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TSX Venture Exchange and Gold & Silver

Not surprisingly, given short-term overbought technical conditions, the Venture Exchange staged a mini-correction last week but the pullback was confined to just a three-day period.  The Index fell 52 points or 3.9% from Monday to Wednesday’s intra-day low and then rebounded sharply to close the week at 1335, a loss of just 11 points from the previous Friday.  Last weekend we wrote, “A move down to one or both of these SMA’s (10 and 20-day moving averages) would be a healthy development that would lay the groundwork for the next surge.”  Indeed, the Venture tested its 20-day SMA just below 1300 and then headed higher again.  The next major test for the Index it to push through a resistance band between 1350 and 1365.  Thanks to the cleansing of the recent overbought condition, the Venture is better positioned now and likely has the energy to get through that resistance in the coming week.  The RSI(14) in John’s 6-month daily chart below has unwound from an overbought level and is now climbing again, while other indicators including buying pressure are very encouraging.

Four other very important factors have us convinced the Venture is gearing up for what has the potential to be a very strong fourth quarter and a spectacular start to 2013:

1. The Index has broken out relative to the U.S. dollar, ending a decline that started in the spring of 2011.  There is a strong inverse relationship between the Venture and the greenback, and the current state of the U.S. dollar (technically and fundamentally) is very weak given QE3 (QE Infinity) and the growing probability of another four years of Barack Obama in the White House and a possible Democratic sweep in November’s elections.  Ben Bernanke’s job is safe as Federal Reserve Chairman and the Americans won’t seriously deal with their debt issue until another major financial crisis forces them to;

2. Over the past couple of months the Venture has been outperforming the broader equity markets – this is another important change in trend and reflects a more “risk-on” environment;

3. The Venture’s 1,000-day moving average (SMA) has flattened out and is ready to move higher – this ends a four-year decline and suggests we’re now in the very early stages of a new bull market;

4. Commodities, in particular Gold and Silver, are going much higher for technical and fundamental reasons.

Gold

Gold traded in about a $50 range last week, falling as low as $1,735 (just above very strong support at $1,730) and as high as $1,785 where there is obviously some resistance.  For the week, bullion settled at $1,771 for a loss of just $2 an ounce.  Short-term overbought technical conditions have unwound which makes a near-term breakout through $1,785 increasingly likely.  Below is a 6-month daily Gold chart update from John.

Some interesting comments on Gold from respected Credit Suisse analyst Tom Kendall:

“The one part of the puzzle that’s still largely absent is a stronger pick up in Indian demand.  We’ve seen a bit of an upturn as the rupee has strengthened, but we’re still waiting for that market to come back into Gold in more sizable volume.”

“The Gold market has already come up 12% since mid-August, so that’s a pretty good rate of return over six weeks or so.  It’s natural to expect some consolidation before it pushes up through $1,800.  But the pull is definitely to the upside now.”

Credit-rating agency Egan-Jones had this to say last week:

“The FED’s QE3 will stoke the stock market and commodity prices, but in our opinion will hurt the U.S. economy and, by extension, credit quality. Issuing additional currency and depressing interest rates via the purchasing of MBS does little to raise the real GDP of the U.S., but does reduce the value of the dollar (because of the increase in money supply), and in turn increase the cost of commodities (see the recent rise in the prices of energy, Gold, and other commodities). The increased cost of commodities will pressure profitability of businesses, and increase the costs of consumers thereby reducing consumer purchasing power.”

Silver was relatively unchanged for the week, closing at $34.49.  Copper fell 2 pennies to $3.74.  Crude Oil was off nearly $1 a barrel to $92.19 while the U.S. Dollar Index rallied half a point to 79.89.

John will update his long-term Silver chart, with a Fibonacci target level of $78, as part of tomorrow’s Morning Musings.

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.  QE3 has arrived, and massive central bank intervention is now taking place 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.

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,

Terry Dyer

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.

Forward Looking Statements:

All statements in BMR’s reports, other than statements of historical fact, may be forward-looking statements. These statements relate to future events or future performance. Forward-looking statements are often but not always identified by the use of words such as “seek”, “anticipate”, “plan”, “continue”, “estimate”, “expect”, “may”, “will”, “project”, “predict”, “potential”, “targeting”, “intend”, “could”, “might”, “should”, “believe” and similar expressions. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements.

Toronto – Cambridge Resource Show, 7:45 am eastern

After yesterday’s powerful move, Gold shot up a little higher overnight and reached $1,785…as of 7:45 am eastern, the yellow metal is up $2 an ounce at $1,780…Silver had added 6 cents to hit $34.72…Copper is relatively unchanged at $3.73…Crude Oil has gained 18 cents to $92.03 while the U.S. Dollar Index has declined slightly to 79.52…

Barclays has opened a precious metals vault in London to store physical Gold, Silver, platinum, palladium and rhodium, the firm says…“This new client service is a very significant milestone in the expansion of our physical commodities offering, filling an important gap across metals and energy…in doing so we further strengthen our metals business and our presence in the bullion market,” stated Mike Bagguley, head of commodities and FX at Barclays…

Today’s Markets

China’s Shanghai Composite Index powered higher again overnight, climbing another 30 points to 2086 on stimulus hopes after briefly falling below the 2000 level earlier this week…China markets will remain shut all of next week for the Mid-Autumn Festival while Hong Kong will be closed next Monday and Tuesday…European markets reversed to the downside in mid-day trading as the yield on 10-year Spanish government bonds once again crept over the 6% mark…Spain announced a fifth round of budget cuts and tax increases in just nine months yesterday…that was part of a reform package that could pave the way for an EU bailout and sovereign debt purchases by the European Central Bank…stock index futures in New York as of 7:45 am eastern are pointing toward a mildly lower open on Wall Street…

Israel Draws Clear “Red Line” With Iran

Israeli Prime Minister Benjamin Netanyahu, in a speech at the U.N. General Assembly yesterday, said Iran was on track to build an atomic bomb by the summer of next year and exhorted the U.S. and other global powers to set a strict limit on Tehran’s nuclear fuel production as the clear “red line” that would trigger military strikes…Netanyahu’s speech was the latest public challenge to President Barack Obama to more aggressively confront Tehran…but Netanyahu also implied that Israel wouldn’t consider attacking Iran at least until the spring (unless, of course, he’s trying to throw the Iranians off and catch them somewhat by surprise)…by then, he argued, Iran will have amassed enough medium-enriched uranium to convert into fuel for a nuclear bomb in a matter of weeks or months…

