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Gold Bullion Development (GBB, TSX-V)

Gold Bullion gained just a penny last week, closing at 26 cents Friday, despite a jump of nearly 6% in the Venture Exchange…GBB faces major technical resistance in the mid-30’s in the vicinity of its declining 50 and 100-day moving averages (SMA) while very strong support exists at the October 4 low of 21 cents…investors continue to wait for the delayed but much-anticipated initial 43-101 compliant resource estimate for the LONG Bars Zone at the same time as the stock faces stiff technical headwinds…GBB does have a very valuable asset – Gold in the ground and close to surface at Granada…just how much of it remains to be seen but we’re optimistic as a resource estimate draws closer…one important point is very certain in this current equity and Gold environment – many producers, big, medium and small, are sitting on large piles of cash and are looking to add ounces to their production profiles…any junior with an advanced property like GBB possesses, and a 43-101 resource to back it up, could be the target of a potential takeover…merger and takeover activity and property acquisitions in this sector are likely going to increase substantially in the months ahead…GBB’s latest drill results, released September 14, continue to show wide intersections of low but mineable grade…half of the 28 holes had intercepts of 100 metres or more grading between 0.31 g/t Au and 0.50 g/t Au…the northern part of the Eastern Extension continues to show excellent potential and tonnage is adding up in that area…so, overall, we continue to like how the LONG Bars Zone is coming together but GBB has frustrated investors by not producing a 43-101 earlier as promised…companies are rewarded when they exceed the market’s expectations and are punished when they don’t fulfill them which is a major reason GBB has been struggling of late…the Castle spin-off is nice in a way but it also reminds investors that resources have been diverted from the company’s core project (Granada) over the last nine months to a property that may or may not prove to be a winner…GBB’s current market cap of $44 million puts a value of just $15 an ounce on Gold in the ground at Granada if one were to assume the 43-101 will outline approximately 3 million ounces in the measured, indicated and inferred categories…that’s just a hypothetical number on our part at the moment but whatever number GENIVAR comes up with, we believe it should exceed the 2.4 to 2.6 million ounce conceptual figure that Gold Bullion gave in April of last year…based on all the drill results to date, this appears to be shaping up as a half-gram deposit with a higher grade starter pit and big volume…it’s all about volume at Granada which is why the drills have to keep turning and why we’ve been stating all year that more than just two rigs are needed in the LONG Bars Zone…this property continues to offer great potential but massive drilling is necessary…GBB is up 271% since we introduced it to BMR readers in late December, 2009…

Currie Rose Resources (CUI, TSX-V)

