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This is an early pre-market edition of Morning Musings (5:40 am Pacific) due to a property visit again today and important developments in the last few hours…Gold and stock index futures, as well as European markets, reversed abruptly around 3 am Pacific when China surprised with its first cut in banks’ reserve requirements for nearly three years…futures had been lower before the Chinese move, with Gold dipping as low as $1,700 (a couple of hours later, the U.S. Federal Reserve, the European Central Bank, and the central banks of Canada, England, Japan, and Switzerland announced plans to coordinate their actions to boost liquidity in the global financial system)…these strategic moves come amid increasing concern among policymakers worldwide that the global economy is on a slippery slope as the euro zone struggles to decisively tackle its increasingly worrisome debt woes and even stay intact (the next two weeks will be crucial)…China’s central bank is lowering the reserve ratio by 50 basis points, effective December 5, reducing the ratio for the biggest banks to 21% from a record high 21.5%…this helps to free up funds that could be used for lending to cash-strapped small firms…the cut in the reserve ratio was the first since December, 2008, marking a policy shift after a spate of tightening measures since last year aimed at fighting inflation which hit a three-year peak in July of 6.5%…however, inflation has since eased to 5.5% in October while economic growth has weakened for three straight quarters due to tight domestic credit and sagging demand overseas…

This morning’s developments have very bullish implications for Gold which is entering a critical month as John’s recent charts have shown…

The situation in the euro zone has become outright dangerous…a 10-day whirlwind of high-level meetings, parliamentary votes and diplomatic gatherings has started that could prove pivotal to Europe’s increasingly frantic efforts to prevent a breakup of the euro zone which some businesses are already planning for according to reports from the Financial Times…markets will be intensely focused on a summit meeting in Brussels December 8-9 when European leaders may agree to overhaul EU treaties treaties for an historic leap forward in the bloc’s economic and political integration…

The CDNX is off 6.8% so far this month after a 10% jump in October…support right around 1500 needs to hold from a technical perspective, and that’s a daunting task considering the time of year (tax-loss season) and the risk aversion in this market right now, but central bank action this morning will certainly help…Gold producers (and near-producers) have significantly out-performed the CDNX in recent months and that trend can be expected to continue…below is John’s update on the TSX Gold Index which closed at 398 yesterday…it’s sitting at resistance entering the final trading day of the month, but a breakout is a certainty today with trading commencing in 50 minutes…as of 5:40 am Pacific, Gold is up $27 an ounce at $1,742…

Richmont Mines (RIC, TSX) is one of favorite smaller producers and has the potential to absolutely explode to the upside in December if Gold continues to move higher…Richmont came out with fresh drill results from Wasamac yesterday and we’re eagerly looking forward to an updated 43-101 resource estimate for the deposit which the company expects to release by mid-December…an additional 37,000 metres have been drilled at Wasamac since the February estimate of 1.4 million ounces (all categories) which was released after an initial 10,000 metres of drilling in 2010 and a review of historical data…given encouraging results from 2011, we expect the revised December estimate will upgrade and expand resources significantly, taking Wasamac to the 2 million mark or better in all-category ounces…with two mines already in operation, and a third one (Francoeur) coming on stream by mid-2012, Richmont’s current market cap of $382 million has to be considered a bargain…at yesterday’s close of $11.57, RIC is trading at approximately 15 times estimated 2011 earnings…2012 production is expected to increase by at least 30% to 100,000 ounces or more…Wasamac will eventually take RIC’s annual production beyond 200,000 ounces…below is John’s updated chart for Richmont with a Fibonacci target level 40% above yesterday’s close…

Gold has been a little firmer most of this morning…as of 8:45 am Pacific, the yellow metal is up $3 an ounce at $1,713…Silver is flat at $32.06…Copper is up 2 pennies at $3.38…Crude Oil is 87 cents higher at $99.08 while the U.S. Dollar Index has slipped one-third of a point to 78.92…