Cambridge Resource Show

It’s the second and final day of the Cambridge Resource Show in Toronto (attendance appears to be down somewhat from last year) where the overall mood is definitely more positive than it was at the Cambridge Show last June in Vancouver…however, there’s still some nervousness among some companies and investors and that’s actually a good sign at this juncture…while we believe the Venture is on track for a very powerful fourth quarter, that view is not shared by everyone which we find encouraging from a contrarian point of view (we were one of the few on the bullish side last June)…the many skeptics still out there will be ones starting to pile in two or three months from now to help take this market through important resistance levels…

Great line yesterday by a successful investor we met on the floor of the Resource Show…”The dotcom boom was fueled by greed…the coming Gold and Silver boom will be fueled by both greed and fear”…

Let the bull (or, as some cynics would say, the bull----run) at the Cambridge Show in Toronto. Companies and investors are more optimistic than they were at last June's show in Vancouver, but there are still plenty of nervous investors which in our view is a bullish sign.

Foundation Resources (FDN, TSX-V)

Our Cambridge “bottom fishing” tip for the day – a company our readers should perform some due diligence on – is Foundation Resources (FDN, TSX-V) which is trading at just 6 cents a share after climbing as high as 90 cents in 2010…it’s important to note that FDN now has a new CEO – the highly respected Ian Lambert who was previously at the helm of Trade Winds Resources which got taken out by Detour Gold (DGC, TSX) in a stock transaction valued at $84 million…we spoke at length with Lambert at the show yesterday, and he’s confident he can ultimately build resources at the company’s Coldstream Gold Project near Thunder Bay from just under 800,000 to several million ounces…

Technically, FDN – like a lot of companies on the Venture at the moment – appears to be on the verge of breaking out of a downtrend…below is a 2.5-year weekly chart from John that shows a lot of promise…FDN will have to look at doing a financing in the not-so-distant future but an improved market environment should allow them to do so, and on more favorable terms…

Rainbow Resources (RBW, TSX-V) Update

Rainbow Resources (RBW, TSX-V) held a very well-attended and impressive reception last night at the popular Turf Lounge on Bay Street, and the message was very simple:  Good things are happening, and expect news by the middle of next week…based on comments from President David W. Johnston, as well as Jim Decker who’s overseeing developments on the ground, October will be the company’s busiest month ever with more drilling not only in British Columbia (and results from the International) but also in Nevada where the company is gearing up to tackle the Jewel Ridge Property…October is Rainbow’s month to shine – the company needs to deliver the goods, and we’re confident it will – and some interesting guests were in attendance last night including newsletter writer Jeb Handwerger who made the Rainbow event his first stop after getting off the plane from Florida…Handwerger speaks at the conference today…

Other Companies With Some “Buzz”

We heard plenty of positive talk yesterday concerning Precipitate Gold (PRG, TSX-V) which we’ve mentioned here on a few occasions over the last six weeks…it has a strong group behind it and recently joined the Dominican Republic Gold rush where there’s only a very limited number of well-positioned juniors to begin with…PRG has been consolidating lately around the 40-cent level, and John’s 3-month daily chart shows RSI(14) has fallen very close to strong support…the SMA-50 is at 36 cents and rising, also providing solid support…

Great Atlantic Resources (GR, TSX-V)

We’ve been very positive throughout the year on the prospects for Great Atlantic Resources (GR, TSX-V) which has considerable potential in our view given the assets it’s building in Atlantic Canada…the company almost has too many things on the go, which can confuse the story for some investors, but you can’t fault President and CEO Chris Anderson for his aggressive approach at a strategic time in the markets…Anderson is a go-getter and one of the Venture’s rising CEO stars, so we have no doubt he’ll do something big with Great Atlantic…the stock is currently trading at just 10.5 cents for a very modest market cap of just over $4 million…what’s interesting about John’s 2.5-year weekly GR chart below is the very noticeable increase in buying pressure (accumulation) since June…this is a very positive omen…the stock has been trading in a horizontal channel between 9 and 15 cents since February, and we see a good chance of a breakout above that channel during the fourth quarter…

Tinka Resources (TK, TSX-V)

A little plug on BNN can sometimes do wonders for a company’s stock price, and that’s what happened with Tinka Resources (TK, TSX-V) yesterday which created some talk on the floor of the Cambridge Show…Tinka is a promising Silver play in Peru, and we believe it’s worthy of our readers’ due diligence though we wouldn’t recommend chasing any stock after it has just been recommended on BNN..nonetheless, Tinka has progressed well this year and has the potential to become a big winner in 2013…below is a 2.5-year weekly chart from John…keep in mind that at the moment, TK is at resistance…whether it has enough energy right now to break out is very questionable given current overbought technical conditions…if it does, it’ll likely fall back to test the current resistance area which will become new support…this is definitely one to keep on the radar screen…we’d prefer to wait for a slight to moderate pullback before jumping in…check out the 18-month ascending triangle…

Aurcana Resources (AUN, TSX-V) Update

Aurcana Resources (AUN, TSX-V) has done well recently as expected…like Tinka, however, AUN is currently up against resistance and could retreat temporarily to cleanse an overbought technical condition…below is John’s updated AUN chart…

Notes: Both John and Jon hold share positions in Rainbow Resources (RBW, TSX-V) with Jon increasing his position this week.