Activity in Currie Rose picked up last week and the stock gained a penny to 11 cents as Liontown Resources (LTR, ASX) reported strong drill results from the Jubilee Reef Project in Tanzania (Liontown has an option to earn as much as a 75% interest)…Liontown completed 4,000 metres of RC and RAB drilling over three prospective areas at Jubilee and reported very encouraging near-surface results including 28 metres grading 3.02 g/t Au (hole #18) and 40 metres grading 1.19 g/t Au (hole #19) at Masabi Hill…two intersections from the Shangaza/Panapendesa area also highly encouraging – 28 metres of 2.8 g/t Au (hole #24) and 12 metres of 2.3 g/t Au (hole #25)…with initial results like that, the potential of a substantial Gold system at Jubilee clearly exists…more drilling is planned but the exact timing of that is uncertain... so not only is Jubilee now in play for CUI, but the company of course continues to work directly on its Mabale Hills and Sekenke Projects…investors should not forget that CUI reported positive visuals from all holes drilled at Sisu River and Dhahabu and assays are pending from both properties…drilling also continues at Sekenke which certainly has blue sky potential…the company stated August 24 that 20 RC holes were completed at Mabale Hills (16 at Sisu River, 4 at Dhahabu) with drilling shifting to the Sekenke Project approximately 200 kilometres to the southeast…what we found especially encouraging about that news is the fact that disseminated sulphides were intersected in all 16 holes at Sisu River, unlike Phase 1 drilling there last winter…the initial stage of drilling at Sisu River gave the company some important geological clues and it’s quite possible that assay results will turn out much better this time around…each of the 4 holes at Dhahabu also intersected disseminated sulphides…drilling has yet to commence at Mwamazengo…geochemical analysis has outlined a continuous anomaly over a few hundred metres that runs parallel to the west of a previously reported discovery at Mwamazengo where drill results included notable high-grade intercepts such as 34 metres grading 3.60 grams per tonne Gold, 12 metres grading 9.11 g/t Au, 63 metres grading 2.59 g/t Au and 31 metres grading 5.97 g/t Au…we’re most excited, however, about the Sekenke Project which is why we decided to start following CUI when it was trading around a dime last fall…results from satellite imagery provide additional evidence that Sekenke is a highly intriguing geological target and part of the same northwest trending structure that hosts Canaco’s (CAN, TSX-V) Handeni Project…satellite imagery has also shown that the structures at Sekenke are coincident with a strong alteration envelope…what’s unique about this project is that it surrounds and runs in between two former high grade Gold mines including Tanzania’s original producer…this greatly increases the chances of a discovery as it’s unlikely the former mines were fully exploited or explored as techniques a century ago in this industry obviously weren’t what they are today…CUI has a terrific chance to hit it big at Sekenke and we also wouldn’t be surprised if the company also takes a shot at acquiring the former Sekenke Mine…that’s speculation on our part but it makes sense from a strategic point of view…Trueclaim Exploration (TRM, TSX-V) has completed a Phase 2 drill program at the Scadding Propery…TRM has earned a 51% interest in Scadding and can acquire a full 100% interest by completing a feasibility study, paying $2 million to Currie Rose, and giving Currie Rose a 3% net smelter royalty…Trueclaim’s results were encouraging but considerably more work needs to be completed at Scadding to better determine its ultimate potential…while Currie Rose has had its market cap shaved by 70%, from a high of nearly $40 million late last year to the current $9.8 million, what hasn’t changed is the quality of this company’s project portfolio which remains as high as ever…Currie Rose‘s June 30th financials (six months) show the company has all the cash it needs (nearly $2 million as of June 30) to complete an initial major round of drilling (10,000 metres) in Tanzania this summer…CUI has fallen a nickel since being added to the BMR model portfolio a year ago…

Adventure Gold (AGE, TSX-V)