U.S. consumer confidence bounced back from a 2.5-year low in November as apprehension about job and income prospects eased, according to a private sector report released this morning…the Conference Board said its index of consumer attitudes jumped to 56.0 from a upwardly revised 40.9 the month before…it was the highest level since July and handily topped economists’ forecasts for 44.0 (October was originally reported as 39.8)…”Consumers’ assessment of current conditions finally improved, after six months of steady declines,” Lynn Franco, director of The Conference Board Consumer Research Center, said in a statement…”Consumers appear to be entering the holiday season in better spirits, though overall readings remain historically weak”…

Markets are cheering the news, fresh on the heels of a strong start to the Christmas shopping season…the Dow and TSX are extending yesterday’s gains while the CDNX has climbed 4 points to 1517…Jon is on special assignment today, checking a property in British Columbia, so today’s Morning Musings are abbreviated but John has a couple of charts to share…

The rally in the markets that began yesterday appears to have some energy to it…this is confirmed by the chart for the HXD which is the short ETF for the S&P/TSX 60 (double leveraged)…while the overall picture for the HXD remains positive, the immediate outlook has turned bearish as John shows below…

The HXD is currently down 18 cents at $10.63 after running as high as $11.31 last Thursday, a nearly 20% jump since we highlighted the opportunity at the end of October…

We’ve had several inquiries from readers regarding Canada Rare Earths (CJC, TSX-V) which has also been mentioned by some of our astute followers in our comments’ section…this morning we take a look at CJC from a purely technical point of view with the following chart…

As of 8:45 am Pacific, CJC is off a penny at 40 cents on light volume…

Markets are buoyant today as a rally has set in as expected…conditions were ripe for this toward the end of last week…after testing strong support in the $1,665-$1,680 area, Gold has shot up higher today…as of 7:50 am Pacific, the yellow metal is up $33 an ounce to $1,713…Silver has gained $1.15 to $32.13…Copper is 11 cents higher at $3.40…Crude Oil is enjoying a powerful day, up $2.53 a barrel to $99.30 while the U.S. Dollar Index has lost one-quarter of a point to 79.00…this day definitely belongs to the bulls but as we stated over the weekend, the big picture is still bearish for equities though Gold producers and near-producers could out-perform…it’s “decision time” for Gold in December (see last Thursday’s “Gold Update”) and its performance next month should set the tone for how things kick off in the New Year…a rising trendline will converge with the $1,665-$1,680 band of support by the second half of next month which will make that area even more interesting and critical from a technical perspective…these are fascinating times for Gold…

U.S. retailers racked up a record $52.4 billion in sales over the Thanksgiving weekend, a 16.4% jump from a year ago, as early hours and attractive promotions brought out more shoppers, an industry trade group said yesterday…the American consumer is still spending and markets are certainly encouraged by those early Christmas shopping numbers…

Several pieces of critical economic data for the U.S. will be released this week including the ISM, a manufacturing report, slated for release on Thursday and the non-farm payrolls report, set for release on Friday…the general consensus is that the data will show that the U.S. recovery remains on track…however, traders and investors will continue to focus on developments in the euro zone where, based on the recent action in the bond markets, the risk of a region-wide credit crunch is growing…some important policy announcements regarding the euro zone are expected this week…

Meanwhile, European leaders need to provide “credible and large enough firepower” to halt the sell-off in the euro zone sovereign debt market or they will risk a severe recession, according to the chief economist of the Organization for Economic Co-operation and Development…the warning came as the organization slashed its half-yearly forecasts for growth within the world’s richest countries, and said activity in Europe would grind to a near-halt…“The scenario so far is that Europe’s leaders have been behind the curve”, Pier Carlo Padoan was quoted as saying in the Financial Times this morning…“We believe this could be very serious”… he said that leaders need to put in place firm plans for fiscal integration…in its twice-yearly Economic Outlook released this morning, the OECD has cut its 2012 world growth estimate to 3.4% from 3.8% this year…that marks a sharp fall from its previous outlook in May when the OECD estimated the world economy would grow 4.2% this year and 4.6% in 2012…struggling to contain an unprecedented debt crisis, the euro zone has already entered a recession and will eke out growth of only 0.2% in 2012, the OECD said, slashing its forecast from 2% in May…the OECD expects growth in China will slow to 8.5% in 2012 from 9.3% this year…