Toronto – Cambridge Resource Show, 7:15 am eastern

Greetings from The Centre Of The Universe, otherwise known as Toronto, where today marks the opening of the two-day Cambridge Resource Show…this will be a shortened version of Morning Musings due to travel and a busy schedule today as we check out some of the many companies that are exhibiting and hear what some outstanding speakers have to say about the state of the current markets – just how bullish (or bearish?) will some of them be?…

The Vancouver Resource Show in June was full of so much doom and gloom it almost made one sick…and you know what, that was the best time ever to be investing in Gold and Silver and the junior resource market…one of the few analysts who was actually bullish on the markets last June was Jeb Handwerger (www.goldstocktrades.com), a highly respected Florida newsletter writer who has become familiar to us and Rainbow Resources‘ (RBW, TSX-V) followers for his recent RBW recommendation…Handwerger will be speaking again at this Cambridge Show and we’re looking forward to hearing what he has to say, and we also wouldn’t be surprised if he were to give Rainbow a strong mention (by the way, Rainbow is holding a reception for brokers/investors this evening, an event we don’t think they’d be staging unless there was some good news coming down the pipe very soon – speculation)…

Now below is a chart we’d love to show everyone who’s walking through the doors of the Sheraton today and tomorrow because this is the most important thing they need to know – the awful state of the U.S. Dollar Index…folks, if there’s anything that confirms the direction the Venture Exchange is going (up, up and away), it’s the U.S. Dollar Index…the Venture has a strong inverse relationship with the greenback and has recently broken out relative to the Dollar Index…that’s a huge development from a technical standpoint as it breaks a trend that has been in place for well over a year…the Dollar Index is in for a rough October, as John points out, as it approaches a downtrend line and resistance from three moving averages…what this chart tells us is that Gold and Silver are both going a LOT higher, QE Infinity may even be put on steroids, Obama will win re-election, and the Americans once again will punt the debt can down the road a little further…

Any rallies by the Dollar Index, like we’ve seen in recent sessions, will be viewed as shorting opportunities by astute traders…as of 7:15 am eastern, the Dollar Index is off slightly at 79.78 after briefly touching the 80 level overnight…resistance, resistance, resistance – that’s what the Dollar Index is facing right now, and that’s music to the ears of Gold and Silver bugs and junior resource investors in general…

Okay, with that out of the way, let’s take a look at the TSX Gold Index which staged an interesting reversal yesterday (as did the Venture once it nearly hit its 20-day moving average)…the outlook for the Gold Index is very positive for the fourth quarter as it has superb support near current levels (it closed at 341 yesterday) and should really start to fly once it breaks through the resistance band between 352 and 360…the 100-day SMA recently reversed to the upside after a decline that started late last year…the Gold Index has been consolidating in recent sessions, and that could continue for a little while longer, but we’re expecting the next leg of the uptrend to kick in shortly (sometime in October)…

Today’s Markets

Gold fell as low as $1,735 on profit-taking yesterday before finding support, as expected, and rebounding…as of 7:15 am eastern, the yellow metal is up $2 an ounce at $1,755…Silver is flat at $34.00…Copper is up a penny at $3.71 while Crude Oil has gained 83 cents to $93.81…

Asian markets were up strongly overnight with China’s Shanghai Composite Index leading the way with a powerful 52-point jump (2.6%) to 2056…sentiment was supported by comments from the Chinese central bank that it would inject 180 billion yuan into the money market, its largest weekly injection since Reuters records began in 2006…European markets are higher this morning, ahead of the much-anticipated Spanish budget, while stock index futures in New York as of 7:15 am eastern are pointing toward a positive open on Wall Street…

Smart investors weren’t pushing the panic button yesterday – they were picking up bargains – when the Venture Exchange wobbled for the third day in a row as part of a very normal and healthy mini-pullback…the Index fell as low as 1294 and then rallied to finish at 1307…

RJK Explorations (RJX.A, TSX-V)

We’re very bullish on the Blackwater Gold-Silver district in central British Columbia going into the fourth quarter, and one of the juniors to keep a close eye on is RJK Explorations (RJK, TSX-V) which recently started a follow-up drill program at its Blackwater Northeast Property where it made an interesting high-grade Silver discovery last spring…John’s 3-year weekly chart below shows RJK has found strong support and appears to be in the early stages of a new uptrend…what’s particularly revealing is that the MACD has crossed above a signal line and is very well positioned to support a strong move up…RJK closed off half a penny at 15.5 cents yesterday…

Chart note: Both Jon and John hold share positions in RJX.A (Terry does not).

Gold traded in a positive though tight range overnight but suddenly broke lower as traders decided this would be a “risk-off” day as euro zone concerns flared up…as of 6:00 am Pacific, the yellow metal is down $15 an ounce at $1,745 after dropping as low as $1,738, just $8 above an important support level…Silver is 13 cents lower at $33.61…Copper is off a nickel to $3.71…Crude Oil is $1.22 lower at $90.15 while the U.S. Dollar Index has rallied nearly one-quarter of a point to 79.90…

South African Strikes Curtail Gold Production

Strikes at South African Gold mines have shut about 39% of capacity as unofficial walkouts spread across the country in demand of above-inflation pay increases…AngloGold, the world’s third-largest gold producer, today said all of its South African mines have been halted…Gold Fields Ltd. also lost a metric ton, or about 32,000 ounces, of production after strikes at its KDC and Beatrix operations…

Central Banks Continue To Add To Gold Holdings

Data from the International Monetary Fund yesterday showed South Korea raised its holdings of Gold by nearly 16 tonnes in July, along with Paraguay, which raised its reserves in July from a few thousand ounces to more than 8 tonnes, continuing the trend among central banks to hold more bullion…according to the IMF’s international finance statistics report, South Korea added 16 tonnes of Gold to bring its holdings to 70.4 in July, meaning it has doubled its bullion reserves in the space of a year after being one of the largest purchasers of Gold in 2011…Paraguay raised its holdings by 7.5 tonnes to 8.2 tonnes two months ago…so far this year, central banks have added a net 262 tonnes to their reserves, compared with 203.39 tonnes in the first eight months of 2011…Turkey has added the most to its holdings, having raised its reserves by 100.2 tonnes in the first eight months of the year, followed by Russia, which has added 53.8 tonnes…private investors have also added to their holdings of Gold through exchange-traded funds backed by physical metal, which now hold a record 74.06 million ounces…”We still prefer to be buying Gold on dips and believe the break higher will eventually come,” stated Standard Bank analyst Walter de Wet in a research note…”But the futures market needs to lose some speculative length and the physical market needs to adjust to a higher price-range first”…

Behind The Scenes In The Gold Market

A bullion insider claims JP Morgan is accumulating huge volumes of physical Gold and Silver despite short positions against the precious metals on paper…according to Silver Doctors (www.SilverDoctors.com), renowned analyst Ted Butler alleges JP Morgan’s major reported short positions in Gold are held on behalf of a key government client – either the Federal Reserve or the Chinese, and that the storied financial institution is actually long on Gold and Silver bullion…metals investment guru Jim Sinclair further asserts that the bank’s short positions on paper for the precious metals would serve to facilitate their own furtive accumulation of bullion by dragging down prices…Silver Doctors substantiates these speculations by citing an industry insider who claims to have overseen the movement of 27 million ounces of Gold from HSBC vaults into JP Morgan’s possession…according to the confidential source, JP Morgan’s paper short position is a hedged trade offsetting the bank’s amassing of vast amounts of Gold and Silver billion in its own private vaults…