Adventure Gold is a good example of why we’re very cautious with the current overall market rally…this is a solid junior exploration company that got beaten down to 30.5 cents October 4…over the last 7 trading sessions the stock has gained 44% from its closing price October 4 but on limited CDNX volume of 305,000 shares or an average of just 44,000 per trading session…the move has come more from an absence of sellers as opposed to a desire by many hungry buyers to accumulate…AGE remains one of our favorites, though, with several exciting projects on the go…our contention is that there’s a strong chance at least one of them will “hit” but in the current market environment, it’s impossible to say what the potential impact could be on the share price…President and CEO Marco Gagnon is a sharp operator who knows how to maximize every dollar the company spends…he also has the strong backing of Montreal investment firm Windermere Capital which holds just under 20% of AGE as disclosed January 21…the company has five active key projects, two of which are in the hands of joint venture partners Lake Shore Gold (LSG, TSX) and Agnico-Eagle Mines (AEM, TSX)…AGE started a 5,000 metre Phase 2 program in late May at its very promising Pascalis Property near Val d’Or…on May 31 the company reported more highly encouraging Phase 1 drill results from this former producer including 4.8 g/t Au over 33.1 metres in hole #20 (plus lower grade halos over significant widths)…the Phase 2 program was designed to further define the Gold system, leading to a resource calculation which is already being worked on…initial results from Phase 2 were released September 13 and were solid…they included 7.1 g/t Au over 4.3 metres, 4.5 g/t Au over 9.3 metres and 4.1 g/t Au over 5.8 metres (different holes)…Pascalis encompasses the past producing L.C. Beliveau Mine (Richmont’s Beaufor Mine is nearby)…we found a comment from Gagnon in AGE’s June 2 news release quite interesting…“Following positive drill results and the permitting process, an open-pit or an underground operation could be producing in the near future”…we believe Richmont Mines (RIC, TSX) could be very interested in this project as they are looking for an acquisition in the general area…earlier this year we met with AGE’s Jules Riopel, VP Exploration, regarding the company’s strong portfolio of properties…he was very keen at that time on Pascalis and given the drill results, his bullishness on this property appears to have been justified…the former L.C. Beliveau Mine was a very profitable operation between 1989 and 1993, producing nearly 170,000 ounces of Gold for Cambior…we believe a lot of Gold was overlooked in that area…in addition, the geometry of the deposit is such that mining costs should be relatively low…considerable infrastructure is also in place…meanwhile, drill results are pending from Agnico-Eagle’s 4,000 metre drill program at AGE’s Dubuisson Property near Val d’or…Dubuisson is contiguous to the Goldex Mine Property and also straddles a 5-kilometre segment of the prolific Cadillac-Larder Lake Gold break…also of immediate interest is AGE’s partnership with Lake Shore Gold on the Meunier 144 Property where deep drilling is still 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 and has reached a core length of 2600 metres…with recent wedging it appears to be on track to potentially hit its intended target by the end of this month…if a discovery is made, AGE will instantly explode higher…AGE has completed an 8-hole Phase 1 program at the Lapaska Property near Val D’Or and 4,000 metres of follow-up drilling is now underway…results released July 21 for the remaining 6 Phase 1 holes at Lapaska were very mediocre compared to the first 2 holes (MZO-TSX-V has an option to earn up to a 70% interest in the property) but Lapaska still holds good potential…AGE course also still has plans for the Granada Extension Property…AGE’s latest financials, released June 29, show the company with $3.3 million in working capital as of April 30, a $300,000 improvement in working capital over the quarter ending January 31…we first mentioned Adventure Gold to our readers in an article September 29 last year, 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 just 34 cents October 28…Adventure Gold has been around only since late 2007…AGE is clearly a keeper for the long haul as the company is well positioned to survive any downturn in the markets…

GoldQuest Mining (GQX, TSX-V)

What an unexpected change of events for GoldQuest…long-term, the proposed merger with Takara Resources (TKK, TSX-V) could work out exceptionally well but investors, who often look at just the short-term,  aren’t impressed at the moment…GQC closed Friday at 9.5 cents after falling as low as 8 cents during the week while TKK finished at 5.5 cents…GQC investors aren’t pleased with the ratio – GQC shareholders will receive 1.6287 shares in Takara for each share held in GoldQuest…talk of a potential rollback (perhaps 1-for-4) and a possible large financing prior to drilling aren’t going over very well with investors either…over the long run, however, GQC Chairman Bill Fisher is positioning for making the combined GQC-TKK entity a producer…that makes sense but, still, investors believe he could have negotiated a better ratio for GoldQuest given the company’s substantial assets in the Dominican Republic and Spain…insider trading reports show that Fisher has purchased over 300,000 GQC shares over the last six weeks…GQC has fallen in half since being added to the BMR model portfolio a year ago…

Seafield Resources (SFF, TSX-V)

