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Markets are solidly in the green across the board this morning after European Central Bank President Mario Draghi pledged to do “whatever was necessary to protect the euro zone from collapse, and believe me it will be enough“…those are strong words from a central bank president who must know he has the firepower within his means to back those words up…Gold and Silver are both close to a confirmed breakout…Gold is up $10 an ounce at $1,615 as of 6:05 am Pacific while Silver has added 28 cents to $27.62…Copper is up 3 pennies at $3.42…Crude Oil is $1.24 higher at $90.21 while the U.S. Dollar Index has fallen more than three-quarters of a point to 82.77…

Draghi’s comments come a day after European Central Bank member Ewald Nowotny said there was an argument for allowing the European Stability Mechanism, the bloc’s permanent bailout fund, to borrow without limit from the ECB…together, such chatter has convinced many traders and investors that the ECB would soon wade in to ensure fiscally-strapped nation’s borrowing costs did not remain at unsustainable levels – potentially creating a firebreak to eurozone contagion…this could remove a heavy weight bearing down on global sentiment and economic activity, and provide a spectacular boost for precious metals…

This is the best Gold has looked on the charts in quite some time…on the 6-month daily chart from John below, completed after yesterday’s trading, you’ll notice Gold is currently above its down trendline for the first time since the spring…Gold needs to close above this line today and tomorrow to give us confidence that a breakout is in progress…notice the recent increase in buying pressure which is accelerating again today…

Below is another technical look at Gold from John, a 1-year weekly chart…the declining weekly EMA-20 provides resistance at $1,617 while horizontal channel resistance exists at $1,630…

In recent days it appears the Venture Exchange has been completing a double bottom…as a reminder, what we all need to watch for is a move through the EMA-20 and the 1200 level – this would signal the end of the downtrend in place since the spring and the beginning of a bullish new phase…the chart below was completed after Tuesday’s close at 1166…the Index gained 6 points yesterday to finish at 1172…

Great Panther Silver (GPR, TSX)

A rising Silver market would be a tremendous boost for producer Great Panther Silver (GPR, TSX-V) which is currently resting at support on the charts as shown by John below…jumping in on a confirmed close above the down trendline would make sense…interestingly, GPR is currently resting at support just above its 200-week rising moving average (SMA)…

Orko Silver (OK, TSX-V)

Another Silver play that’s looking attractive on the charts at the moment is Orko Silver (OK, TSX) which closed up a nickel yesterday at $1.19…OK is less than half where it was back in March, and may have found a bottom at the $1 level where there was strong resistance during 2009…

Note: John, Jon and Terry do not hold positions in GPR or OK.

Precious metals are waking up this morning…as of 6:10 am Pacific, Gold has jumped $21 an ounce at $1,602…Silver is 34 cents higher at $27.30…Copper is up 4 pennies at $3.39…Crude Oil has added 53 cents to $89.03 while the U.S. Dollar Index has slipped one-third of a point to 83.63…a European Central Bank council member this morning suggested the possibility that Europe’s rescue fund (European Stabilization Mechanism) could get a banking license, allowing it to tap cheap ECB funding…this has given a boost to the euro and precious metals…

Britain’s Economy Continues To Slide

The UK economy contracted much more sharply than expected in the second quarter of the year, prolonging and deepening the country’s double-dip recession…output fell 0.7 per cent between the first and second quarter, more than the 0.2% fall economists had expected…the UK economy has contracted for three quarters in a row and is now smaller than when the coalition government took office in 2010, providing fuel to critics of its austerity measures…

O’Neill Sounds Off On Euro Zone

Jim O’Neill, Chairman of Goldman Sachs Asset Management who famously coined the term BRIC – Brazil, Russia, India and China – to describe the stars of the emerging markets in the 1990’s – told CNBC this morning that euro zone policymakers need to take a “United States of Europe” attitude to solving the debt crisis…“All 17 leaders could get together and commit to a euro bond some time in the future and hey presto, that would be the beginnings of a major resolution,” he stated…he admitted this was unlikely and policymakers would opt for their usual route of “muddling through”, saying their actions thus far were “not good enough”…he added that the markets were now priced for “almost permanent disaster”…