Moody’s, the U.S. rating agency, warned this morning that the rapidly escalating crisis in the euro zone is threatening the standing of all the region’s governments as their ability to raise capital in the markets is increasingly questioned…

The CDNX is up 26 points to 1531…it will of course face resistance around 1575 which was previous support…Cap-Ex Ventures (CEV, TSX-V) is up 2 pennies to $1.07…the company has made what appears to be a world class iron ore discovery near Schefferville, Quebec…with a bullish chart and a current market cap of just under $50 million, CEV holds considerable promise…strong insider buying is also a positive sign…from a technical perspective, it’s reasonable to conclude that CEV’s 52-week (or all-time) high of $1.62 could very easily be tested in December…since last week there has been a gradual and healthy unwinding of an overbought technical condition, setting the stage for another possible leg up in the near future…Adventure Gold (AGE, TSX-V), Spanish Mountain Gold (SPA, TSX-V) and Gold Canyon Resources (GCU, TSX-V) are all looking favorable at the moment…we’ll have more on AGE’s Pascalis-Colombiere Property in early December including some impressive pictures from a recent site visit…

TSX Venture Exchange and Gold

Markets suffered across the board last week, sending the CDNX below important support between 1575 and 1600.  The Index closed Friday at 1505 for a weekly decline of 103 points or 6.4%.  Our overall bearish stance toward the CDNX continues, especially now with a declining 300-day moving average (SMA), but one reasonable theory is that a temporary bounce or “relief rally” could now unfold (followed by another wave down) given current technical conditions in both the CDNX and the broader markets.  The CDNX does have support at 1500, another critical area to now watch.  It could initially bounce off 1500 before ultimately crashing through that level to test the support band shown in John’s chart between 1300 and 1350.  The “big picture” strongly suggests there is more downside risk in this market than upside potential at this point and investors need to be extremely careful.  Protection of capital is paramount.  There will be some exceptions but in general there should be better buying opportunities in most speculative plays during the first quarter of next year.

There are some individual situations that do look positive.  Cap-Ex Ventures (CEV, TSX-V), for example, gained 7 cents last week on strong volume to close at $1.05.  The company has made a potential world class iron ore discovery near Schefferville, Quebec.  The fact that insiders bought over half a million shares at an average price of $1.14 last week should be a sign to investors of just how big this deposit could be.  The chart is strong, more results are on the way and the current market cap is modest ($46.3 million) given the significance of this discovery.  The company’s latest financials for the nine-month period ending May 31 showed working capital of $11.5 million.

Spanish Mountain Gold (SPA, TSX-V) is working on an advanced high-tonnage, low-grade Gold deposit in central British Columbia, and last week the stock became heavily oversold and fell below its rising 100-day moving average (SMA) where it has been a strong buy throughout the year.  On Friday, SPA dipped as low as 67 cents before rallying back strongly to close up 3 pennies for the day at 75 cents.  SPA has significantly out-performed the CDNX this year and that trend should be expected to continue, especially if Gold moves higher.  The company was armed with nearly $20 million in cash as of the end of September.

Gold Canyon Resources (GCU, TSX-V), developing a potential 5 million+ ounce Gold deposit in Ontario (Springpole Project, 110 kilometres northeast of the Red Lake mining camp), has had 10 consecutive losing sessions and closed Friday at $2.35, a 42-cent loss for the week.  It has good support around current levels and has once again dropped below its still-rising 300-day SMA where it has to be considered attractive from a technical standpoint.

For smart traders and patient investors, there are still opportunities in the current market environment.