We remain very pleased with how things are proceeding with Seafield, especially considering the current markets…President and CEO Carlos Lopez continues to put the building blocks together with this company…we’re impressed with his actions over the last few months as he has strengthened Seafield in several ways…he has also put his money where his mouth is, buying significant amounts of stock in the open market…Seafield enjoyed a strong session Friday, climbing 3 pennies on CDNX volume of 748,000 shares to close the week at 21 cents…that was a gain of 2 pennies for the week…the company released positive results September 21 for the initial scoping level metallurgical testwork on its Miraflores Property which showed gravity recoveries as high as 94.3%…Seafield announced August 31 that it has opened its new office in Medellin…this followed the news August 11 that Giovanny Ortiz, the former exploration manager of the Angostura Project, has been appointed General Manager of the company’s operations in Colombia…heavy selling came into the SFF market July 25 when the company announced drill results from Dos Quebradas which were disappointing, though we caution it’s still early in the game for that property…Seafield is currently drilling a promising area at Dos Quebradas approximately 250 metres wide (east to west) and more than 300 metres long (north to south)…the zone is open at depth and is interpreted to plunge to the north…more drill results from Dos Quebradas are expected by the end of the month…meanwhile, Seafield has added a second drill rig at Miraflores in order to expedite a Phase 2 program there which is designed to better define the shape of the orebody, increase the resource confidence and extend mineralization…a total of 10 holes or 6,200 metres is expected to be completed by November (the rock is hard at Miraflores, so the drilling is slow which is why a second rig has been added)…the company announced July 5 that it has hired SRK Consulting for a preliminary economic assessment or scoping level study on Miraflores for completion by the first quarter of next year…SRK will evaluate the potential positive economics of developing an open-pit and underground operation at the property…it will also provide recommendations to advance the project to prefeasibility…Seafield released an updated 43-101 resource estimate for Miraflores May 26…the project has gone from an inferred resource of 776,000 ounces (at a cut-off grade of 0.5 g/t Au) to a measured and indicated resource of 1.2 million ounces and an inferred resource of 354,000 ounces (at a cut-off grade of 0.3 g/t Au)…Seafield exploded from the low 20′s to an all-time high of 77 cents in just one day last December but then proceeded to give up all of those gains…the company’s Quinchia land package in Colombia has a great deal of untapped potential and Seafield is also in a very strong cash position ($18 million at the end of June)…patient investors have an opportunity to do extremely well with this play given the geological merits of Quinchia and the real potential for 5 million+ ounces from several potential deposits…we have confidence the new management group will unlock value by bringing fresh insight and new energy to this play along with a more aggressive exploration approach…Seafield has gained 250%% since we made it the first company in the BMR model portfolio two years ago…its current market cap is $35 million…

TSX Venture Exchange, Gold & Commodities

Markets powered higher again last week and the CDNX, after hitting a low of 1306 October 4, shot through resistance around 1530 to close Friday at the day’s high of 1558.  That represents a whopping gain of 19% over just eight sessions, though volume in this move has been unimpressive.  A 20% jump in such a short period during a real bull market would have looked very different in terms of the performance of certain individual stocks.  What has happened since October 4 is that a lot of stocks have just bounced off their lows, which is simply one reason we still consider this nothing more than a bear market rally.

The weekly gain for the CDNX was 5.8%, in line with weekly gains in the TSX (4.3%), the Dow (4.9%), the Nasdaq (7.6%) and the S&P (5.9%).  So where to from here?

John’s latest CDNX chart, posted earlier today, makes a strong case for a move to 1700 on the CDNX.  There is significant resistance at 1600 and major resistance just below 1700 (we have re-posted the chart below).  One possible scenario is that this market will initially push higher next week, stall or react around 1600, pull back 5% or so, and then make a run to 1700.  But that’s simply an educated guess.  It’s reasonable to expect a pullback in the coming days and then a resumption of the rally.

The problem for the CDNX is that, baring an unexpected explosion to the upside, this market has suffered some major technical damage over the last couple of months and it seems almost inevitable that the critical 300-day moving average (SMA) will reverse to the downside by the end of the year.  With the 100, 200 and 1,000-day moving averages currently in decline, and very little hope of any reversal in those SMA’s over the next several months, a declining 300-day will confirm the bear’s victory over the bull.  Over the last six months there have been many deceiving rallies in the CDNX which is typical of a bear market.  And that’s why it’s so important to be careful now.

As we have stated many times in the past, the CDNX has proven to be an incredibly reliable leading indicator of the broader markets and even the global economy.  Year-to-date, the CDNX is off 32%.  The Dow and Nasdaq are both up just over one-half of 1% for the year (in positive territory again), the S&P is down 2.63% while the TSX is off 10% for the year.  The CDNX led the markets higher in the third and fourth quarters of last year.  It has significantly under-performed the broader markets for most of this year and we believe that indicates big trouble for the beginning of 2012.  The good news is, we all have a bit of time to prepare for the coming downwave.