Today’s Markets

Futures in New York as of 6:10 am Pacific are pointing toward a strong open on Wall Street this morning after three consecutive triple-digit losses by the Dow…while Apple had a a rare earnings miss yesterday, Caterpillar – an industrial bellwether – reported quarterly earnings this morning that solidly outpaced analysts’ expectations…Asian markets were down slightly overnight while European shares are higher this morning…

Venture Exchange

The CDNX has fallen 30 points so far this week, but remains within a support band as shown by John’s chart below…while a select number of individual stocks can still perform well in this environment, the start of a broad-based uptrend will only begin once the Venture is able to climb above resistance at its daily EMA-20, currently at 1197…the Venture closed at 1166 yesterday, 12 points above its late June low…

“Discovery plays” is where the safety, excitement and upside potential is at the moment in the CDNX…GoldQuest Mining (GQC, TSX-V) is the best example of that, but certainly not the only one…John’s GQC chart was bang-on again yesterday as the stock ended a three-day slide with a gain of 13 cents to $1.10…over 33 million GoldQuest shares have traded over the last 9 sessions (all exchanges) for an average daily volume during that time of 3.3 million shares…

Also in the Dominican Republic, keep a close eye on Unigold Resources (UGD, TSX-V) which jumped a nickel yesterday to 37.5 cents…UGD has been reporting solid results from a property along the same belt as GQC’s Escandalosa to the north…

Canamex Resources (CSQ, TSX-V)

A stellar drill result last week from its Bruner Gold Property in central Nevada sent Canamex Resources (CSQ, TSX-V) flying from a low of 9.5 cents to a high of 44 cents…over 80 million shares have traded on Canadian exchanges over the last 5 trading sessions…the company has 68 million shares outstanding but 29 million warrants are also now in the money between 15 and 25 cents (23 million expire at 15 cents by December 31 of this year) which is likely helping to keep a lid on the stock price at the moment…CSQ closed yesterday at 31.5 cents – it has declined in three out of the past 4 sessions after last Wednesday’s news of an intercept grading 4.08 g/t Au over 118.1 metres…expect more consolidation in the near future as the stock continues to deal with the warrant issue, but CSQ could get more interesting as the summer progresses…below is a chart from John that gives a good picture of the current technicals…the stock appears to be in the early stages of a flag formation which we’ll continue to keep an eye on…

Rainbow Resources (RBW, TSX-V) Chart Update

Discovery plays is where the action is in the market right now, and Rainbow as we’ve been stating is in an excellent position to drill into a near-surface, high-grade discovery in the near future at its International Silver Property in the West Kootenays which has never been previously drilled…in the updated chart below from John, notice how RBW has outperformed the CDNX (thick blue line) this year and in the last five weeks in particular – a very encouraging sign…RBW has broken out above its daily EMA-20 as well as a recent downtrend in advance of the CDNX hopefully doing the same…

Note: Both John and Jon hold share positions in RBW while Jon holds a share position in GQC (Terry does not).

Gold has traded in a range between $1,571 and $1.587 so far today…as of 5:55 am Pacific, the yellow metal is up $1 an ounce at $1,578…Silver is off a dime at $26.96…Copper is off a penny at $3.36…Crude Oil is down 57 cents at $87.57 while the U.S. Dollar Index is up one-fifth of a point at 83.88…

Below is John’s updated long-term Silver chart, initially posted last night, that paints a remarkable picture of the potential of this market…RSI(2) has nearly touched the extremes of the 2008 Crash with superb support at $26 an ounce…the COT structure is also exceptionally bullish with commercial traders’ short positions at near-record lows…one theory to keep in mind is that “Big Money” may wish to trigger stop-loss orders and flush all the nervous nellies out of the market completely with a brief plunge below $26, but this would be followed by a violent reversal to the upside…there’s no question the opportunity in Silver is huge based on this chart…

