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Gold is edging closer to resistance at $1,800…as of 6:50 am Pacific, the yellow metal is up $14 an ounce at $1,783…Silver was off slightly earlier this morning but is now up 40 cents to $35.04…Copper is up 4 pennies at $3.77…Crude Oil is 82 cents higher at $93.24 while the U.S. Dollar Index is down one-fifth of a point at 79.22…

A “Golden Cross” has formed on the Gold chart which gives bullion investors even more reason for optimism…Gold’s 50-day moving average (SMA) has now moved slightly above its 200-day SMA, indicating bullion’s intermediate and longer-term momentum is becoming increasingly bullish…in John’s daily chart below, going back to April, you’ll also note that Gold is clearly in overbought territory on a short-term basis, so a pause in the near future should be expected with the resistance band starting at or near $1,800…

Below is a 3-year chart from John that shows the last time the 50-day (in this weekly chart, the SMA-10) crossed above the 200-day was in early February, 2009, and the Gold price then jumped 11% over a two-week period before a minor consolidation set in…

Obama Good For Gold

If you own Gold (or Gold stocks) and want to see even greater returns in the months ahead, you should be rooting for the re-election of President Obama in the upcoming U.S. elections, according to BMO Financial Group Global Portfolio Strategist Donald Coxe…in an exclusive interview with Kitco News, Coxe pointed out that Gold could easily go higher if the problems in Europe continue and if Obama is re-elected…Coxe is also Chairman of the Chicago-based investment advisory firm Coxe Advisors LLC…“Obama runs a deficit of over a trillion a year…in his first two years in the White House, he didn’t produce a budget at all…and his only proposal for reducing the deficit going forward is to tax the 1% of ‘rich’ people – if you tax that away you might raise as much as $500 billion over the next decade but that doesn’t put a dent in it…so what we are going to have is more of the same,” Coxe said…

Worth adding to Coxe’s comments is that the ideal scenario for Gold is a Democratic sweep, just like in 2008, with Obama winning re-election and Democrats maintaining control of the Senate and regaining control of the House…the odds of that are becoming increasingly likely given the potential collateral damage Republicans may suffer thanks to an incompetent Presidential campaign being run by Mitt Romney…

TD Raises 2013 Gold Price Forecast To $1,900

The Globe and Mail reports this morning that TD Securities has raised its forecast for Gold to average $1,900 in 2013…TD analyst Greg Barnes says stimulus programs “leave the door open for Gold to move higher in the face of increased liquidity and rising inflation concerns”…since the start of September, the Gold price has risen 5% while the S&P/TSX Gold Index has climbed 14%, notes Barnes…”We believe that the out-performance by the Gold equities over the past month reflects two things…Gold equities were oversold in our view, and investors are beginning to believe that the capital expenditure and operational expenditure inflation that has dogged the producers for the past three years is starting to moderate”…TD’s top picks along with new target prices (in brackets) are as follows: Eldorado Gold ($20 a share); Goldcorp ($60); Yamana Gold ($25); B2Gold ($6) and Alamos Gold ($26)…among the juniors, the team likes Continental Gold ($12) and Rubicon Minerals ($5)…

Silver ETF Holdings Near Record Levels

Investors have so far purchased more than 32 million ounces of Silver through Silver ETFs this year, according to the the Washington, D.C.-based Silver Institute…Silver ETF holdings now total more than 608 million ounces with a value of $20.5 billion through September 15, the Institute stated in a news release Wednesday…”Significantly, from January, 2009, through September 15, 2012, the Silver price has increased an astounding 211%,” said the Institute…”Factors leading to the price increase include a desire by investors to diversify their portfolios with hard assets, the diminished value of key currencies and continued global economic uncertainty…investors and analysts are bullish on expectations that additional central banks will do more to attempt to stimulate the economies in order to increase consumption and spur employment, leading to even greater investor attention on the 4,000 year allure of Silver as a safe haven and a store of value,” said Silver Institute Executive Director, Michael DiRienzo…

U.S. Dollar Index Chart Update

The greenback has clearly broken down and will likely be pressured and constrained by a downtrend line for many more months which is very bullish for Gold and Silver and the Venture Exchange…while it’s currently bouncing up from temporarily oversold conditions, the U.S. Dollar Index faces huge resistance at the old support band beginning at 81…traders will enjoy shorting any rally that takes the Index up to that level…below is an updated 6-month daily chart from John…notice how the euro broke out relative to the Dollar Index in early August…recently, the Venture Exchange has done the same…

U.S. Risks Igniting New “Currency Wars”

Guido Mantega, Brazil’s finance minister, has warned that the U.S. Federal Reserve’s “protectionist” move to roll out more quantitative easing will reignite “currency wars” with potentially drastic consequences for the rest of the world, according to a report in the Financial Times…he said QE3 was aimed at lowering the U.S. Dollar and boosting U.S. exports…as finance minister under President Dilma Rousseff and former president Luiz Inácio Lula da Silva, Mantega has watched Brazil’s economy move from confident boom to near-stagnation this year…he cited Japan’s decision this week to expand its own QE program, coming on the heels of the Fed’s decision to launch further QE last week, as evidence of growing global tensions…“That’s a currency war,” he said…Mantega coined the phrase “currency wars” two years ago when the second round of QE by the Fed pushed a wall of money abroad, leading to a punishing appreciation of many emerging market currencies, especially Brazil’s…