Today’s Markets

Asian markets were weaker overnight with the Nikkei losing 2% while China’s Shanghai Index fell to its lowest level in more than 43 months…the Index briefly traded below 2000 but managed to close above it in the final minutes of trading to finish at 2004…investors continue to fret about the health of the world’s second largest economy…it’s hoped that China’s leadership transition in mid-October will be the catalyst to get both the market and the economy moving in the right direction…European markets are off between 1 and 2% on continuing uncertainty over the euro zone debt crisis, with investors concerned over Spain’s reluctance to ask for a full sovereign bailout and 10-year treasury bond yields also hitting the 6% mark for the first time in a week…Spain unveils its 2013 budget and fresh austerity measures tomorrow amid growing protests…stock index futures as of 5:45 am Pacific are pointing toward a flat or slightly negative open on Wall Street after the S&P 500 suffered its worst day of the quarter yesterday…

Philadelphia Fed Bank President Slams QE3

The Federal Reserve may have to raise short-term interest rates “well before” the current guidance of mid-2015, Charles Plosser, president of the Philadelphia Fed Bank, said yesterday in remarks that spooked some traders…Plosser, a so-called hawk who is concerned about inflation, presented a sharp critique of the central bank’s decision earlier this month to launch a third round of asset purchases…he said that further easing wasn’t appropriate nor likely to be effective…In addition, the actions present “significant risks” to the Fed’s inflation fighting credibility…Plosser was relatively optimistic about the economy, forecasting 3% growth in 2013 and 2014…

Venture Exchange

In last Saturday’s Week-In-Review, we warned about the increasing likelihood of an immediate minor pullback in the Venture Exchange due to short-term overbought technical conditions brought on by a 15% advance in just two months…understanding and managing volatility is one of the biggest challenges investors face which is why technical analysis is so important – it takes the emotion out of equation, and gives you an all-important road map…over the last two days, the Venture has fallen 33 points and hopefully this hasn’t unnerved any of our readers because it’s a very normal, healthy drop – and one that we warned was likely on the way…it takes nerves of steel to buy into weakness but that’s when the big money is made…

Against a backdrop of unprecedented easing measures by the Fed, combined with other central bank action around the globe, the Venture is well positioned in our view to enjoy its best quarter of the year in Q4 and finish the year in positive territory…that’s the big picture…what has us particularly excited is an imminent reversal of the 1,000-day moving average (SMA) to the upside, ending a four-year decline…this is an event that cannot be ignored…there is something going on that will lead to a powerful surge in junior exploration stocks in the months ahead – that surge is still in its very early stages…the Fed seems determined to ignite a “wealth effect”, devalue the dollar, lower unemployment and encourage at least a little inflation…of course that’s all hugely positive for Gold and Silver…this is also the kind of environment within which the Venture performs best, and the numbers back that up when one looks at how the Index has performed during previous “QE” programs…

If we’re right, and we’re convinced we are, then these occasional pullbacks in the Venture (mostly to the 10-and-20 day moving averages) are great opportunities to make money – just like they were during other historical uptrends…below is an updated chart from John that shows how the Venture simply just ran out of steam, temporarily, in its recent effort to push through the 1350-1365 resistance band…the overbought technical condition needs to be cleansed first and that process accelerated yesterday…this appears very similar to the August retracement that took the Index down to its 20-day SMA (currently just below 1290)…there is also strong support not far below that including the rising 50-day SMA…so this is not a time to be pushing the panic (sell) button…it’s time to be thoughtfully examining opportunities, just like you would after spotting some major sale signs in a mall…

Cascadero Copper Corp. (CCD, TSX-V)

One of many reasons we’re bullish on the Venture right now is the fact that so many individual stocks that have been languishing for months are starting to come to life…a great example is Cascadero Copper (CCD, TSX-V) which has seen a major increase in volume over the last few sessions…the company also impressively just finished raising $2.43 million, so some investors definitely want a piece of this action…we’ve mentioned CCD before…it has a tremendous portfolio of properties in Argentina where fears of resource nationalism have dissipated lately (Lumina Copper Corp., LCC, TSX-V, has been on fire in recent sessions)…Cascadero has two properties adjoining Lumina’s 1.8 billion tonne Taca Taca Cu-Mo-Au deposit – Francisco 2, where Lumina has drilled some nice intercepts within shouting distance of the boundary with Cascadero (Francisco 2 could be an extension), and Sarita Este where Cascadero in mid-August reported some high-grade Gold assays (up to 162.6 g/t Au) from geochemical sampling…CCD has a lot going on in Argentina, and the fact they’re reporting good results right next to Taca Taca is encouraging to say the least…looking out over the next few months, CCD has an opportunity to bust loose given the geological potential of its properties but investor patience is required…

GoldQuest Mining (GQC, TSX-V)

GoldQuest took a major hit yesterday for the first time since the company started reporting results from its Romero discovery in the Dominican Republic…the stock fell 60 cents to $1.23, crashing through its 50-day moving average (SMA) which it has consistently traded above over the last four months…results from three holes from the northern part of the IP anomaly at Romero fell short of market expectations (100 m @ 2.64 g/t Au and 0.33% Cu; 146.5 m @ 0.42 g/t Au and 0.74% Cu; and 110 m @ 0.59 g/t Au and 0.24% Cu)…current drilling is focused on the central and southeastern portions of the anomaly and the potential at depth, and this is where better results can be expected…mineralization continues to expand in all directions, and yesterday didn’t change the fact that Romero is still a world class discovery…assays are pending for five more holes while three are in progress…GoldQuest is no stranger to volatility and our hunch is that it will turn around sharply again at some point in October, but perhaps not before reaching oversold conditions which will open up some great opportunities…investors shouldn’t forget about Gold Standard Ventures (GSV, TSX-V) which plunged to $1.15 in mid-August on disappointing results from its Railroad Project in Nevada, and then proceeded to double to $2.40 in just over a month thanks to better results that came out September 18…

Below is an updated GoldQuest chart (6-month weekly) from John showing key support levels at $1.17 (the weekly EMA-20), $1.05 (Fib. 50% retracement level and the 100-day SMA), and 81 cents (Fib. 61.8% retracement level)…

Everton Resources (EVR, TSX-V)

The drop in GoldQuest yesterday brought some weakness into the other Dominican plays, though Everton Resources (EVR, TSX-V) closed unchanged at 10 cents…EVR, which just recently raised $1.6 million, has strong support around current levels including a rising 200-day SMA at 8.5 cents, half a penny above the financing price…the fourth quarter should be an active one for Everton which has some options to advance its promising DR land package…below is a 2.5-year weekly chart…

Note:  Jon holds share positions in EVR and GQC.