Improvement in China Manufacturing Activity

China’s manufacturing sector clawed its way back toward growth in July, according to a survey that suggests that government policies to support the economy are starting to work…HSBC said its purchasing managers’ index for July was on track to rise from 48.2 last month to 49.5, which would mark a five-month high..but, in remaining below the 50 threshold, the flash PMI figure –  the earliest piece of monthly economic data for China – indicates that factory activity is still contracting at a mild pace…although shifting its policy footing to a pro-growth stance, which has included two recent interest rate cuts within a month and some fiscal stimulus measures, the government has so far been reluctant to deploy a large-scale stimulus as it did in late 2008…the critical factor in restraining its response has been relative stability in the labor market…

Euro Zone Private Sector Continues To Struggle

Business surveys showed today that the euro zone’s private sector shrank for a sixth month in July as manufacturing output remains weak, adding to the likelihood that the bloc will slip back into recession…in a further blow to policymakers battling a raging debt crisis, the downturn that began in the euro zone’s smaller economies has become entrenched in the core countries of Germany and France…Markit’s euro zone Composite Purchasing Managers’ Index (PMI), a combination of the services and manufacturing sectors and seen as a guide to growth, held steady at 46.4 this month, slightly under expectations for an uptick to 46.5…the index has been below the 50 mark that separates growth from contraction for six months, and Markit said it suggests a quarterly GDP fall of 0.6%…a Reuters poll predicted last week that the bloc’s economy would shrink a more modest 0.1% in the current quarter…coupled with an expected 0.3% contraction in the second quarter, that would put the euro zone in its second recession since 2009…

Data from Germany, Europe’s largest economy, showed its manufacturing sector contracted at its fastest pace in over three years and that its service sector, which was expected to stagnate, also shrank…in France, factory activity fell at its fastest pace since May, 2009, although its service sector confounded expectations by eking out a small amount of growth…to try and aid the euro zone economy, the European Central Bank cut its main refinancing rate to a record low 0.75% and the deposit rate to zero earlier this month…more measures are expected from the ECB…

Other Euro Zone Developments

Germany’s finance minister is meeting with his Spanish counterpart in Berlin today, amid fears that Madrid will be forced to seek a bailout from its euro zone partners of the sort used to rescue debt-laden governments in Greece, Ireland and Portugal…meanwhile, inspectors from the international lenders keeping Greece afloat returned to Athens today to relaunch its stalled economic plan and decide whether to keep the nation hooked up to a 130 billion euro ($158 billion U.S.) lifeline or let it go bust…

Today’s Markets

Stock index futures in New York as of 5:55 am Pacific are pointing toward a slightly weaker open on Wall Street after triple-digit losses on the Dow Friday and yesterday…Asian markets were mixed overnight while European shares are flat today…the Venture Exchange slipped 22 points yesterday on low volume, closing at 1172, but remained above the June 28 intra-day low of 1154…

GoldQuest Mining (GQC, TSX-V)

After climbing to an intra-day high of $1.28 last week on more stellar drill results from its Romero discovery in the Dominican Republic, GoldQuest Mining (GQC, TSX-V) has backed off into an “accumulation zone” in a textbook technical pullback over the last three trading sessions as shown in an updated chart from John…GQC, which hit John’s latest Fibonacci level of $1.20, closed at 97 cents yesterday…the accumulation zone is between the Fibonacci 50% and 38.2% levels – 88 cents and 98 cents…while we caution that it’s still very early in the drilling stage, the possibility of a “monster” Gold-copper porphyry deposit at Romero is very real based on what is known so far…

Note: Jon holds a share position in GQC (John and Terry do not).