Fed Encouraging Inflation, Will Clean Up Mess Later:  El-Erian

The Federal Reserve and Chairman Ben Bernanke not only are willing to tolerate inflation but actually are trying to create it, with a “mess” left behind for their successors to clean up, according to Pimco’s Mohamed El-Erian in an interview this morning with CNBC…the reason, the Pimco CEO said, is that the risks outweigh the rewards as the central bank tries to stimulate an economy that is still struggling three years after the financial crisis recession ostensibly ended…El-Erian has called the policy a “reverse Volcker moment” in reference to former Fed Chairman Paul Volcker, who rose rates and deliberately put the nation into recession in the early 1980’s to control runaway inflation…”Not only will they tolerate higher inflation, not only will they wish for higher inflation, but they actually may target higher inflation,” El-Erian, who helps run the largest bond fund in the world, said during a “Squawk Box” interview…”This is true for all central banks — the (European Central Bank), the Fed, the Bank of Japan, the Bank of England. We are so deep into unfamiliar territory, so deep into experimental mode, that we don’t know what the consequences will be,” he said. “Whoever comes afterward will have to clean up the mess”…El-Erian added, “This is true for all central banks – the (European Central Bank), the Fed, the Bank of Japan, the Bank of England…we are so deep into unfamiliar territory, so deep into experimental mode, that we don’t know what the consequences will be…whoever comes afterward will have to clean up the mess…this is a historical bet that our kids will be reading about in history books,” he concluded…

Today’s Markets

Markets are up across the board this morning and appear poised to finish the week on a strong note…the Venture Exchange is up 13 points at 1348NG as of 6:50 am Pacific…as we mentioned yesterday, the next major short-term resistance level is 1375…

New Gold Inc. (NGD, TSX) Chart Update

One of our favorite producers is New Gold Inc. (NGD, TSX) which came out with a very robust Preliminary Economic Assessment on its Blackwater deposit yesterday…the stock reacted well, closing 18 cents higher at $12.32 on a slightly negative day for the Gold stocks as a whole…as of 6:50 am Pacific, NGD is up another 15 cents at $12.47…New Gold has staged a confirmed breakout above a downtrend line, as shown in John’s 2.5-year weekly chart below, with the next major resistance at $14…

Some minor profit-taking pushed Gold and Silver down modestly overnight but both are rebounding…as of 5:45 am Pacific, bullion is down just $4 an ounce at $1,766…Silver is now essentially flat at $34.55…Copper is off 6 pennies to $3.71…Crude Oil, which has been hit hard in recent sessions, is down 19 cents to $91.79 while the U.S. Dollar Index has rallied nearly half a point to 79.50 but smart traders are likely using that advance to build short positions as the “big picture” outlook for the greenback is grim given the technicals, QE3 and political dynamics…

Massive injections of stimulus into financial markets by the world’s largest central banks are creating a domino effect around the globe, and investors are hoping China will be the next to take action – likely following that country’s leadership transition in mid-October…data released this morning showed activity in China’s vast manufacturing sector contracted for an 11th consecutive month in September…the HSBS Flash China manufacturing purchasing managers’ index (PMI) stood at 47.8 in September, a very slight improvement over a nine-month low of 47.6 in August but remaining below the 50 mark that divides expansion from contraction…nonetheless, there was a broad steadying among the sub-indexes in the survey so while manufacturing activity in China is slowing, the pace of that slowdown appears to be stabilizing…

Weak Euro Zone Numbers

Meanwhile, the downturn in activity in the euro zone’s service sector fell unexpectedly to its lowest level since June, 2009, according to a Markit PMI report this morning,pointing to a further deepening of that region’s downturn…French companies performing particularly poorly…a good indicator of economic performance, the euro zone services PMI fell to 46.0 in September from 47.2 in August, below even the most pessimistic forecast of 46.5 in a Reuters poll of nearly 40 economists…the services sector figure came despite a surprise upturn in the related German surveys, suggesting smaller euro zone economies like Spain and Italy have performed especially poorly this month, boosting the case for an ECB interest rate cut in October…

Today’s Markets

Global growth concerns have pushed down markets this morning…in Asia, Japan’s Nikkei fell 1.6% after hitting a four-month high the other day, while China’s Shanghai Composite Index shed 43 points or 2.08% as it closed at its lowest level since February, 2009, at 2025…Japanese exports to China dropped 9.9% in August compared with the same month a year earlier…European markets are modestly lower this opening while stock index futures in New York as of 5:45 am Pacific are pointing toward a slightly negative open on Wall Street…the weekly jobless claims report just came out, and the number of Americans filing new claims fell last week but the underlying tone of the report pointed to some further weakening in the labor market…investors will be eager to take a look at the Philadelphia Fed’s manufacturing index at 7:00 am Pacific…the index is expected to rebound but remain in negative territory…economists surveyed by MarketWatch forecast a bounce to -4.0 from -7.1 in August…

Rebound In U.S. Housing & Construction

U.S. home sales and construction have jumped to their highest levels in more than two years, offering the strongest signal to date that the American housing sector has turned the corner after a six-year rout…”The housing recovery has indeed started,” said Michelle Meyer, an economist at Bank of America Merrill Lynch…single-family housing starts in August rose by 5.5% from July to their highest level in 28 months, the Commerce Department said yesterday…in August, builders started construction on 535,000 homes at a seasonally adjusted annual rate, up 26.8% from one year ago…overall housing starts were up by 2.3%, amid a small drop in the more volatile multi-family sector…meanwhile, sales of previously owned homes in August rose by 7.8% from July to their highest level in 27 months, the National Association of Realtors said… sales climbed 9.3% from a year ago, marking the 14th straight year-over-year sales increase, even as the number of homes listed for sale was down sharply…

Venture Exchange-Gold-CRB Index Chart Update

The Venture Exchange, which leaped past the 1325 resistance area with a 21-point gain yesterday (next significant resistance levels are 1375 and 1425), is getting very close to breaking through a downtrend line that has been in place since the spring of 2011…we must be patient as this important technical event could still be a week or two away, it’s impossible to predict…the CDNX would be following in the footsteps of both Gold and the CRB Index which have already surged above their downtrend lines…below is an updated 2.5-year weekly chart from John that compares the CDNX with Gold and the CRB Index…