Gold is firming up after trading in a tight range overnight…as of 6:25 am Pacific, the yellow metal is up $8 an ounce at $1,773…it has been as high as $1,777 and as low as $1,760…Silver is 29 cents higher at $34.26…Copper has gained 2 pennies to $3.73…Crude Oil is up 82 cents at $92.75 while the U.S. Dollar Index is down slightly at 79.44…

Remarks from UBS on Gold:  “What’s been quite evident over the past week is that buyers are very eager to step in on dips such that any move lower has been short-lived…there is a risk that no such better buying opportunity will present itself, as we saw after QE1 when Gold simply proceeded to make higher highs and higher lows”…

Indian Monsoon Season Not As Bad As First Feared – Good For Gold

There has been a noticeable pick-up in Gold demand in India recently, thanks to a declining U.S. dollar and a monsoon season that has turned out to be not as bad as first feared…since rural farmers account for 70% of that country’s Gold purchases, a successful monsoon season there has important implications for the Gold market…in fact, according to the Ministry of Agriculture today, Indian farmers are expected to produce 117.8 million tonnes of food grains in this current season, higher than expectations…the Ministry said the first advance estimates of production of kharif crops (rainy season) are actually higher than the average of the first advance estimates of the last five years of 113 million tonnes…

Meanwhile, India’s monsoon rains have begun easing from the western desert state of Rajasthan but should continue in the northeast until the end of the month and give a lift to summer-sown crops there, weather office sources said today…”The monsoon withdrawal has started,” one of the sources at the India Meteorological Department (IMD) told Reuters…the monsoon rains are so far 6% below average and the uneven distribution has already led to drought in pulse and cereal growing areas of western and south states, reducing planting…but late rains in other areas have improved prospects for summer-sown crops…”We expect this year’s monsoon season to end with around 7-8% below normal rainfall,” one source said…it is considered a drought if the figure is 10% below the long-term average…in the northeast, floods and landslides triggered by relentless rain have killed at least 33 people and displaced more than a million over the past week…India depends on the annual monsoon to irrigate more than half of its farmland…

Silver Assets In ETP’s Near Record

Silver assets in exchange-traded products are poised to expand to a record, joining the biggest- ever hoards of Gold and platinum, as increased stimulus from the world’s central banks spurs investors to accumulate precious metals…the amount held in ETP’s was 18,525.76 metric tons as of yesterday, just 0.6% below the peak of 18,639.07 tons in April, 2011, according to data compiled by Bloomberg…Silver, which also benefits from bets on economic recovery, has risen 22% this year, outperforming Gold, platinum and palladium futures…Silver “runs very hard and fast and it usually goes too far in whatever direction it’s going,” said Nick Trevethan, senior commodities strategist at Australia & New Zealand Banking Group Ltd., who predicts record ETP holdings…“Silver will track Gold, but for people to get really excited about Silver, we’ll need to see strong industrial demand as well”…

Great Panther Silver (GPR, TSX) Chart Update

One of our favorite Silver producers is Great Panther Silver (GPR, TSX) which has a very interesting chart at the moment…you’ll notice below, in John’s 2.5-year weekly, how GPR recently broke above a downsloping flag in place for over a year…the top of the flag is now support, and what typically happens in situations like this is that this new support is quickly tested…GPR, which shot as high as $2.40 last week, fell 15 cents yesterday to $2.19…a decline back down to the $2 area would put GPR in the “sweet spot” at the top of the flag…this is not shown on the chart, but it’s interesting to note that GPR‘s rising 1,000-day moving average, currently around $1.60, provided stellar support this year…GPR could be one of those Silver stocks that absolutely explodes during the fourth quarter, assuming Silver does what we believe it will do…

Will QE3 Turn Into A Juiced-Up QE4?

Wouldn’t the Gold market love this…Morgan Stanley chief equity strategist Adam Parker believes the Fed will actually soon will find its new program inadequate…”QE3 will likely be insufficient to significantly boost equity markets and we wouldn’t be at all surprised to see the Fed dramatically augment this program (i.e., QE4) before year-end,” Parker said in a research note, according to a CNBC article by Jeff Cox…Parker said the probability that the Fed will need to juice up the program will increase “particularly if economic and corporate news continue to deteriorate as they have over the past few weeks”…as it stands, the latest round of easing will see the Fed create money that will allow it to buy $40 billion of mortgage-backed securities each month…following the conclusion of its September meeting two weeks ago, the Fed said that rather than target a specific amount of purchases – the “quantitative” part of QE – it instead will keep buying until the unemployment rate hits an acceptable though unspecified level…but Parker said that total will achieve only incremental help in the Fed’s quest to spike asset prices, particularly in the stock market, and help out the housing recovery, which it hopes will generate a “wealth effect” that will lead to more hiring…

Obama Now Leads Romney In Who Can Better Fix Economy

In a scary statistic, a national CNBC poll finds President Barack Obama holds a commanding lead over Mitt Romney on the key issue of who would be better for the economy over the next four years…Obama gets that nod even though Americans, by overwhelming margins, believe the economy is worse now than it was four years ago when Obama’s term began…the latest CNBC All-America Economic Survey of 800 adults across the nation shows Obama with a 9-point lead over Romney, 43% to 34%, on who would do a better job on the economy in the future…that’s a huge shift from the June survey when Romney held a 39% to 33% edge, and reflects the recent damage to the Romney brand from an incompetent campaign…the former Massachusetts governor, in our view, has the right ideas on how to revive the American economy but has been astonishingly unable to articulate that vision and rally the nation in the process…a Ronald Reagan he is not…the danger for the Republicans is that Romney’s campaign will cause collateral damage for the GOP, setting up the possibility of the Democrats regaining control of the House…the scenario of another four years of Obama, combined with Democratic control of Congress (the House and the Senate) for at least the next two years, would be hugely bullish for Gold as markets would assume the U.S. debt problem won’t be effectively addressed anytime soon…real change won’t come to Washington until at least 2014, perhaps only after another financial crisis…