Rainbow Resources (RBW, TSX-V) Chart Update

Like GoldQuest, Rainbow Resources‘ (RBW, TSX-V) pullback yesterday to its rising 20-day moving average (SMA) was very normal from a technical perspective…on the daily chart, the RSI(14) is back at support at 50…RBW has clearly broken out of a down trendline and this bodes well for the coming days and weeks with a drill program slated to begin shortly at the company’s flagship International Silver Property in southeast British Columbia…discoveries are still rewarded handsomely in this market, as we’ve seen with GoldQuest and some others recently, and that’s why Rainbow is in such a favorable position…they’re about to drill shallow holes into a known high-grade structure with the exploration target being a high-grade, near-surface Silver and polymetallic deposit…the risk-reward ratio at current levels and leading into the speculative drilling stage is highly favorable – hence, an initial Fibonacci level from John that makes perfect sense…all of John’s Fibonacci levels with GoldQuest have been bang-on…

Note: John and Jon both hold share positions in RBW with Jon adding to his position yesterday (Terry does not hold a position).

Great Atlantic Resources (GR, TSX-V)

One of the emerging Venture Exchange CEO stars, in our view, is Great Atlantic Resources‘ (GR, TSX-V) Chris Anderson, and we’ll be conducting a series of short interviews with Chris in the near future to get his take on a range of issues including the current markets and the strong potential of mining and exploration in Atlantic Canada…

Welcome to our site, or at least the initial version of it!  BMR has been online for nearly three years and strictly through word-of-mouth we have built a loyal following. 

We’re continuing with our plans to ultimately build a very unique investment and money-management resource site that goes considerably beyond what we have now.  While we focus a great deal on the Gold and Silver markets and trends in the global economy, and of course the technical health of the TSX Venture Exchange (CDNX), an important component of this site will always be original research on undiscovered junior exploration companies or small producers, mostly in the Gold and Silver exploration space, that offer very real and significant upside potential. We are extremely selective in the companies we feature and put forward to investors – we prefer quality over quantity.  However, investors must understand that these are still highly speculative situations and entail considerable risk, volatility and unpredictability.  Our stock coverage is for informational and entertainment purposes only and must not be viewed or interpreted as “buy”, “sell” or “hold” recommendations. We are not Registered Securities Advisers. Our opinions can only be construed as a solicitation to buy and sell securities when they are subject to the prior approval and endorsement of a Registered Securities Adviser operating in accordance with the appropriate regulations in your area of jurisdiction. Always perform your own due diligence and please read our disclaimer at the bottom.

We use a combination of fundamental and technical factors in determining the value and potential of a stock.  In terms of fundamentals we look for a company with a superb project supported by strong management.  Management must possess integrity, solid ethics and a determination to succeed and build shareholder value.

At BullMarketRun (BMR) we approach the handling of money from a biblical perspective and this is an important topic we will be sharing with our readers (and listeners) as the site continues to develop. The Bible teaches so much about money and how to handle it and invest it –  there are literally thousands of verses on how we should handle the money and possessions that God entrusts us with.  By examining the life of Jesus and reading the Word of God, we can all become fully equipped to be successful investors and handle money wisely.  If it’s the other way around –  if you’re a slave to money by being in debt for instance, or if you don’t respect the value of money and spend it foolishly –  you’re in trouble and you’ll never be blessed financially.  We have a God who thinks big – He created the universe – and He wants us to think big  in every area of our lives.  When we handle money from a Biblical perpective (His money that we have been given stewardship of) He will bless our financial decisions and an increase of tenfold or a hundredfold is always possible.  This all begins, of course, with a personal relationship with Jesus Christ by accepting Him as your Lord and Savior and putting Him at the throne of your life.  It is the most important decision you’ll ever make.