Rainbow Resources (RBW, TSX-V) Chart Update – The “Golden Cross” Event

Below is a Rainbow Resources’ (RBW, TSX-V) updated chart that paints a very encouraging picture despite some minor recent weakness that has brought about some healthy consolidation…not only does this stock have rising 50, 100, 200 and 300-day moving averages, and very strong technical support, but notice the recent “Golden Cross” that has occurred this month – the 50-day SMA has crossed above the 200-day SMA…one only has to look at the Venture chart going back to 2009 to understand the importance of the “Golden Cross”…in early 2009, the Venture’s 50-day crossed above the 200-day and this occurred again in the summer of 2010 – on each occasion, this gave advance warning of a major bullish move in the Index…we suspect a similar situation with RBW and the catalyst will be an upcoming “triple play” – speculation regarding pending results from the International, the start of drilling at Gold Viking, and the commencement of drilling at Jewel Ridge in Nevada…yesterday, RBW gapped up and closed at its high of the day, 20.5 cents, after successfully testing its 300-day moving average (SMA) the day before…notice the bullish “W” formation in the RSI(14)…

New Gold’s PEA Shows Very Robust Economics For Blackwater

New Gold Inc. (NGD, TSX) has just released a very powerful Preliminary Economic Study for its Blackwater deposit in central British Columbia, and company officials are in Toronto today to review the report with analysts…over the initial 15 years of its mine life, Blackwater is estimated to produce an annual average of 507,000 ounces of Gold and 2,039,000 ounces of Silver at total cash costs(1) per ounce sold (net of by-product sales) of $536 per ounce…at assumed Gold and Silver prices of $1,275 and $22.50 per ounce, and a 0.94 U.S.$/CDN$ foreign exchange rate, the project is expected to yield a base case after-tax, 5% net present value (“NPV”) of $1.1 billion and an after-tax internal rate of return (“IRR”) of 14.0%…at spot commodity prices of $1,775 per ounce Gold and $34.50 per ounce Silver, and a parity exchange rate, the after-tax, 5% NPV and IRR move to $2.8 billion and 25.8%…

Other highlights include…

Conventional truck and shovel open pit mine with 60,000 tonne per day (“tpd”) whole ore leach process plant

Start of production targeted for 2017

Initial 15-year mine life with additional 1.4 years of processing low grade stockpile at end of pit life

Life-of-mine strip ratio of 2.36 to 1.00 of waste to mineralized material

Life-of-mine Gold and Silver recoveries of 87% and 53%, respectively

Life-of-mine Gold and Silver production, inclusive of low grade stockpile, of 6.2 and 18.6 million ounces from the Indicated category and 1.8 and 13.5 million ounces from the Inferred category, respectively

Development capital costs of $1.8 billion inclusive of 24 percent, or $346 million, contingency

Higher grade initial five years resulting in accelerated payback of capital costs

Keep in mind, these numbers could easily get better…NGD currently has 18 drill rigs at Blackwater and has recently discovered higher grades of Silver in addition of course to more Gold…the company’s total area land package is 1,000 kilometres, and the likelihood of additional deposits (beyond Blackwater and Capoose) has to be considered high…

Keep a close eye on juniors in the area including two of our favorites, Parlane Resource Corp. (PPP, TSX-V) and RJX Explorations (RJK, TSX-V)…we expect both to begin drill programs shortly…

OK Silver Corp. (OK, TSX-V)

OK Silver (OK, TSX-V) has been halted this morning, pending news…the stock has been a strong performer recently, and below is an updated chart from John for our readers’ due diligence…

John has two other chart updates this morning – Richmont Mines (RIC, TSX) which has been recovering as expected, and Scorpio Mining (SPM, TSX)…

Richmont Mines (RIC, TSX)

Scorpio Mining (SPM, TSX)

Chart Notes:  John and Jon both hold share positions in RBW with Jon increasing his position Tuesday.

Fool’s Gold:  Counterfeit Bars Turn Up In NYC

Fox News is reporting that a jeweler in Manhattan’s Diamond District has learned the hard way that all that glitters is not Gold…Ibrahim Fadl, a chemical engineer who owns a downtown business, bought four 10-ounce Gold bars and decided to check them out further since he heard counterfeits were making the rounds…Fadl, who paid $100,000 for the merchandise, drilled into several of the bars and found gray tungsten, which has nearly the same density as Gold, making it difficult to detect…the same thing reportedly happened in Great Britain earlier this year, and finance blog ZeroHedge.com reported that in 2010 German refiner W.C. Heraeus claimed to have received a 500-gram bar from an unnamed bank that proved to be filled with tungsten…the scheme purportedly involves a genuine Gold bar that is purchased with serial numbers and authentic documents and is then hollowed out to be replaced with tungsten…the bar is then closed up to finalize the sophisticated operation, the website reports…Fadl, who could not be reached for comment, told NY1.com that the shell of the Gold was sold to him by a customer at his Gold refinery business and peeled off like foil on a candy bar…“It’s got to be somebody really, really professional…when I analyzed them, it showed they were tungsten…sick to my stomach, but thank God we didn’t sell this to somebody…people are selling their homes to buy Gold, it’s a big issue,” Fadl told the web site…

Gold has traded in a range between $1,761 and $1,781 so far today…as of 5:45 am Pacific, the yellow metal is down $3 an ounce at $1,768…Silver is 35 cents lower at $34.43…Copper is flat at $3.76…Crude Oil is off 46 cents at $94.83 while the U.S. Dollar Index has rallied one-fifth of a point to 79.38…

While some short-term consolidation is quite likely, as John has recently pointed out, Gold is in the midst of a move that ultimately should take it well beyond $2,000 an ounce by sometime next year…below is an updated 18-month weekly chart from John that shows the top of “Wave 1” is $1,900 while the top of “Wave 3” is $2,100 (Gold is in the first wave of a new 5-wave up motive phase)…fundamental factors, from QE3 to the increasing likelihood of an Obama victory in November, are strongly supportive of much higher Gold prices while Silver can be expected to rise at an even faster rate…

