important to stress that the overall trend with the CDNX remains exceptionally bullish and this brief period of weakness – just like every other pullback we’ve seen since this bull market started in late 2008 – presents some tremendous opportunities…Gold Bullion Development (GBB, TSX-V) is off 4 cents at 70 cents…GBB is strongly supported by its rising 100-day moving average (SMA) at 67 cents which has underpinned this stock going back to 2009…Granada has consistently delivered solid results since last spring and there’s no reason why that won’t continue as the LONG Bars Zone is such a tremendous geological target…our gut feeling is that we may see an update on Granada from GBB prior to the start of the Vancouver Resource Show Sunday, so that means by tomorrow sometime…look for potential news from other companies as well…GoldQuest Mining (GQC, TSX) has announced this morning that Bill Fisher has been named Executive Chairman of the Board…as stated in GQC’s news release, “His experience in the discovery, financing and development of mineral properties is outstanding, coupled with his long-established relationships in both the Dominican Republic and Spain. Most importantly, Bill has an extraordinary record of building shareholder value”…GoldQuest is conducting a major drill program in the DR where it has a fabulous pipeline of advanced and early staged exploration projects…GQC is off 2.5 cents at 34.5 cents…keep an eye as well on Everton Resources (EVR, TSX-V) which will be the first of the two companies to report drill results from the DR… Everton is currently up half a penny at 32.5 cents…Abcourt Mines (ABI, TSX-V) is down 3 cents at 19 cents…any further weakness in ABI has to be considered a gift given the fundamentals underlying this situation as we have already pointed out…there is a huge amount of technical support on ABI between 15.5 and 17.5 cents…times like these take nerves of steel and separate the successful investors from unsuccessful ones who panic and throw good stocks overboard when they see many others selling…our advice is to remain unemotional and search for quality situations, like the ones we focus on at BMR, that are being knocked down with the rest of the market and present low-risk entry points based on simple technical and fundamental analysis…the companies mentioned above – GBB, ABI, GQC and EVR – are just four such examples…others obviously include Seafield Resources (SFF, TSX-V), Cadillac Mining (CQX, TSX-V), Adventure Gold (AGE, TSX-V), Richfield Ventures (RVC, TSX-V), Sidon International (SD, TSX-V), Greencastle Resources (VGN, TSX-V), Colombian Mines (CMJ, TSX) and Excel Gold Mining (EGM, TSX-V)…we’re looking at other potential opportunities as well…it’s a great time to go fishing – you never know what you may catch…

Gold is firmer this morning but has pulled back from its earlier $1,380 high for the day…as of 9:20 am Pacific, the yellow metal is ahead $3 an ounce to $1,371…Silver, which John featured in a chart yesterday, is 2 cents higher at $28.90 but also down from earlier this morning…Copper hit an all-time record high of $4.44 per pound this morning while Platinum hit a 30-month high…Asian buying  and a weaker U.S. Dollar are factors helping Gold today…Tokyo now has its first Gold-selling vending machine, a concept that is attracting more and more interest around the world…construction of new homes in the U.S. fell 4.3% in December as builders endured their second worst year on modern record after 2009…U.K. inflation data came out higher than expected this morning…China reports on its consumer price inflation tomorrow and markets will be paying close attention to those numbers…the greenback has hit a two-month low with the U.S. Dollar Index currently down half a point at 78.50…the CDNX is following up on yesterday’s strong move with more gains so far today…as of 9:20 am Pacific, the CDNX is up 3 points at 2296 after climbing as high as 2310…there is obviously some resistance at and near the recent high of 2312 but we suspect it’s only a matter of time before that’s taken out…Gold Bullion Development (GBB, TSX-V) is off three pennies at 73 cents but on low volume…Abcourt Mines (ABI, TSX-V), which came out with some very good assay results yesterday from its Elder-Tagami Gold Project near Rouyn-Noranda, is down half a penny at 21 cents…Abcourt has some technical resistance between 22 and 24 cents…once that is cleared, ABI could accelerate rapidly…the fundamentals underpinning Abcourt are impressive…the company continues to build resources at Elder-Tagami which potentially could go into production as early as next year…in addition, Abcourt has one of the best undeveloped Silver assets in Canada just north of Val d’Or…the Abcourt-Barvue Silver-Zinc Property has all-category reserves and resources totaling 19.6 million ounces of Silver and nearly 300,000 tonnes of Zinc…drilling is ongoing at this former producer and more assay results should be coming out soon…investors who have not done their DD yet on Abcourt should definitely check it out…the potential of ABI is phenomenal (current market cap is only $24) in a rising precious and base metals market environment if the company plays its cards right…Sidon International (SD, TSX-V) President and CEO Kamal Alawas has agreed to a first-ever interview on BMR…we’re not certain of the exact date we’ll be able to do this but we’re hoping it will be within the next week to 10 days…Sidon is off half a penny to 17.5 cents…it has strong technical support at the rising 50-day moving average (SMA) of 16.5 cents…Cadillac Mining (CQX, TSX-V) is off two pennies at 34 cents where it bounced from strongly in November…this is unquestionably one of our favorites with a market cap of only $8.5 million at 34 cents…the company has pulled off a major coup with an important and strategic acquisition in southern Utah, near the Nevada border (Gold/Silver), and we expect its Cadillac Trend properties (especially adjoining Wasamac and Galloway) are going to generate considerable interest and excitement in the coming weeks…smart management and a highly favorable share structure are also in Cadillac’s favor…Galahad Metals (GAX, TSX-V) traded nine million shares on the CDNX yesterday after reporting drill results from its Regcourt Gold Property 30 kilometres east of Val d’Or…intersections included 79.37 g/t Au over 3.6 metres…the stock hit a high of 22 cents yesterday before closing at 17.5 cents…it has pulled back a little more this morning and is currently at 15 cents…this is certainly worth keeping on the radar screen..technically, the stock may have to consolidate for a brief period after a significant recent run-up…Greencastle Resources (VGN, TSX-V) is up a penny at 32 cents…Greencastle has been quiet lately but the stock needed to catch its breath after a powerful move from 14 cents to 44.5 cents between late October and early December…based on recent news releases, we believe the odds are good that Greencastle is searching intensely for an advanced Gold project to add to its portfolio…the company has approximately $6 million in cash with oil royalties in excess of $100,000 each month…Greencastle is focused on becoming much more active in the Gold exploration space and currently holds two promising properties in Nevada plus its recently acquired land package near Richfield’s (RVC, TSX-V) Blackwater Project…