God Bless,

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Owner/Publisher, www.BullMarketRun.com

Disclaimer:

BullMarketRun.com (BMR) is completely independent from any companies it covers.  BMR accepts no compensation of any kind from any groups, individuals or corporations for coverage of any company mentioned on this site.  We accept no advertising either.  Our stock coverage is for informational and entertainment purposes only and must not be viewed or interpreted as “buy”, “sell” or “hold” recommendations. No investment opinion or other advice is being rendered on any stock or company. We strongly recommend that you consult with a qualified investment adviser, one licensed by appropriate regulatory agencies in your legal jurisdiction, and do your own due diligence and research before making any investment decisions. The stocks we cover, by definition, are highly speculative and potentially very volatile. Investors are cautioned that they may lose all or a portion of their investment if they make a purchase or short sale in these speculative stocks.  We are not Registered Securities Advisers. Our opinions can only be construed as a solicitation to buy and sell securities when they are subject to the prior approval and endorsement of a Registered Securities Adviser operating in accordance with the appropriate regulations in your area of jurisdiction. It should be assumed that BMR personnel, writers and their associates may hold or dispose of or trade in positions in any securities mentioned herein at any time.  Owner/Publisher of BullMarketRun.com is Terry Dyer of Langley, British Columbia.

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Markets are weak across the board today…as of 5:25 am Pacific, Gold is down $18 an ounce at $1,566…Silver is 47 cents lower at $26.86…Copper is at a 3-week low, off nearly a dime at $3.34…Crude Oil has retreated $3.09 a barrel to $88.74 while the U.S. Dollar Index is up nearly one-fifth of a point at 83.81…

U.S. stock market futures are pointing toward a lower open on Wall Street to begin a busy new week (a barrage of earnings reports and economic news will be released this week including second quarter U.S. GDP on Friday) after Asian and European markets suffered from worries that Spain will need a full bailout…European shares are off close to 2% today while China’s Shanghai Composite sank 27 points to close at 2141…the Chinese market is looking very attractive according to some analysts, especially those who are anticipating an economic rebound in that country during the second half of the year…Chinese stocks are currently trading at 9.6 times forward 2012 earnings, compared with an average of 17.5 times since 2006, according to data from the Shanghai Stock Exchange…the SSEC has fallen 13% from the year’s high on March 2…

A slowdown in the broader Chinese economy hasn’t had an impact on the advertising market, which is a positive sign for the growing consumption-driven side of the Chinese economy that the mainstream media often overlooks….in an interview with CNBC Friday, WPP Group CEO Sir Martin Sorrell said that for the advertising industry, consumption rates matter more than the headline economic numbers…“In China, we’re up 14% so far this year,” Sorrell said…“We’ve seen no slowdown, but we’re focused on consumption”…he noted that China’s five-year growth plan shifts the emphasis from investment and savings toward even greater consumption…he said the consumption trend is also still going strong in other big emerging markets like Brazil, India and Russia…”In all those economies, the rise in the middle class has been enormous,” Sorrell said…“We’re talking about hundreds of millions of people that have been brought into a consumption phase, and that’s having an impact on our business”…

Energy Takeover

Calgary-based Nexen Inc. (NXY, TSX) has agreed to a $15.1-billion (U.S.) takeover by Chinese oil producer CNOOC Ltd., marking the most important acquisition to date by an Asian firm in Canada…the all-cash deal is worth $27.50 per Nexen share, a 66-per-cent premium to the 20-day volume-weighted average for the company, which has not seen its shares reach that level since before the financial crisis…Nexen closed at $17.29 Friday on the TSX…the Nexen takeover, which will test Canadian foreign ownership rules, is a signal of a dramatic boost in confidence by Chinese acquirers since the Unocal deal died in 2005…

Reading The Fed

The U.S. will make little progress tackling high unemployment before 2014 unless the Federal Reserve eases policy further, one of the central bank’s leading officials has warned in the run-up to a meeting next week where the option of “QE3” will be on the table…the comments by John Williams, president of the Federal Reserve Bank of San Francisco, show how the weak economy is pushing the central bank towards action to support growth…in an interview with the Financial Times, Williams predicted that unless “further action” was taken, there would be a lack of progress in boosting the jobs market – where the unemployment rate has been stuck around 8.2% since the start of the year – over the next 18 months…but he declined to call directly for a Fed move…“I think the argument against further action is the question of uncertainty around the effects, the costs and the benefits of doing so,” he said…Williams is regarded as close to the centre of gravity on the rate-setting Federal Open Market Committee, of which he is a voting member this year…the FOMC will conclude its next meeting on August 1…a series of Fed officials, including chairman Ben Bernanke, have said the central bank will need to consider further action unless it sees progress towards lower unemployment…