Given the current “big picture” environment and the overall technical condition of the CDNX, chasing penny stocks at the moment involves an unusually high degree of risk.  Our approach will continue to be a cautious one but in the coming weeks we’ll be putting forth ideas and potential strategies to deal with what could be on the horizon beginning later this quarter or the beginning of 2012.  If there’s going to be a market meltdown,  it’s important to be ready to profit handsomely from it.

Exposure to Gold through physical ownership of the yellow metal or through Gold producers and quality near-term producers continues to make a lot of sense.

Gold & Commodities

Gold enjoyed a positive week, closing at $1,680, as it continues to flirt with the $1,685 resistance level.  Our near-term outlook, based on John’s most recent chart, weighs more to the bullish side.  The next major resistance after $1,685 is in the mid-$1,750’s.

The U.S. Dollar Index (76.61) has weakened, which is bullish for Gold, while there are encouraging signs in Silver as well which closed Friday at $32.16.  Copper finished the week at $3.41 while Crude Oil also firmed up, closing at $86.80.

The technical behavior of the CRB Index (John updates the CRB chart below) gives additional credence to the argument that commodities and the CDNX do have higher to go over the short-term.

The “Big Picture” View Of Gold

As Frank Holmes so effectively illustrates at www.usfunds.com, Gold is being 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, is having a huge impact on Gold.

The fundamental case for Gold remains incredibly strong – currency instability and an overall lack of confidence in fiat currencies, governments and world leaders in general, an environment of historically low interest rates and negative real interest rates (inflation is greater than the nominal interest rate even in parts of the world where rates are increasing), massive government debt from the United States to Europe, central bank buying, flat mine supply, physical demand, investment demand, emerging market growth, geopolitical unrest and conflicts, and inflation concerns…the list goes on.  It’s hard to imagine Gold not performing well in this environment.  The Middle East is being turned on its head and that could ultimately have major positive consequences for Gold.

What’s also driving Gold is the weakness of the United States, brought on in no small part by one of the most ineffectual Presidents the nation has ever been saddled with.  America has lost its way and the recent S&P downgrade is both a real and a symbolic reflection of that.  Since the summer of 2009, the U.S. economy has produced a net total of just two million jobs while federal spending has gone through the roof.  Throughout its incredible history, the United States has demonstrated an amazing resiliency and the ability to bounce back from major economic, social and political troubles.  It will do so again but this will take time and a real Commander-in-Chief in the White House by November, 2012.  By then Gold will have climbed another 50% or more.

After Friday’s bullish move through the 1530 resistance area, John’s updated CDNX chart this morning shows that we should expect the Index to climb another 10% or so from current levels during this fourth quarter.  Such a move should still be viewed within the context of an overall bear market.  We’ll have more in our Week In Review later today.

Gold has traded between $1,663 and $1,685 so far today…as of 7:55 am Pacific, the yellow metal is up $3 an ounce at $1,670…Silver has gained 27 cents to $32.09…Copper is 9 cents higher at $3.40…Crude Oil  has surged $2.37 to $86.60 while the U.S. Dollar Index is off half a point to 76.67…

The $1,685 area continues to be key for Gold over the near-term…it has been providing stiff resistance lately and it must be overcome for Gold to climb higher…for some possible clues regarding the odds of that, John has prepared an updated chart on the U.S. Dollar which has been weakening recently…

Global stocks surged this morning, extending the biggest weekly rally since July, 2009, as the Group of 20 began talks to tame Europe’s debt crisis…

CNBC has reported this morning that emerging market countries are working on ways to contribute money rapidly to expand the effective firepower of the International Monetary Fund, with the aim of increasing its role in combating the euro zone sovereign debt crisis…the discussions, in parallel with talks in the euro zone about creating a bigger “bazooka” to intervene in financial markets, are aimed at producing a confidence-boosting announcement by the Group of 20 heads of government summit next month…

U.S. consumer sentiment unexpectedly slumped in early October as worries about declining incomes drove consumer expectations back down to the lowest level in more than 30 years, a survey released this morning showed…the Thomson Reuters/University of Michigan’s preliminary reading on the overall index on consumer sentiment sagged to 57.5 from 59.4 the month before…it fell short of the median forecast of 60.2 among economists polled by Reuters…”Overall, the data indicate that a recessionary downturn is likely to occur,” survey director Richard Curtin said in a statement…”Even if the economy manages to avoid the formal recession designation by (The National Bureau of Economic Research), real consumer expenditures will not be strong enough to enable the more robust job growth that is needed to offset the negative grip of economic stagnation on consumer behavior”…