General Electric Aims To Double The Size of Its Mining Business

GE executive Lorenzo Simonelli told the Wall Stree Journal Monday that the company wants to more than double the size of its new mining business to $5 billion in revenue by 2016…”measured acquisitions” would be a part of that, Simonelli said, but he cautioned not to expect anything huge or “all at once”…expansion into the mining sector would be part of a larger bet by GE on energy and resource-rich countries…the conglomerate expects them to spend heavily on its drilling and mining equipment, as well as on the medical machines and power generators it sells…the strategy will mirror the approach the company used to build up its oil and gas business…five years ago, GE’s oil and gas presence was inconsequential…but after spending $11 billion over the last five years acquiring companies, oil and gas is now a stand-alone business on track to make $14 billion of revenue this year…

Today’s Markets

Asian markets were quiet overnight with China’s Shanghai Composite declining 4 points to 2029…European shares are relatively unchanged while stock index futures in New York as of 6:15 am Pacific are pointing toward a slightly positive open on Wall Street…the Conference Board will release its consumer confidence index 30 minutes into trading at 7:00 am Pacific…analysts polled by Briefing.com forecast a jump to 63 in September, from 60.6 in August…

The Venture Exchange softened yesterday, not surprisingly, as temporarily short-term overbought technical conditions set in last week…the Index fell 12 points, closing at 1333 – about 10 points above the 10-day SMA…the 20-day SMA is currently just under 1290…we expect any further weakness in the Venture to be short-lived and limited given those supporting moving averages and the bullish primary trend…the advantage of this minor pullback is that it will cleanse the overbought conditions enough in order to allow the Index to push through the next resistance band between 1350 and 1365 as John outlined in his chart Saturday…

Canadian Dollar = Commodities, Venture Strength

We’ve found it very useful in recent months to closely track the Canadian dollar, the strength of which has consistently shown the commodities skeptics to be dead-wrong…the loonie is on a roll, and there’s really no end in sight to this based on John’s updated 21-month weekly chart below…for now the loonie is taking a bit of a breather, which is very healthy from a technical perspective, and it’s sure to find strong support between $1.01 and $1.015…the Canadian dollar has a high correlation to the CRB, and the Venture performs best when the dollar is strong, so this is one major reason we’re so bullish on the markets over the next several months at least…

GoldQuest Mining (GQC, TSX-V) Update

GoldQuest Mining (GQC, TSX-V) has just released assay results from three more holes at Romero, and these are the weakest numbers GQC has announced so far from this important discovery in the Dominican Republic…hole LTP-100 – the deepest mineralization to date – returned 122.7 metres grading 2.64 g/t Au and 0.33% Cu…a 72-metre interval in LTP-99 graded 0.51 g/t Au and 1.31% Cu while hole LTP-98 returned 146.5 metres of 0.42 g/t Au and 0.74% Cu…Romero is still a major discovery but these latest results won’t meet the market’s expectations…

Orko Silver (OK, TSX-V)

Below is an update on Orko Silver (OK, TSX-V) which encountered resistance at $2 as John predicted in his most recent OK chart…it then corrected 20% to the top of the cup support…in a runaway Silver market, OK should be a star performer…

Comstock Metals (CSL, TSX-V)

The waiting game is on for assays from Comstock Metals (CSL, TSX-V) which announced yesterday that it has just completed 1,300 metres of drilling (8 holes) at its very promising QV Project in the White Gold District of the Yukon…as reported by CSL, early indications are positive as drilling intersected thick zones of quartz-sericite-carbonate-altered quartz-biotite gneiss, feldspar augen gneiss, and feldspar porphyry dikes with stockworked quartz veining, breccias, disseminated and vein controlled pyrite, and locally, visible Gold…the alteration and mineralization appear to be hosted along a northeast-trending fault zone, with a shallow 30 degrees dip to the northwest, and overlay intensely potassic and iron-altered footwall units…the zone is open along strike and at depth, and the geology and style of mineralization are similar to that of Kinross’s Golden Saddle deposit located 10 kilometres from Comstock’s discovery…CSL fell another 7 cents yesterday to 46 cents…John’s updated chart shows a strong support band between 43 and 46 cents, with secondary support at 36 cents…

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

Gold is under some profit-taking pressure this morning…as of 6:00 am Pacific, bullion is down $12 an ounce at $1,761…Silver is off 71 cents at $33.81…Copper is 6 cents lower at $3.70…Crude Oil is down $1.34 a barrel to $91.55 while the U.S. Dollar Index has rallied one-quarter of a point to 79.71…

As mentioned in Saturday’s Week in Review And A Look Ahead, Gold and Silver are both technically overbought at the moment…therefore each is vulnerable to a minor correction…Gold has excellent support at $1,730 while a major support area for Silver, as John shows in his chart this morning (see further below), is $32.50…the primary trend for both is up, so astute traders and investors will take advantage of any immediate or near-term weakness and build positions for potential huge upside moves during the fourth quarter…

Fed’s Monetary Monster Creating Inflation Risks – Physical Gold Ownership Becoming More Attractive To Certain Investors

More high-net-worth individuals are seeking to buy Gold to protect their wealth from the risk of rising inflation after central banks boosted stimulus, according to Deutsche Bank’s asset and wealth-management unit…”Gold has historically been considered to be a store of value and an inflation hedge and increasingly it is being utilized as a monetary instrument,” said Mark Smallwood, head of Asia-Pacific wealth management solutions…”There is a growing interest among our clients to gain exposure,” he added, with an increased preference for physical holdings…”For our ultra-high-net-worth clients, and a growing number of our high-net-worth clients who have significant liquidity, they are becoming increasingly concerned to have at least some of their exposure to this asset class in the form of allocated physical bullion itself, rather than the indirect exposure that an over-the-counter product offers,” he said…