The Dow and S&P 500 are coming off their worst Thanksgiving week performances (losses of of 4.78% and 4.69%, respectively) since The Great Depression.  The HXD, the double-leveraged short S&P/TSX 60 ETF that we have been excited about in recent weeks, has posted 10 straight daily gains and is up in 12 out of the last 13 trading sessions.  The crowd is once again scared and very negative.  All the more reason why a rally in the markets is probably imminent but beware of January.

Gold

Support appears to be holding for Gold in the $1,665-$1,680 area, and that bodes well for a possible bullish move in the near future. For the week, Gold fell another $45 an ounce to close at $1,680.  Silver lost $1.43 to close at $30.98, Copper fell 12 cents to $3.29, Crude Oil slipped 64 cents to $96.77 while the U.S. Dollar Index surged to 79.63 as anxiety grew over the euro zone debt crisis.

Beneath Gold’s $1,665-$1,680 support band is huge trendline support around $1,625 as John’s latest chart, posted yesterday, clearly shows.  December will be a key test of Gold’s strength going into 2012 as the trendline support will continue to rise and converge with that band between $1,665 and $1,680.  “Decision time” is on the way.  An explosive move to the upside in Gold is certainly possible.

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.

While a spike downward to long-term trendline support around $1,625 can’t be ruled out in the immediate future, Gold has been giving some encouraging signals in recent days as the strong support band between $1,665 and $1,680 has been holding.  In John’s 6-month daily chart below, note the Slow Stochastic indicator and how the RSI(14) has bounced off support.  Next week and the month of December should be very interesting for Gold – it’ll be “decision time” for the yellow metal as trendline support meets the $1,685-$1,680 support band.

Gold once again successfully tested a support band between $1,665 and $1,680 this morning…as of 7:45 am Pacific, the yellow metal is now up $2 an ounce at $1,697 after touching a low of $1,671…Silver is down 18 cents at $31.69…Copper is up a penny at $3.30…Crude Oil has reversed and is now 72 cents higher at $96.89 while the U.S. Dollar Index is up one-quarter of a point at 79.37…

Troubles continue in the dysfunctional euro zone…Italy’s borrowing costs shot higher today as Rome was forced to pay euro-era high interest rates to investors in what analysts called an “awful” auction of short-term debt…yields on two-year bonds jumped above 8% after an auction of this debt and six-month bills raised the full targeted 10 billion euros but at the cost of sharply higher yields…

This is an abbreviated version of Morning Musings today due to travel commitments…markets in New York, which were closed yesterday of course for American Thanksgiving, shut down early today at 10:00 am Pacific…

The CDNX is flat at 1513…the Index does have support at 1500 and that may hold for now but a breach of that support is inevitable in our view as the grip of the bear gets tighter, certainly by January if not sooner…in the meantime, we could see a month-end rally…

Spanish Mountain Gold (SPA, TSX-V) has been knocked down just below its rising 100-day moving average (SMA) where it has consistently been an attractive buy throughout the year…the Chaikin Money Flow (CMF) and Stochastics show deeply oversold conditions…SPA is the fourth most active stock on the Venture so far this morning, up a penny at 73 cents…SPA is developing a high-tonnage, low-grade deposit in central British Columbia and is anchored by a strong and respected management team…second in volume this morning is Cap-Ex Ventures (CEV, TSX-V) which has made a very significant iron ore discovery near Schefferville, Quebec…CEV traded as high as $1.18 in early trading and is currently down 3 pennies at $1.11…this one could have legs and is also a likely takeover candidate if a multi-billion ounce resource is proven up…the drill results so far are certainly impressive…

We’ve mentioned Probe Mines (PRB, TSX-V) consistently in recent months as we’re impressed with the progress the company is making with its Borden Lake Gold Project near Chapleau, Ontario…PRB is currently down a penny at $2.24…John’s chart for PPB is interesting as it’s one of the few bullish ones in this weak market…holders of PRB have reason for optimism…