Frank Holmes at www.usfunds.com uses a standard deviation chart (a statistical measure of variability) to show that while Gold has been on a tear recently, breaking through some key resistance areas to move within shouting distance of its yearly high, bullion still looks very attractive in terms of the “big picture” with a low sigma reading of -1.7…historically, this has occurred only 2% of the time and underscores how much potential exists over the next year or so…

Deutsche Bank sees Gold exceeding $2,000 an ounce in the first half of 2013…the bank cites growth in the supply of fiat currencies such as the U.S. dollar…“When one has accumulated too much debt, while the right thing to do is pay it back, the easiest thing to do is default and hope your creditor has a short memory,” Deutsche Bank says…“We believe the Western economies in general are biased towards the latter, whether they will admit it or not…we expect a soft default will likely be the preferable course of action; a managed form of currency depreciation through various stages of quantitative easing or successive bailouts by central banks of the banking system…this ‘easy’ scenario is good for Gold, in our view…we expect the Gold market to continue to respond positively to further central bank activity which in our view is likely to continue to be biased towards further monetary expansion”…Deutsche Bank adds that low interest rates are likely to keep making Gold attractive due to a “negligible” opportunity costs and longer-term fears of adequate stores of value and wealth preservation…

Analyst Calls For Gold To Hit $2,400

In one of the most bullish Gold calls since the Federal Reserve announced a new round of easing last week, one strategist sees a nearly 40% jump in the metal’s price to $2,400 an ounce by the end of 2014…“The new target reflects our view that the Fed will maintain mortgage purchases until the end of 2014 and will move to buy Treasuries following the end of Operation Twist this coming December,” wrote Francisco Blanch, a global investment strategist with Bank of America Merrill Lynch, in a note to clients yesterday…“Given the new open-ended nature of QE3, the upward pressure on Gold prices should continue until employment is strong enough to require a change in policy,” Blanch added…”In our view, this is unlikely to happen until the end of 2014″…

St. Louis Fed Chairman Concerned About Risk of Future Inflation

The Federal Reserve should have waited for clearer signs of a flagging economy before launching its new bond-buying program, the head of the St. Louis regional Fed bank said yesterday, adding that he would have voted against it…James Bullard, president of the St. Louis Fed, also told Reuters that he is sufficiently concerned about the risk of future inflation that he backs a controversial proposal by congressional Republicans for the Fed to return to having only a single mandate: preventing inflation…the Fed currently has a dual focus on full employment and stable prices…in discussing his views on more monetary stimulus, Bullard said, “We should take a little bit more (of a) wait-and-see posture”…His comments, in an interview with Reuters Insider, highlight potential dissent on the Fed’s policy committee next year when he will be a voting member…

Japan Follows The Fed, Eases Monetary Policy More Than Expected

The Bank of Japan decided on surprisingly strong steps to further ease its monetary policy today following recent easing action by the Federal Reserve, as the central bank looks to tackle entrenched deflation, the strong yen, and slowing global growth…the central bank’s policy board decided to increase the size of its asset-purchase program, its main tool for monetary easing with interest rates near zero, to ¥80 trillion ($1.01 trillion) from ¥70 trillion, and also to extend the deadline of the program by six months to the end of 2013…while some had predicted that the BOJ would take additional steps, the combination of an expansion and an extension of the asset purchases was at the higher end of expectations…”The BOJ took more action than we anticipated,” Finance Minister Jun Azumi told reporters, adding that the decision was timely given signs of slowing growth in the Japanese economy…

Today’s Markets

Asian markets were stronger overnight, thanks in part to the easing move in Japan…the Nikkei hit a 4-month high, closing up 108 points to 9232…China’s Shanghai Composite, meanwhile, bounced back 8 points to 2068…European markets are generally flat this this morning while stock market futures in New York as of 5:45 am Pacific are pointing toward a slightly positive open on Wall Street…

The Venture Exchange, still looking to push through resistance at 1325, closed at its high of the day yesterday at 1323…

GoldQuest Mining (GQC, TSX-V) Chart Update

GoldQuest Mining (GQC, TSX-V) is an excellent example of how sometimes the market just doesn’t know there’s great news just around the corner, a point Rainbow Resources‘ (RBW, TSX-V) shareholders should keep in mind in the event any of them believe the recent weakness in RBW is related to anything other than technical trading or the efforts perhaps of some pro traders (and posters) to shake a few loose apples out of the tree…leading up the announcement of GQC’s incredible hole at Romero in the Dominican Republic four months ago, there were no clues in the way the stock was trading that the company had made a magnificent hit in its drilling…in fact, the share price had been under some pressure…as soon as the news came, of course, the stock had a huge gap up and the rest is history…the recent weakness in GQC was also nothing more than simple consolidation – exactly what RBW has been going through – and this is something John had clearly pointed out as GQC fell about 30% from its high…there was nothing to worry about…

Yesterday, GQC jumped 23 cents on increased volume to close at $1.93…fresh results are expected in the near future, and of course the company now has its deep drilling rig in action which should prove interesting as all holes drilled so far have ended in mineralization…below is an updated chart from John that shows the GQC bullish trend is strengthening once again…we’re confident the $2 resistance area will ultimately be overcome…

Gold Bullion Development (GBB, TSX-V)

Gold Bullion Development (GBB, TSX-V) is waking up out of a long slumber, and the stock has finally broken above a downtrend line that has been in place since late 2010/early 2011..GBB released drill results from 43 holes yesterday, one of which returned 58 metres grading 1.76 g/t Au (included a high-grade section of 15.27 g/t Au over 6 metres)…six of the holes featured decent mineralized intervals of 100 metres or more…with a new geological consultant for Granada, GBB does seem to be getting back on track and there’s no denying the LONG Bars Zone has great potential to host a multi-million ounce deposit…investors will have to continue to be patient, however, and keep in mind – as John’s chart shows – that the stock has some work to do to plow through a resistance band between 14 and 18 cents…GBB closed up 3.5 cents yesterday to 14 cents on volume of nearly 1 million shares…