Silver Chart

While it’s down today, Silver has been gathering internal strength recently while testing key support at and above its December lows in recent weeks…the unusually bullish COT and sentiment indicators for Silver suggest that a powerful upside move is in the works, likely commencing during this third quarter…commercial short positions are close to record lows, while the large and small spec long positions are also close to record lows…the commercials are rarely wrong, so our money is on them….a new uptrend in Silver which will really gain traction and accelerate once the price succeeds in breaking above the downtrend line as shown in John’s 1-year weekly chart below…

Alexco Resources (AXR, TSX)

A strong Silver producer to keep in mind for a potential major upside move in the metal is Alexco Resources (AXR, TSX) which has been hit hard since March…selling pressure remains intense, as John’s chart shows, but common sense tells us to go in the opposite direction of the crowd with this one at the moment…AXR closed at $4.10 Friday…

Everton Resources (EVR, TSX)

On Friday, we had a brief chat with Everton Resources‘ (EVR, TSX-V) President and CEO Andre Audet who has agreed to do another interview with BMR in the near future…Everton is focused on the hot Dominican Republic, where of course GoldQuest Mining (GQC, TSX-V) has made a significant discovery, but EVR is still languishing under a dime…it’s trading at long-term support and should be on everyone’s radar screens as there’s enough interest in the DR right now that Everton shouldn’t have a problem attracting joint-venture partners for its projects which, it appears, is the route it will need to take…we’ll have more on Everton in the next week or so…in the meantime, below is an updated multi-year weekly chart from John…

Corvus Gold (KOR, TSX)

Corvus Gold (KOR, TSX), which we’ve mentioned several times in recent months, is enjoying exploration success in Nevada and has been a strong performer this year…based on fundamentals as well as John’s latest chart, we see Corvus as having considerable potential during the second half of 2012…

Note: John, Jon and Terry do not hold positions in AXR, EVR or KOR.

TSX Venture Exchange And Gold

While volumes are still low and the Venture Exchange has been trading in a fairly narrow range in recent weeks, this Index continues to hold above its June 28 low of 1154 and has the look and feel of a market crawling along the bottom in advance of what could be a sudden breakout to the upside at some point in the near future (within a few weeks).  There are many potential catalysts for this:  1) Fresh discoveries – some companies, like GoldQuest, Unigold, ATAC and Canamex Resources, reported market-moving drill results last week; 2) Increased takeover activity; 3) Higher Gold and Silver prices; 4) Clear signs of a pick-up in economic growth in China; and 5) QE3 and additional global stimulus measures.  There is too much bearish sentiment at the moment in the junior exploration market, and plenty of cash on the sidelines.  So the conditions are just right for a big move up during this third quarter.

The Venture gained 9 points last week to close at 1196.  Whole volume was weak Friday (on all markets actually), it was encouraging to see the Venture close as its high for the day while Toronto was down and the Dow suffered a triple digit loss.

From a technical perspective, the key event we have to watch for as investors is when (not “if” in our view but “when”) the Venture Exchange and Gold both break above their 20-day EMA’s.  Interestingly, the EMA-20 for each has served as stiff resistance since the spring.  Below is John’s updated 3-month daily chart for the Venture.  The EMA-20 is currently at 1203.  We could continue to see more basing for a little while, and then “kaboom” – some investors will be caught sleeping while the Index suddenly breaks above this resistance and begins what could be a powerful new uptrend (on John’s Gold chart,  you’ll see the same thing with the EMA-20).