Deutsche Bank clients can store Gold in Malca-Amit Global’s vault at the Singapore FreePort, Smallwood said…Malca Amit, which holds assets for banks and individuals, is doubling its space in Singapore, the company said in February…”With the movements by the central banks globally in the last few weeks, there is considerable investor concern as to the long-term effects of the liquidity infusions,” Smallwood stated…”As a result of that, private clients are concerned about the possible future effects of inflation and the means of hedging that risk”…

More Views On Gold

Michaer Purves, Chief Global Strategist for Weeden & Co., commented on CNBC Friday:

“One key message I’d like to get out there is simply that we’ve seen a lot of money being made over the last several weeks, but I think we have to step back and realize that this is really breaking out of a consolidation and a really important move to the upside across the precious-metals complex…don’t be so fast to take profits here…right now, we have American, European and Japanese helicopters increasingly showering the world with money and therefore debasing reserve currencies…Gold is still under-owned by a wide spectrum of investors and owners…it’s important to point out that the bullish sentiment on Gold and Silver is still very low compared to where it was in 2010, 2011…the spec interest is still low as well…Gold’s been off everyone’s radar for a long time because it went through a very messy consolidation…I think that’s at an end, and I think we’re going to start seeing continued movement to the upside”…

Gold bug Jim Rickards (jimrickards.blogspot.ca):

Is the Fed trying to ramp up inflation to as much as 5% per year in an effort to tackle the debt problem?…that’s the type of solution the Fed is crafting, according to Rickards – a plan of targeting inflation at 5% for 14 years to cut the value of the greenback in half in real terms…”China owns $3 trillion of our debt and this would effectively be a $1.5 trillion real wealth transfer from China to the United States…this is the easiest solution to our debt problem and is the most likely choice policy makers will take”…

Silver – Short-term & Long-term Chart Updates

As regular BMR readers know, we are incredibly bullish on the long-term outlook for Silver…in fact, on July 23, we posted one of our most important articles of the year – “Silver’s Strength And Investors’ Historic Opportunity” when the metal was languishing at $27 an ounce but showing signs of getting ready to push higher…since then, Silver has climbed 30%…while it’s currently overbought on a short-term basis, and due for a minor pullback, we ultimately see Silver exploding to nearly $80 an ounce…

Silver has become the “Poor Man’s Gold” and the growth in investment demand over the last few years has been incredible…this will continue, especially in Asian markets…but Silver of course is also an industrial metal and we’re now entering a new era of technological change which is creating new sources of demand for Silver…photographic usage has dived dramatically with the onset of digital photography, but Silver’s unique properties are being increasingly used in the electronics and medical fields in particular and this is expected to contribute to a substantial boost in industrial consumption going forward…meanwhile, Silver supply comes mostly from Peru and Mexico where it’s getting more difficult in some areas of those countries to extract the metal due to violence (mining law reforms are also a concern)…”jurisdictional” risk exists in other Silver-producing areas around the world as well…

Below is a 9-month daily chart from John that shows a correction to at least the EMA-20, currently at $33, makes sense…

Long-term, Silver is in the early stages of a powerful “Wave 5” move that has a Fibonacci target (no precise timeline yet) of $78 an ounce…in the 15-year monthly chart below, you’ll notice that the RSI(2) has gone from historically oversold conditions over the summer to overbought levels now…however, on the monthly chart, it’s likely to remain in overbought territory for an extended period as was the case during much of the 2009-2011 advance…

What’s Happening With Crude Oil?

Crude Oil rebounded slightly at the end of last week after suffering through a 3-day rout that knocked it down by 7%…rising U.S. inventories and Saudi efforts to tame prices contributed to the slide…the decline followed weeks of concern about the impact of higher Oil and fuel costs on the struggling U.S. economy, which had prompted expectations the White House could tap emergency reserves to cool off prices (Obama will not hesitate to use the SPR for political purposes but he may not need to as he’s getting so much help right now from an incompetent Mitt Romney campaign)…

John’s latest WTIC chart (6-month daily) shows a breakdown in an upsloping channel that had been in place for a couple of months, perhaps an early warning that we could see some temporary weakness in the Gold price as there’s a close relationship between the two commodities…RSI(14) seems to have found support, as indicated in John’s chart, so the minor correction possibly may have already run its course or the downside from current levels is at least very limited…since Crude Oil prices make up such a large component of Gold producers’ cost structures, some minor weakness in Oil (or at least no surge through the $100 barrier) is actually helpful to many Gold stocks…having said that, Oil in the high $80’s at a minimum seems to be a magic number that keeps producers and investors happy…continued trading in the $88 – $100 range, like we’ve seen since early July, is probably ideal…the risk to the global economy at this moment is significant if Oil were to surge through $100 a barrel which is why there is probably a concerted effort behind the scenes, especially after the launch of QE3, to prevent that from happening…WTIC has very strong technical support between $88 and $92 per barrel…

Today’s Markets

Asian markets were mixed overnight with China’s Shanghai Index, coming off its worst week in 11 months, falling to a intra-day low of 2005 before rebounding to finish at 2033…European shares are moderately lower this morning while stock index futures in New York as of 6:00 am Pacific are pointing toward a negative opening on Wall Street but nothing severe…

The Venture Exchange has climbed for 6 out of 7 weeks and closed Friday at 1346…the Venture is facing a resistance band between 1350 and 1365 and may need to test its supporting 10 and 20-day moving averages first prior to overcoming that, given temporarily overbought technical conditions…any minor pullback may open up some attractive opportunities in certain issues, some of which we detail below…

First, John has an interesting technical update from two different perspectives on Rainbow Resources (RBW, TSX-V) which formed a bullish hammer reversal pattern last week (requires confirmation) and appears to be gearing up for another challenge of the 25-cent resistance area…October should be a very interesting month for RBW, especially with the launch of two more drill programs and results expected from the International…

John’s first chart, a 22-month weekly chart, shows a bullish hammer reversal candle last week almost identical to the one in June (blue circles)…accumulation is still very strong, and RSI(14) at 54% has plenty of room to support a move up after bouncing off the 50 level…the stock has rising 50, 100, 200 and 300-day moving averages which confirms the primary trend remains up…