Gold Canyon Resources (GCU, TSX-V)

In northern Ontario, Gold Canyon Resources (GCU, TSX-V) continues to make progress at its Sprinpole Project…yesterday, the company released additional infill drilling results which included 311 metres grading 1.81 g/t Au in SP12-179…this hole demonstrated continuity of mineralization 60 metres below the potential pit which was used in the calculation of the NI-43-101 resource estimate in February of this year…a new resource estimate will be coming out in the fourth quarter, taking into account recent positive drill results including SP12-179…

John’s updated GCU 2.5-year weekly chart shows the stock is now up against down trendline resistance for the fourth time in about a year…all factors considered, we do expect to see a breakout in GCU in the neat future…

Chart notes: Jon holds a share position in GQC while Terry holds a share position in GBB.

Gold fell as low as $1,750 overnight but is rebounding, showing the current strength of this market…as of 6:15 am Pacific, the yellow metal is up $1 an ounce at $1,764…Silver dropped just below $34 an ounce but is now 16 cents higher for the day at $34.41…Copper is off 2 pennies at $3.74…Crude Oil, which fell $3 a barrel within minutes yesterday due possibly to a high frequency trading glitch, is down 61 cents at $96.01 while the U.S. Dollar Index has rallied just over one-tenth of a point to 79.11…high prices notwithstanding, consumers in India are stepping into stores and purchasing Gold coins and bars which is a good sign…jewelers and retailers say sales across India have shot up by 10-20%…contributing factors include several major Gold-buying festivals and an improvement (more rainfall) in the monsoon season…

76% Of U.S. Gold Production From Nevada In First Half Of 2012

U.S. Gold mining production for the first half of this year declined slightly from the same period last year, according to the the U.S. Geological Survey…for the first half of 2012, the agency reports there was a total 3,633,034 ounces of Gold production, down 3% from the same period last year…of that January through June, 2012 production, 2,761,750 ounces were mined in Nevada while 395,454 ounces were produced in Alaska…

Greenback Outlook Is Grim – Venture Exchange Breaks Out Relative To U.S. Dollar Index

As we mentioned yesterday, and although it could rally marginally out of current oversold conditions which would create another great shorting opportunity, the U.S. Dollar Index is in serious trouble both technically and fundamentally…it has fallen below an important uptrend line that started in September of last year…one key support level (81), as John has already pointed out, has been breached, and some others are in jeopardy looking out into the fourth quarter…fundamentally, QE3 is a killer for the greenback and that’s of course hugely bullish for Gold and Silver and commodities in general…

The overall decline in the purchasing power of the U.S. Dollar over the last four decades is stunning and certainly strengthens the case for Gold as a store of value…

The Venture Exchange performs best under weak U.S. Dollar conditions, so that’s another reason why we’re so bullish regarding the CDNX over the next six months at least…below is a very important chart from John, a 5-year weekly comparative showing the Dollar Index in comparison with the Venture…if there’s just one point that sinks in with our readers from today’s Morning Musings, it’s that the Venture has broken out relative to the U.S. Dollar (check the bottom right hand corner of the chart) which is a major trend change…the reverse occurred in early 2011 which kicked off a bear market that wiped 53% off the value of the CDNX…

As you can also see in the above chart, the Venture Exchange has not yet actually broken above its downtrend line in place since the second quarter of 2011…we’re speculating that’s likely to occur within the next few weeks, and then watch the volume pick up again as it did last week…strategically, now is the time to be accumulating quality junior exploration plays, particularly of course on any minor weakness or a normal slight pullback…the CDNX‘s 10 and 20-day moving averages, currently at 1287 and 1264 respectively, can be expected to provide strong support throughout this uptrend…

Currency Wars To Heat Up Again?

The Federal Reserve and the European Central Bank’s new rounds of quantitative easing could herald a new era of “currency wars”, according to Bank of New York (BNY) Mellon research…the dollar has fallen to a seven-month low against the yen and a four-month low against the euro in the wake of QE3 announced by the Fed last Thursday…adding insult to the greenback’s injury on Friday, the ratings agency Egan-Jones cut the U.S. sovereign rating to AA-minus from AA, saying the Fed’s QE3 would reduce the value of the dollar rather than reduce national debt…”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,” the firm said…central banks such as Brazil and others around the globe are already moving to mitigate the effects of the “debasement” of the dollar by taking “measures to prevent excessive currency strength”, according to BNY Mellon…

Today’s Markets

Asian markets were mildly negative overnight with China again leading the way, falling another 19 points to 2060…Automakers Nissan Motor Co., Honda Motor Co. and Mazda Motor Corp., who collectively employ thousands of Chinese workers, each announced they were temporarily suspending production in China after a week of anti-Japanese protests around the country that saw Japanese-owned businesses looted and Japanese cars and restaurants attacked over a China-Japan spat over some disputed islands in the east China Sea…other industries, including electronics, food and retail, were also affected and the dispute put global supply chains for Japanese products produced in China under threat…the Chinese need to back off on this one…

With China’s leadership transition set for the middle of next month, we’re expecting new stimulus efforts in that country and a gradual rebound in the Shanghai Index and the economy in general…the Chinese do have their work cut out for them as the financial system is struggling in part with bad loans from the property sector and local governments…meanwhile, average property prices in 70 Chinese cities rose for a third straight month in August on a sequential basis, pointing to a continued turnaround in the once-ailing market…the latest gains in housing prices, shown in a government survey issued today, extend a trend that emerged in June after eight months of decline…the figures come on the heels of improving housing starts and show a bright spot in a generally weakening economy…