Gold

Gold was down $5 for the week but had an interesting day Friday as it fell as low as $1,572 but rallied modestly and closed at $1,584, despite a sharp advance in the U.S. Dollar.  The hot-money crowd has lost interest in Gold for the time being (that’s actually a good thing – they will chase the yellow metal at higher levels), but the value-based crowd is apparently accumulating Gold at these levels which is why we’re seeing such strong support on pullbacks.  Swap dealers, a category of relatively large traders and big banks, are currently (and unusually) net longs in Gold, and that’s definitely a bullish sign.

Below is John’s a 1-year weekly Gold chart – just like with the Venture, the EMA-20 has been the key resistance since the spring.  It’s currently at $1,618.

Silver, which has an extremely bullish COT structure as we’ve been pointing out recently, was relatively unchanged last week at $27.33.  Copper backed off from resistance at $3.50 and closed at $3.43, down 6 cents for the week.  Crude Oil continues to move higher, mostly on heightened geopolitical tensions, and gained $4.73 last week to close at $91.83.  The U.S. Dollar Index was up one-fifth of a point last week to 83.50.

New Gold Discoveries Lagging Behind What is Being Mined

The latest analysis of Gold exploration by the well-respected Halifax-based minerals-focused research organization, Metals Economics Group, suggests that despite a huge focus by global miners and explorers on precious metals exploration over the past few years, the rate of new Gold resource discovery is substantially lagging behind resource depletion (bullish for the long-term Gold price).  The group’s latest study, “Strategies for Gold Reserves Replacement: The Costs of Finding and Acquiring Gold,” reports that Gold discoveries of at least 2 million ounces over the past 14 years could only replace around 56% of the estimated amount of Gold mined over the same period, and this is only if these same discoveries prove to be economically minable.

China To Introduce Interbank Gold Trading System

China is preparing to introduce an interbank Gold-trading system, a move that may enable domestic banks to treat the precious metal as a more liquid asset and increase holdings. China has been the world’s largest Gold producer since 2007. An interbank Gold-trading system would be part of a set of broader reforms that Beijing aims to introduce to make the financial sector more market-driven. Traders note that China is already very important in terms of Gold production and consumption, and if a new interbank system really does flourish, it could put the Chinese market in the mainstream.

Redefining Gold As A Tier 1 Asset

As Julian Phillips of the Gold and Silver Forecaster recently noted on Mineweb, monetary authorities and the banks are ill-prepared to take five more years of what has happened in the last five years. The entire subject of Gold being mobilized in the developed world’s monetary system is now firmly center stage as commentary on re-defining Gold from a Tier II asset to a Tier I asset has been called for by the Federal Reserve in the U.S. at the same time it is being proposed to the Basel III Committee on monetary reform. If it is so redefined, this will mean that 100% of its value can be attributed to a bank’s balance sheet as required assets, up from the current 50%.  The Basel Committee’s proposed effective date of January 1 could be the most significant step in the re-monetization of Gold since it was written out of the global monetary system back in 1971. Redefining Gold as a Tier I asset would advance bullion’s desirability enormously next year. Expect to see concerted efforts from the banking system to harness this private Gold.

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 that won’t end anytime soon (inflation is greater than the nominal interest rate even in parts of the world where rates are increasing), money supply growth, 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.  Massive central bank intervention appears increasingly likely to prevent a breakup of the euro zone and to kick-start the global economy.  It’s hard to imagine Gold not performing well in this environment.

Gold has traded in a range between $1,574 and $1,588 so far today…as of 4:50 am Pacific, the yellow metal is down $5 an ounce at $1,577…Silver is 35 cents lower at $26.93…Copper is off 7 cents at $3.45, weighed down by China’s warning against curbs on the property sector…Crude Oil has retreated $1.38 a barrel to $91.28 while the U.S. Dollar Index is up one-third of a point at 83.28…