Happy Thanksgiving to our American friends…U.S. markets of course are closed, so all other markets are quiet as a result…Gold traded as high as $1,704 overnight and is currently up $1 at $1,693 (as of 8:45 am Pacific)…the support band between $1,665 and $1,680 is holding so far…a breach of that area would likely mean a test of the important trendline support at about $1,625…Silver is unchanged at $31.77…Copper is off a penny at $3.29…Crude Oil has gained 65 cents to $96.82 while the U.S. Dollar Index is up slightly at 79.12…

European shares pared gains today after German Chancellor Angela Merkel reiterated her opposition to jointly issued euro bonds and calls to change the role of the European Central Bank in the fight against the euro zone debt crisis…meanwhile, investors continue to fret about the implications of Germany’s poor debt auction yesterday with some fearing it shows sovereign contagion has reached the very core of the single currency bloc…Japanese shares are at their lowest level since April, 2009, a slump that is testament to the sentiment-sapping force of the euro zone debt crisis and the negative impact the fiscal turmoil is seen having on the global economy…who knows where this is all going to lead but one would think the end result will be bullish for Gold…with the CDNX in the grips of a bear market, we continue to favor the producers at the moment…

The TSX is down 100 points at 11,472…the Index has now retraced 63% of its gains from the October 4 low of 10,848 to the November 8 high of 12,543…the HIX and HXD short ETF’s have been on fire with the HXD on track for its ninth consecutive daily gain…the CDNX, meanwhile, is off another 10 points at 1512 with support at 1500…

The Canadian Dollar has taken a pounding recently but is now oversold based on Stochastics and close to support, which suggests the markets could be ready to turnaround and that we could see a significant bounce perhaps next week…the Dollar is flat this morning at 95.4 cents, and John updates the chart below…

Cap-Ex Ventures (CEV, TSX-V) corrected to 96 cents yesterday but has rebounded today, thanks in part to a large insider buy yesterday of nearly half a million shares at $1.14 which has given the market a boost of confidence…CEV opened higher at $1.03, touched $1.01, ran as high as $1.10 and is currently up 7 cents at $1.07…the company has made a significant iron ore discovery near Schefferville, Quebec, but got a little over-zealous in its news release yesterday and had to issue a retraction regarding comments made regarding the potential size of that deposit (“Block 103 appears to host a multi-billion-tonne near-surface iron ore deposit”)…nonetheless, they got their message out…

Miner Anglo-American PLC is “very positive” on the fundamentals of the iron ore industry, with demand for the steelmaking material to increase as much as 39% over the 2010-2020 period, Brazil-based directors of the mining company said yesterday…annual world iron ore demand is set to grow at an average of 3.4% a year between 2010 and 2020, mainly driven by Chinese steelmaking growth, according to Paulo Castellari, commercial director of Anglo’s Brazilian iron ore unit…Anglo will “significantly enhance” its presence in the global iron ore market when it brings its $5 billion Minas-Rio iron ore project in Brazil into production in the second half of 2013 with a capacity of 26.5 million tons a year of iron ore…(the resource contains 5.3 billion tons)…

Visible Gold Mines (VGD, TSX-V) closed a flow-through private placement yesterday at 30 cents, raising net proceeds of nearly $2.7 million…we remain bullish on the prospects of VGD’s two main projects, Joutel and its Wasamac-area properties…however, it seems the market has knocked VGD off its game…rather than being on the offensive, like it was over the summer, the company seems to have pulled back as evidenced by this flow-through financing (shows weakness) and the statement in yesterday’s news release that next year’s drilling will be 25,000 metres…assuming the company completes 40,000 meters this year, as promised, that would mean they are proposing a nearly 40% reduction in next year’s drilling – before all results are even in from Wasamac and Joutel…that is astounding…VGD management is sending confusing and disturbing signals to the market and that’s not helpful when it comes to share price performance…the stock is unchanged this morning at 20 cents…