European shares are weaker this morning as investors continue to wait for Spain to decide whether to ask for help from the ECB’s bond-buying program…Spain, however, had a successful debt auction this morning and yields eased a bit…stock index futures in New York as of 6:15 am Pacific are pointing toward a flat to slightly negative open on Wall Street…

CRB Index Chart Update

A minor pullback in the CRB Index to its weekly EMA-20 seems quite possible given John’s updated 1-year weekly chart below, but this will merely set the stage for another powerful leg up during the fourth quarter as the primary trend remains very bullish…

New Gold Inc. (NGD, TSX)

New Gold Inc. (NGD, TSX) is performing well, as expected, and any pullback to or slightly below the supporting 20-day SMA (currently around $11.20) would be an ideal entry point for those who are not yet positioned in this quality opportunity…once the $12 – $14 resistance band is cleared, which could easily occur during the fourth quarter, NGD is off to the races in our view…on Thursday, the company will be releasing its Preliminary Economic Assessment (PEA) for the massive Blackwater Gold-Silver deposit in central British Columbia…NGD closed up 50 cents yesterday at $12.01, and has climbed from a low of $10.63 over the last four sessions…

Parlane Resource Corp. (PPP, TSX-V)

Speaking of Blackwater, Parlane Resource Corp. (PPP, TSX-V) staged a confirmed breakout yesterday, closing at 19.5 cents on volume of 250,000 shares…the steady increase in volume in this stock since the beginning of August is a very bullish sign…Parlane will soon be drilling its 14,000-hectare Big Bear Project, strategically located between the Blackwater and Capoose deposits, and the company as we’ve been mentioning has to be considered as another potential Blackwater-area takeover target for New Gold…below is an updated 2.5-year weekly chart from John…notice the recent clear break above the downtrend line in place since the spring…

ATAC Resources (ATC, TSX-V)

This slow-moving train may be starting to kick into gear after release of encouraging assay results yesterday…the company reported a discovery hole (8.5 metres grading nearly 20 g/t Au) from a prospecting find located approximately 10 kilometres west of the Conrad, Osiris, Isis, and Isis East Gold zones in a new area not previously drill tested…this helps confirm the district-wide potential of the 40-kilometre-long Nadaleen Trend located at the east end of the 185-km-long Rackla Gold Belt…ATC has broken above its weekly EMA-20 but this time we don’t believe it will be a “bull fake” as was the case in June…below is a 15-month weekly ATC chart…

Notes:  John and Jon both hold positions in PPP.

Gold has traded in a narrow range so far today…as of 5:30 am Pacific, the yellow metal is off $2 an ounce at $1,769…Silver is down 15 cents at $34.53…Copper has retreated 3 pennies to $3.77…Crude Oil is 27 cents lower at $98.73 while the U.S. Dollar Index is up slightly at 79…

Physical Demand For Gold Picks Up In India

After a lackluster buying trend for the past few months, physical demand for Gold in India rose “dramatically” on Friday, says Barclays Capital, citing a report by Reuters…jewelers and investors scaled-up purchases despite local record prices, the firm says…“Indian buyers bought into the rally ahead of several major Gold-buying festivals”…

Chinese Silver Buying On The Rise

Buying interest in Silver is rising in China with the metal “benefiting from its status as the higher-beta, cheaper version of Gold,” according to UBS…stronger Silver prices are attracting investors, particularly in China, which had vacated the market following violent action in 2011, UBS says…they note that SGE Silver volumes are at the highest level since May, 2011, with 4,062 metric tons traded on Friday alone…this was the highest daily volume since late April, 2011 , when Silver neared $50 an ounce…the bank says action is similar on the SHFE, where combined volumes picked up significantly since late August…“It’s clear that Silver is rebuilding investor interest here…we will continue to closely monitor participation out of China as investors here have played a significant role in Silver’s powerful moves,” says UBS…

Today’s Markets

Asian markets were mixed overnight with China’s Shanghai Composite tumbling 45 points or 2.14% to 2079…the property sector was very weak after private data showed slack home sales, suggesting curbs on the sector have hit sales during the traditional peak season…bizarre growing tensions between China and Japan over two disputed islands in the east China Sea are not helping the Chinese market either…six days of sanctioned anti-Japanese protests in China escalated yesterday into a nationwide day of rage that saw Japanese businesses and diplomatic missions attacked…European shares are off mildly this morning while stock index futures in New York as of 5:30 am Pacific are pointing toward a slightly negative open on Wall Street…

Venture Exchange – Understand The Big Picture NOW To Make Huge Profits In The Months Ahead

Get ready for a MASSIVE move to the upside in the Venture Exchange over the next several months as a “risk-on” environment has emerged with no end date to the Federal Reserve’s just-announced QE3 program…add to this the ECB’s fire hose of cheap money and the likelihood of more stimulus measures from China following that country’s leadership transition in mid-October, and what we have is a Perfect Storm for junior resource investors…by late July/early August, it was clear to us – based on technical considerations – that the Venture Exchange low of 1154 in late June was in all likelihood the bottom of a 53% bear market slide that started in early March, 2011, shortly before the end of QE2…policy and political events this month (ECB, the Fed, and the growing probability of an Obama victory in November due to QE3 and an incompetent Republican campaign) have radically altered the monetary and fiscal landscapes, setting up a situation that is extremely bullish for hard assets and a speculative market like the Venture Exchange…

The Move has already started but is still in its infancy…since August 1, the Venture is up 11.4% vs. a gain of 4.5% for the Dow and 7.1% for the TSX…between now and the end of February, at the very least, we expect the Venture to be the best-performing exchange in North America and one of the best in the world…that was the case during QE1 and QE2, and there’s no reason to believe things will be any different this time around…the Venture could easily challenge the 2000 level by early next year which is almost a 50% jump from current levels…in that kind of environment, we’ll see plenty of doubles, triples, quadruples, and 10-baggers among individual stocks…