WGC Outlines Supportive Factors For Gold In Second Half

The World Gold Council, in a quarterly report on investment trends, lists a number of factors it sees as supportive for Gold in the second half of this year…the WGC says that lower global inflation in the second quarter contributed to a price pullback in the metal…however, as a result, further fiscal and monetary stimulus may mean more “debasement of currencies through unconventional monetary policy and an increased risk of future inflation,” the WGC says…underlying structural issues in the euro zone are unresolved, meaning investors may continue to seek Gold to diversify risk and preserve capital…“The flight to the U.S. Dollar as a safe-haven in the first half of 2012 could be reversed,” the WGC says…“The U.S. debt ceiling debate in Q3 and federal elections in November, followed by the necessity to confront a 1.3 trillion budget deficit, will prove challenging to the U.S. dollar…with most currencies under pressure in one form or another, Gold is likely to provide a hedging mechanism for investors”…

India Update – Gold Demand Under Pressure, Bring On The Rain

India’s Gold imports fell by over half in the June quarter with demand dampened in part by higher prices due to a weak rupee…the upcoming festival and wedding season typically ignites Gold demand in India, but offsetting that this year could be a poor monsoon season which runs from June to September…the monsoon’s slow progress across the country and below-average rainfall have heightened concerns that output of summer-sown crops may fall this year…average total rainfall so far this monsoon season is around 22% below the long-term average…deficient monsoon rains would reduce output of major summer-sown crops such as rice, sugar cane and oilseeds…if the rains fail to pick up soon, it could have a lasting impact beyond the summer season and affect even the winter season crop…it would also depress demand from rural workers for a wide range of consumer goods and deepen a slowdown in industrial growth…most of India’s Gold imports are through rural areas, so farm income is critical…on the positive side, weather forecasters are predicting a normal monsoon season in India…

France Punishes The Rich – Will Capital Flee To Friendlier Jurisdictions?

French residents with assets valued above 4 million euros ($4.9 million) will pay more than double what they had expected in wealth taxes this year, after the country’s parliament voted through an emergency measure to raise 2.3 billion euros for the cash-strapped government…the increase – known as the “contribution exceptionnelle sur la fortune” – is a stop-gap measure introduced by François Hollande, the new Socialist president, to reverse his predecessor’s move to cut the wealth tax…it is part of a series of taxes being imposed on wealthy citizens and companies that some business leaders claim will drive entrepreneurs and investors abroad…France is also planning a 75% tax on salaries above 1 million euros, although the budget minister said this would be revised once the country cleared its debt…

David Cameron, Britain’s prime minister, angered the French government recently when he said he would “roll out the red carpet” to French citizens and companies who wanted to flee its punitive taxes…

Crude Oil Chart Update

After dropping into the upper $70’s recently, Crude Oil has rebounded strongly, thanks in part to heightened geopolitical concerns (Israel-Iran, Syria)…below is an updated WTIC chart from John that shows the current bullish trend can be expected to meet strong resistance between $95 and $97.50 a barrel…

CRB Chart Encouraging For Venture Exchange

There’s a strong correlation between the CRB Index and the Venture Exchange, so the fact the CRB Index put in a double bottom in late June is very encouraging and gives us confidence that 1166 was indeed an important low for the CDNX June 26.  While the CRB Index is quickly approaching a resistance area, as shown on John’s chart below, and a short pause/consolidation should be expected in the near future, a fresh advance on an eventual push through this resistance could be one of the triggers that ignites a very strong move in the Venture during this third quarter.  The fact the CRB Index has broken out of a downtrend that started in March, and is in an overall much healthier technical state at the moment, definitely bodes well for the CDNX…

ATAC Resources (ATC, TSX-V)

ATAC Resources (ATC, TSX-V) announced strong drill results the other day (46.06 metres grading 11.24 g/t Au, the highest grade Gold intersection to date at the Conrad zone), and we expect this “bellwether” to do some of the “heavy-lifting” to help lead the CDNX higher over the next couple of months…John sees quite a few positives in the ATC chart at the moment as outlined below, and that’s encouraging for the Index as a whole…the $2.80 area is the key immediate technical hurdle for ATC – a move through this resistance would be a very bullish sign…keep a close eye on ATC for clues on the direction of the CDNX…

Note: John, Jon and Terry do not currently hold share positions in ATC.