We’re long-term energy bulls and this morning John has a chart on Ithaca Energy (IAE, TSX), a former Venture-listed stock, that he’d like to share…IAE is currently up 4 pennies at $1.98 but the 2.5-year weekly chart below shows a better buying opportunity is likely…a strong support band exists between $1.60 and $1.80…it’s worth keeping this play on one’s radar screen…as always, perform your own due diligence…

It’s an ugly day on the markets…Gold got as high as $1,711 overnight but has pulled back toward its support band…as of 8:15 am Pacific, the yellow metal is down $19 an ounce at $1,680…Silver is off $1.29 to $31.48…Copper is 7 cents lower at $3.27 on some weak numbers out of China…Crude Oil has lost $2.29 a barrel to $95.72 while the U.S. Dollar Index has climbed nearly a full point to 79.15 on this “risk-off” day…

A China manufacturing index slowed to 48 in November from 51 in October, according to a preliminary reading reported by HSBC and Markit Economics today…that’s the lowest reading since March, 2009…a number below 50 indicates a contraction…“Industrial output growth is likely to slow further in coming months on weakness in domestic and overseas demand,” said Qu Hongbin, a Hong Kong-based economist for HSBC, in a report in the Financial Times…“Moderating inflation may leave more room for Beijing to step up selective easing measures”…it’s worth noting that the Australian dollar, which is particularly sensitive to perceptions of future Chinese raw material demand, has lost more than 7.5% in November…

A slew of ho-hum economic numbers were released out of the U.S. this morning, the day before Thanksgiving for our American friends (U.S. markets are closed tomorrow of course)…U.S. consumer sentiment held up in late November as some of the gloom over the economic outlook ebbed, a survey released this morning showed…the Thomson Reuters/University of Michigan’s final reading on the overall index on consumer sentiment came in at 64.1, up from 60.9 the month before…that was just slightly below the median forecast of 64.5 among economists polled by Reuters…a separate report showed consumer spending barely rose in October, as households took advantage of the largest increase in income in seven months to rebuild their savings…markets will be closely watching the Black Friday retail numbers out of the U.S. for an important early indication of consumers’ Christmas spending appetites…new orders for a range of long-lasting U.S. manufactured goods unexpectedly rose in October, but sharp downward revisions to the prior months’ data and weak spending plans by businesses suggested manufacturing was taking a breather…a drop in non-defence capital goods orders was not encouraging…and the number of initial claims for U.S. unemployment benefit rose slightly to 393,000…

The Dow and TSX are both down sharply, over 200 points…the CDNX has lost 31 points and is now sitting at 1524…its important 300-day moving average (SMA) is now in decline, the first time that has occurred since just prior to the 2008 Crash…not a good sign…

John’s 2.5-year weekly chart for the CRB Index continues to show a downtrend channel which is also not positive for the CDNX…the RJ/CRB is currently down 4 points at 307 (the chart was based on yesterday’s close)…

Even in a bear market, some stocks will stand out and do well…while we haven’t mentioned Cap-Ex Ventures Ltd. (CEV, TSX-V) before, some of our readers were quick to catch on to it recently and have recorded some nice gains…CEV has made a significant iron ore discovery approximately 30 kilometres northwest of the mining town of Schefferville, Quebec…the stock closed up 27 cents yesterday at $1.24 in anticipation of news which came out this morning…the intervals and grades reported this morning are impressive but the “sell-on-news” mentality and ugly markets today have created some selling pressure…the stock was driven down to a low so far today of $1.06…it’s currently off 17 cents at $1.07…the pullback is healthy, though, from a technical standpoint as CEV has been on fire recently…the 100-day moving average (SMA) has reversed to the upside but the stock faces a resistance band as John’s 1-year weekly chart outlines…all factors considered, a challenge of that resistance – at the very least – seems logical… the rising 10-day SMA, currently just above 90 cents, has been providing strong support over the last month or so…in situations like this, a pullback to the 10 or 20-day SMA would be considered normal before the uptrend resumes…as always, perform your own due diligence…