Within six months of the launch of QE1, the Venture climbed 57%…within six months of Bernanke’s infamous Jackson Hole speech in late August, 2010, which clearly signaled QE2 was on the way, the Venture rallied 67%…this time, we have an open-ended QE program from the Fed as well as aggressive action from the ECB…with loose monetary policy in place on a global scale for an indefinite period, rising commodity prices and a weak U.S. Dollar, this is the best time since the summer of 2010 to be accumulating quality junior exploration stocks…be patient but bold when you have to be…there is an “overhang” of paper in the market and some important CDNX resistance areas that will require volume and a bit of time to deal with, but once this “train” gets moving it will be unstoppable until early next year at least…

Below is a chart from John that we initially posted Friday and is worth re-posting, just to drive home the message…this is a 4.5-year weekly chart of the CDNX which shows how the Index and Gold have both reacted during the Fed’s previous two QE programs…notice in this weekly chart how the Venture’s RSI(14) is ready to bust out above 50, just like it did right around the time of Jackson Hole in 2010…expect the Index to gradually move into overbought territory during the fourth quarter and remain there for a period of time…this will obviously take increased volume, and that’s exactly what we started to see at the end of last week…there’s a lot of money still sitting on the sidelines or in “safe” instruments yielding very low returns…it won’t take long for that money to start flowing into investments and assets that are going to generate much greater returns over the short to medium term…

Poor Fiscal Policy Leads To QE3

Unfortunately, the reason the Federal Reserve has had to implement QE3 is because of a lack of sustained job growth in the United States which has everything to do with poor fiscal policy…Washington is broken and Obama, unlike President Clinton, has proven to be incapable of working with Republicans…he’s probably also the most liberal President in American history who has an un-American intolerance of the “rich” and wants government to play a bigger role in citizens’ lives – exactly at a time when government just doesn’t have the resources to do that…in fact, any responsible political leader (Democrat or Republican) at the moment should be telling people the truth – we each have to accept more personal responsibility for our lives and expect LESS from government in the years ahead…for crying out loud, the U.S. federal government has an official debt of $16 trillion…that works out to $140,000 per taxpayer…unfunded liabilities are through the stratosphere…but of course few politicians, including Obama and Romney, have the courage to tell the people they must expect less from government…at some point down the road, a year or two or three from now, the chickens could come home to roost and all hell could break loose as this lack of fiscal discipline in Washington and elsewhere in the world (if not immediately addressed) blows up…you can kick the can down the road for only so long…eventually the road ends, sometimes with a steep drop off a cliff like some countries have already experienced…the current extraordinary loose monetary environment in the United States, and globally, is going to ultimately result in higher inflation, and interest rates will have to rise in order to combat that…

Romney did make some intelligent comments the other day regarding, in his words, the “sugar high” of QE3…”Recognize that, as the Federal Reserve keeps on trying to stimulate the economy by printing more money, that there’s a cost to that…the value of your savings goes down…people who are living on fixed incomes don’t see much interest income any more…and the value of the dollar goes down, and the risk for long-term inflation goes up”…

CNBC Anchor Larry Kudlow hit the nail on the head in terms of describing what the American economy really needs at the moment which is smarter fiscal policy, not looser monetary policy…“More money doesn’t necessarily mean more growth…more Fed money won’t increase after-tax rewards for risk, entrepreneurship, business hiring, and hard work…keeping more of what you earn after-tax is the true spark of economic growth…not the Fed…in the supply-side model, the combination of lower marginal tax rates, lighter regulation, and a downsized government in relation to the economy is the growth-igniter”…

TSX Gold Index

John’s latest TSX Gold Index chart is another classic example of how important it is to buy on weakness…just like with the juniors, producers were being thrown overboard by investors during the spring and the TSX Gold Index hit a low of 266 even though it was clear valuations had hit ridiculous levels based on historical data and common sense…since the May low, the TSX Gold Index has climbed 30% after closing Friday at 346…we do believe the speculative juniors will outperform the producers over the next several months as production costs can be expected to accelerate thanks to rising commodity prices, especially Oil which makes up such a large component of a producer’s cost structure, and this will somewhat offset the benefits of rising Gold, Silver and Copper prices….the next major resistance for the TSX Gold Index is 360, at which point experienced and astute traders may wish to take a look at the HGD (short ETF) for a very short-term trade (the HGD has support around $7.75)…the Gold Index may need to pause around 360 and retreat in mild fashion in order to cleanse temporarily overbought conditions and lay the groundwork for another leg up to higher levels…

Silver – The “Poor Man’s Gold”

John has two charts on Silver this morning, a short-term chart (6-month daily) that shows very overbought conditions and resistance at $35.50, and a long-term chart showing a Fibonacci target level of $78 an ounce…any near-term profit-taking in Silver would be a healthy technical development and should not take Silver below $30 an ounce as the strong support areas above $30 indicate…Silver has been rising at a much faster rate than Gold and that trend can be expected to continue over the next several months during this powerful new cycle…

Silver – 6-Month Daily Chart

Silver – 15-Year Monthly Chart

The “big picture” for Silver is hugely bullish, and a couple of months ago we were screaming from the rooftops regarding an “historical buying opportunity” in Silver when RSI(2) reached one of its most oversold levels in the last dozen years…that’s when Silver was trading at just $26 an ounce and since then it has surged by more than 30%…Silver is now in a confirmed “Wave 5” phase…RSI(2) has gone into overbought territory but history shows it can remain overbought for an extended period, and that’s exactly what we expect over the coming months…the next huge opportunity in Silver would be on a minor correction that could knock it down by about 10% from current levels…investment demand and industrial demand will ultimately power Silver to new all-time highs…