On the flip side, U.S. retail sales rebounded in September at their fastest pace in seven months as consumers shook off some of their concerns about stock market drops and political gridlock…retail sales rose 1.1% from a month earlier, boosted by strong auto purchases, the Commerce Department said this morning…the reading beat the median forecast in a Reuters poll for a 0.7% rise…sales growth during August was revised upward to 0.3%…consumer spending accounts for about two thirds of U.S. economic activity, and the Commerce Department data suggest growth at the end of the third quarter might have been stronger than previously thought…excluding autos, sales increased 0.6% in September, above forecasts for a 0.3% gain…

The CDNX is up 15 points at 1548 as of 7:55 am Pacific…assuming the 1530 area hurdle is successfully cleared on a closing basis, the next major resistance areas for this CDNX rally are 1600 and 1700…even a move to 1700 would not alter the big picture scenario that we now consider to be a bear market…this rally has been on unimpressive volume and has simply been a reaction from conditions that had temporarily become deeply oversold…the 100 and 200-day moving averages (SMA) are entrenched in a firm decline with the 300-day SMA expected to turn south before the end of December…this is not a healthy market and that does not bode well for the broader markets or the global economy…

Gold has traded between $1,652 and $1,683 so far today…as of 7:00 am Pacific, the yellow metal is down $19 an ounce at $1,656…Silver is 96 cents lower at $31.62 (commercial traders have trimmed their short positions in Silver remarkably which is normally a very bullish indicator for a potential powerful short-term move)…Copper is 8 cents lower at $3.30…Crude Oil has slipped $1.47 to $84.10 while the U.S. Dollar Index is up one-third of a point to 77.37…we apologize for an abbreviated edition of Morning Musings today due to a family emergency…

Markets are on the negative side through the first 30 minutes of trading…the CDNX, which closed at 1543 yesterday for a gain of 237 points or 18% over just six sessions, is off 22 points at 1521…the 1530 “area” is providing resistance as expected and must be convincingly cleared in order for this rally (which disturbingly has been on low volume) to continue…the CDNX is facing major technical headwinds and the primary trend is now down (bear market), so traders/investors should remain cautious…we are working on an overall “big picture” assessment of what the next six to 12 months could look like (economic, political and social landscapes) and it’s not pretty, but there will be opportunities nonetheless…

At least 66 of Europe’s biggest banks would fail a revised European Union stress test and need to raise about 220 billion euros (approximately $300 billion CDN) of capital, Credit Suisse AG analysts said this morning…European policy makers are debating how to recapitalize the region’s troubled banks as the sovereign debt crisis threatens to damage balance sheets, undermining recovery prospects…European leaders meet October 23 to discuss the crisis, which has driven Greece toward default and threatened the survival of the 17-nation currency…

Canadian Finance Minister Jim Flaherty said this morning that he’s “worried” about the possibility of another global recession, saying Canada may be able to avoid a major economic slump but it might be too late for Europe…Flaherty, who is flying to Paris for G20 finance ministers meetings, told CTV that he’ll be urging his European counterparts to take action – a message he has been pushing for weeks…he said European leaders have failed to help Greece emerge from crippling debt and haven’t moved to recapitalize the continent’s struggling banking institutions, both of which he said are essential to staving off another recession…

Gold continues to threaten to push through the $1,680 resistance area…as of 7:30 am Pacific, the yellow metal is up $18 an ounce at $1,681…it climbed as high as $1,693 overnight…Silver has advanced 42 cents and is trading at $32.56…Copper has jumped a dime to $3.40…Crude Oil is off 16 cents at $85.65 while the U.S. Dollar Index has hit a three-week low and is currently down three-quarters of a point at 76.94…