Below is a very different chart that, pardon the pun, shows a Rainbow “above the cloud” – RBW’s bullish position from a different perspective…instead of his usual indicators, John has used the ICHIMOKU CLOUD and Dr. Elder’s IMPULSE SYSTEM…the cloud indicates the trend is up when prices are above the cloud (green)…the chart shows the candle breaking and closing above the green cloud on Friday, indicating RBW’s trend is up…the Impulse System uses the daily EMA-13 (Inertia) and the MACD (12,26,9) Histogram (momentum) to determine entry and exit levels…first, the system requires the trend to be up…this was verified by the cloud…the entry level signal is given when both the momentum and inertia indicators move up together…on the chart we see the MACD Histogram has been moving up since Sept. 19 and the EMA-13 turned up on Friday…together with the trend being up, this shows RBW to be in a bullish position…

RJK Explorations (RJX.A, TSX-V)

RJK announced last Thursday that it has commenced drilling at its Blackwater Northeast Property where it made an interesting Silver discovery last spring, a 3.3-metre super high-grade section grading 79 ounces per ton (2,710 g/t)…this claim group This claim group is contiguous to the east of New Gold Inc.’s (NGD, TSX) Blackwater bulk-tonnage Gold deposit currently shown at 9.6 million ounces of Gold (indicated and inferred) and 58.4 million ounces of Silver (indicated and inferred)…the drill program will consist of a series of angled holes from the discovery hole to test the contact between the felsic volcanics and the sediments…detailed ground magnetic surveying, drill hole interpretation and MMI soils suggest a potential system that strikes northwesterly and is steeply to vertically dipping…

Following Blackwater Northeast, RJK will be drilling its Blackwater West Property where the company has learned there is a significant volume of potential sulphide mineralization, particularly on the southern portion of the property, after a recently completed 18.5-km IP survey and MMI soil sampling…a 350-metre-wide-north-south-by-600-metre-long open-ended anomaly has been outlined on the southern portion which could be an extension of the mineralization located on the 3T’s Property (Independence Gold, IGO, TSX-V) just 3 kilometres to the south…

We are bullish on the entire Blackwater area, and one only has to review New Gold’s Preliminary Economic Assessment last week to understand why…numerous juniors are operating in the area, and two in particular we like are RJK and Parlane Resource Corp. (PPP, TSX-V)…

Another situation worth our readers’ due diligence is Troymet Exploration (TYE, TSX-V) which has resumed exploration at its Key Gold Project (drilling will commence in October)…below is a 2.5-year weekly chart from John after TYE closed Friday at a nickel…

Corvus Gold Inc. (KOR, TSX) and Aurcana Corp. (AUN, TSX-V)

John has two additional charts this morning – Corvus Gold (KOR, TSX), which has been one of our favorites this year due to its strong chart and exploration success in Nevada, and Aurcana Corp. (AUN., TSX) which offers investors great leverage on rising Silver prices (and it too has very favorable technicals)…KOR jumped 22 cents Friday and is up in four of the last five trading sessions, so a minor pullback could be in order…new support is $1.10 to $1.16…

Corvus Gold (KOR, TSX)

Aurcana Corp. (AUN, TSX-V)

Note: John and Jon both hold share positions in RBW and RJX.A.  Jon also holds a share position in PPP.

TSX Venture Exchange and Gold & Silver

The Venture Exchange posted its 6th weekly advance out of 7, climbing another 28 points as it closed Friday at 1346.  Given the current Perfect Storm environment (no end in sight to QE3 and a weak U.S. Dollar), a powerful uptrend is firmly in place that should allow the Index to get back into positive territory for the year during the fourth quarter.  However, minor pullbacks will occur along the way to test the supporting 10 and 20-day moving averages.

Investor patience with this new bullish cycle is critical.  Just like in early 2009, and again at certain periods in 2010, there are still many nervous nellies roaming around who don’t get the big picture of what’s unfolding.  So as soon as the market has a couple of bad days, which is guaranteed to happen but is both normal and healthy, these folks will quickly lose faith in the uptrend and will sell to lock in minor profits.  Seasoned investors who can visualize where things are headed will jump in at important support levels and will ultimately ride the wave and make bucket loads of money.

Below is an updated 6-month CDNX chart from John that shows temporarily overbought conditions, increasing the likelihood of a minor pullback over the next 5-10 trading sessions.  The Index is facing a resistance band between 1350 and 1365 with supporting 10 and 20-day moving averages currently at 1312 and 1278, respectively.  A move down to one or both of these SMA’s would be a healthy development that would lay the groundwork for the next surge.  Meanwhile, the 1,000-day SMA has flattened out at 1500 and is getting ready to head north during the 4th quarter – that’s a hugely significant technical event and has us convinced that we’re about to see a bull market move that could surprise even the most optimistic investors.

For the past couple of months the Venture has out-performed the major equity markets which underscores the point that we’re now in a new risk-on environment that’s likely to last for a while given the unlimited duration of QE3 and the grim outlook for the greenback.  The Venture has broken out relative to the U.S. Dollar, ending a downtrend that started well over a year ago, and that means we can have a high level of confidence that the primary trend with the Venture has reversed to the upside (the Venture and the greenback have a strong inverse relationship).  Volume, importantly, is picking up in this market and should continue to gradually increase during the fourth quarter.  A lot of cash is still sitting on the sidelines.

Gold

While the big picture outlook for Gold is incredibly bullish, against a backdrop of monetary easing by the Fed, the ECB and most recently the Bank of Japan, bullion is approaching resistance at $1,800 at a time when it is also clearly technically overbought on a short-term basis.  So we view the likelihood of a minor pullback in the immediate future to be greater than a breakout through $1,800, though we do expect Gold to easily blast through $1,800 during Q4.    Gold is up 12% since mid-August and hit a 6-month high Friday at $1,790.  For the week, the yellow metal was up $2 an ounce at $1,773.  Below is an updated 6-month daily chart from John.  The $1,730 level can be expected to provide strong support.

Silver was down 16 cents for the week at $34.52.  Copper fell 4 pennies to $3.76.  Crude Oil tumbled $6 a barrel on supply concerns while the U.S. Dollar Index rallied half a point to 79.39, a “dead-cat” bounce that has quite limited remaining upside potential.

John will update his long-term Silver chart, with a Fibonacci target level of $78, on Monday morning.

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.  QE3 has arrived, and massive central bank intervention is now taking place 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.