A bill that aims to punish Beijing for holding down its currency passed the U.S. Senate yesterday despite a warning from China that the legislation could plunge the global economy into a 1930s-like depression…the legislation passed the Democrat-led Senate with a comfortable 63-35 majority, with several Republican senators also supporting the bill…the vote could set up a tussle with the House of Representatives, whose Republican leaders have called the bill “dangerous” and so far have refused to schedule a vote on it…

Republican Presidential candidate Herman Cain, who is gaining in the polls, is making the most sense of any presidential candidate at the moment on a range of issues and taxes in particular…Cain wants to scrap the existing convoluted U.S. tax code and replace it with a “9-9-9” system…at its core, the Cain plan would slap a 9% flat tax – no loopholes, no exceptions – on businesses, individuals and sales…

There is sure to be more of this coming – the Harrisburg, Pennsylvania, city council passed a resolution last night authorizing a Chapter 9 bankruptcy filing…the Pennsylvania state capital has been plagued with cash flow problems and faces a $300 million debt crisis due in part to a project to revamp its incinerator…

The CDNX keeps charging higher…as of 7:30 am Pacific, the Index is up another 26 points at 1537 while the TSX and Dow are posting triple-digit gains…the CDNX has jumped 231 points or almost 18% over just 6 sessions but don’t interpret that as the start of a new bull phase…the CDNX is facing some major technical headwinds and volume on this move over the last week has not been impressive…a “capitulation” moment hasn’t even occurred with this market yet…this has been a rally out of extremely oversold conditions…in terms of how much higher the Index could go, first it needs to convincingly push thru resistance right around where it is now…below is a chart from John we posted last week which shows the 1530 area as the first major hurdle the Index faces…

Richmont Mines (RIC, TSX) is up another 51 cents to $10.92 as of 7:30 am Pacific…Visible Gold Mines (VGD, TSX-V) has touched 30 cents for the first time in 10 trading sessions…VGD is currently up a penny-and-a-half at 30 cents…Currie Rose Resources (CUI, TSX-V) closed up half a penny yesterday at 10.5 cents on positive drill results reported by Australian-traded Liontown Resources which is earning an interest in CUI’s Jubilee Reef Project in Tanzania (Liontown can earn as much as a 75% interest by completing a feasibility study)…results are also pending from CUI’s drilling at Mabale Hills…Currie Rose should definitely benefit from any continued strength in the CDNX…so too should Adventure Gold (AGE, TSX-V) and Gold Bullion Development (GBB, TSX-V)…

Gold has traded between $1,653 and $1,683 so far today…as of 9:00 am Pacific, the yellow metal – after a strong performance yesterday – is off $12 an ounce at $1,664…Silver is down 3 pennies at 32.01…Copper has lost a dime to $3.29…Crude Oil is 34 cents weaker at $85.07 while the U.S. Dollar, which broke below important channel support yesterday, is flat at 77.60…Gold touched a key resistance area – $1,680 – again this morning…John identified three critical levels in his latest Gold chart last Thursday – $1,648, $1,680 and $1,753 – which showed that momentum in Gold is increasing…the producers and near-producers have been the smartest Gold plays in recent months and that should continue to be the case…just two of our favorites in that space continue to be Richmont Mines (RIC, TSX) and New Gold Inc. (NGD, TSX)…those looking for additional leverage (though higher risk) should do their due diligence on the Kinross “D” warrants (K.WT.D) which have an expiry date of September 14, 2014, and a strike price of $21.30 (U.S.) for one common share of Kinross (K, TSX)…

On the junior side, there was good news on the Currie Rose Resources (CUI, TSX-V) front this morning…Liontown Resources, an Australian-based publicly traded company, has delivered several solid drill results from the Jubilee Reef Property in Tanzania which also helps underscore the overall potential of CUI’s entire land package in that country…Liontown, which is earning an interest in Jubilee Reef from Currie Rose, completed 4,000 metres of RC and RAB drilling over three prospective areas at Jubilee and reported very good near-surface results including 28 metres grading 3.02 g/t Au (hole #18) and 40 metres grading 1.19 g/t Au (hole #19) at Masabi Hill…two intersections from the Shangaza/Panapendesa area also highly encouraging – 28 metres of 2.8 g/t Au (hole #24) and 12 metres of 2.3 g/t Au (hole #25)…with initial results like that, the potential of a substantial Gold system at Jubilee clearly exists…more drilling is planned…Currie Rose, which became technically oversold as it dipped as low as 10 cents last week (strong support area), is currently up 2 pennies at 12 cents on CDNX volume of over 300,000 shares…so not only is Jubilee now in play for CUI, but the company of course continues to work directly on its Mabale Hills and Sekenke Projects…investors should not forget that CUI reported positive visuals from all holes drilled at Sisu River and Dhahabu and assays are pending from both properties…drilling also continues at Sekenke which has tremendous blue sky potential…this is a company that has been around for some four decades and has successfully carved out a large and highly prospective land package in an under-explored, mining-friendly region…solid situation with excellent management…recent overall market weakness has beaten CUI down to very attractive levels from an historical standpoint…

The CDNX has jumped 37 points to 1510…as John pointed out last week, there is significant resistance at 1530…over five trading sessions the Index has now gained 204 points or 16%…even a move to 1700 would not alter the primary trend, however, which we believe is now negative…the Index has some major technical headwinds to battle during this fourth quarter, so we’re interpreting any move to the upside as a bear market rally…in that context, though, some companies will still perform very well…this is a very selective market at the moment and that’s likely to continue…

Visible Gold Mines (VGD, TSX-V), like Currie Rose, is showing some strength this morning…VGD is up a penny-and-a-half at 27.5 cents…Visible Gold Mines has a strong cash position and an outstanding property portfolio, including a sizeable land package on either side of Richmont’s Wasamac Property, so we continue to be optimistic regarding VGD…assay results from Wasa Creek are pending while drilling starts at Wasa East and continues at Joutel...Adventure Gold (AGE, TSX-V) has jumped 3.5 cents to 39 cents…the stock dropped as low as 30.5 cents in last week’s sell-off…AGE is in a healthy financial position and has an impressive portfolio of properties including the one we’re most excited about, Pascalis-Colombiere near Richmont’s Beaufor Mine…Gold Bullion Development (GBB, TSX-V), which hit strong support at 21 cents last week, is up 2 pennies at 27 cents as investors continue to wait for an initial 43-101 resource estimate for the LONG Bars Zone…

You’d have to believe in the Tooth Fairy, the Easter Bunny and Santa Claus to think that politicians anytime soon (in the next year or so) are going to be able to solve the euro zone debt crisis, the American growth and fiscal deficits, or a host of similar and other problems that are plaguing many nations including Canada.

Today’s 330-point jump in the Dow, a continuation of a 1,000-point rally that began last Tuesday, may have impressed some but not us.  The Dow could very easily climb higher – near-term technicals have turned bullish – and undoubtedly the CDNX will show strength tomorrow when Canadian markets resume trading, but major storm clouds are still on the horizon and the primary trend of the markets (other than Gold) is down.  The CDNX is firmly in the grips of a nasty bear market, confirmed last month when it suffered some severe technical damage.  The CDNX, even if it rallies another 200 points, is telling us there is big trouble ahead for the broader markets over the next several months.  There are numerous potential catalysts for that – everything from debt issues to an economically incompetent Obama administration in Washington to a possible slowdown in China.  And of course there are those unpredictable Black Swan events.

Our cautious stance regarding the markets continues and we won’t be chasing anything to the upside in the days ahead, though we’re always on the lookout for a potential spectacular discovery somewhere.  As John’s Gold chart showed last Thursday (“Encouraging Signs in Updated Gold Chart”), the yellow metal has been looking stronger recently and enjoyed a very positive day today.  Gold producers in general will continue to be favored over exploration companies.  The TSX Gold Index is up 10% since mid-June while the CDNX has fallen by more than 20% since that time.

It is extraordinarily difficult to make money during a CDNX bear market if you have a short-term time horizon.  Potential fortunes are born during a bear market, however, for patient investors who wait for a new bull phase to begin.  We will continue to focus on companies that have superior long-term potential as well as the financial strength to battle through a downturn.