Rainbow Resources (RBW, TSX-V)

A 1-2-3 punch between now and mid-October should create Perfect Storm conditions for Rainbow Resources (RBW, TSX-V) which will also have the wind at its back in terms of the overall market…recent news confirms that shallow drilling is hitting the International vein structure…assays, which are pending, will confirm just how rich the mineralization might be, and how long the intersections are…there is plenty for the market to speculate about over the coming days and weeks…meanwhile, the company is also gearing up for two additional drill programs – one at Gold Viking, about 70 kilometres to the south of the International and immediately adjacent to the village of Slocan, and the other at Jewel Ridge in the heart of the Battle Mountain-Eureka Trend in Nevada…both are Gold and Silver targets and former producers…with drilling at three highly prospective properties, Rainbow has a fabulous opportunity for a “discovery hole” that could send the stock soaring in an instant – especially in a bullish overall market environment…that has always been the key part of our rationale behind being so excited about the prospects for RBW – this is a pure discovery play offering incredible potential near-term leverage (from three properties) at 20 cents with just 40 million shares outstanding…we’ve already stated the case for the International…below are some facts to consider regarding Gold Viking and Jewel Ridge…

Gold Viking

An old mill is still standing right next to the Gold Viking Property which is also contiguous to the past producing Ottawa Mines that delivered nearly 2 million ounces of Silver in the early 1900’s at an astonishing average grade of 60+ ounces per ton (top producer in the area)…there are numerous historical adits throughout Gold Viking, and records from the B.C. Ministry of Mines show high-grade Gold and Silver ore were shipped from the property to the Trail smelter in the 1930’s…no drilling has ever occurred at Gold Viking…what has Rainbow’s geologists excited, and us quite intrigued, is that a very low resistivity feature from a Fugro heli-borne electromagnetic survey earlier this year corresponds exactly to a strong multi-element geochemical anomaly over the central portion of the property…this feature is 1,400 metres long and 320 metres wide and may represent a structural break that could have acted as a conduit for mineralizing hydrothermal fluids…a north-south trending mafic dike is exposed within the same corridor…the geological richness of the area, and the past historical production, combine to give RBW an unusual opportunity for a discovery….

Jewel Ridge

Nevada is hot, yet investors haven’t caught on yet to the fact Rainbow is about to follow up on a superb and shallow drill hole from 2004 that returned 2.1 g/t Au over nearly 40 metres near the past producing Hamburg pit at Jewel Ridge…a company that would come out with that kind of a result in today’s market would see its share price leap in a hurry…this very interesting property is contiguous to Barrick Gold’s Ruby Hill Mine which produced over 120,000 ounces of Gold last year and has total reserves and resources in excess of 3 million ounces…immediately to the south of Jewel Ridge is Timberline Resources‘ (TBR, TSX-V) advanced-stage Lookout Mountain Project…Rainbow’s drilling strategy will be to extend the past producing shallow pits at Jewel Ridge to depth, and follow the north-south geological contact directly toward the Ruby Hill Mine…long intersections (100 metres+) of economic grade (1 g/t Au+ in addition to Ag) are quite possible at Jewel Ridge given what’s known historically about the area…

Elsewhere in B.C. – Opportunities At Blackwater

A lot of exploration money is being spent this year in mineral-rich British Columbia, and another important area we’re focusing on besides the West Kootenay region is the central part of the province where New Gold Inc. (NGD, TSX) is developing its massive Blackwater Gold-Silver deposit while numerous juniors including Parlane Resource Corp. (PPP, TSX-V) and RJK Explorations are also active in the area…both Parlane and RJK should be drilling the very near future…on Friday, John posted a weekly chart on Parlane and we’ll be watching the stock closely today for confirmation of a breakout…at 16.5 cents with just 28 million shares outstanding (and no need for a financing anytime soon), PPP is well positioned for a strong move in this bullish new market…Parlane’s Big Bear Project (14,000 hectares) is strategically located between the Blackwater deposit and the Capoose deposit which raises the possibility of a potential New Gold takeover of the company, especially in light of NGD Execuive Chairman Randall Oliphant’s recent comments that he wants to control the entire area – not just for the geological possibilities, but also for access/infrastructure and other issues…New Gold, of course, has already bought out Silver Quest Resources and Geo Minerals and completed a cash transaction with Gold Reach Ventures for ground in the area…

RJK is gearing up for more drilling after intersecting 3.3 metres of 79 ounces per ton (BWE12-06) in the spring at their Blackwater East Property…the Blackwater area has plenty of Silver, and New Gold has been intersecting much higher Silver grades this year…so RJK’s discovery of super-rich Silver could be just the tip of an iceberg…technically, RJK is beginning to rebuild after a spring plunge that took it to a low of 8.5 cents…below is a 3-year weekly chart from John that shows now is an ideal time for accumulation…things should heat up significantly for RJK once drilling commences…interestingly, the stock has held support at its 1,000-day moving average (SMA) at two critical periods – late 2011, and again over the last few months…

Comstock Metals (CSL, TSX-V)

We warned our readers about this one in August, and CSL has enjoyed a spectacular September now that the company is following up on impressive trenching results with a drill program at its QV Property in the White Gold District of the Yukon…a significant discovery could be in the making here, so speculative interest should remain high…CSL climbed 12.5 cents Friday to 58 cents…below is an updated chart from John…as always, perform your own due diligence and understand that the Fibonacci numbers are not price targets but merely theoretical levels based on Fibonacci analysis…

Critical Elements Corporation (CRE, TSX-V)

Critical Elements Corporation (CRE, TSX-V) has been interesting to follow from a technical perspective recently, and the stock has climbed 53% over the last nine sessions…it gained another 2.5 cents last week to close at 23 cents…it is firmly in overbought territory, however, so chasing this in the mid-to-upper 20’s in the immediate future is probably not a good idea…there is significant resistance on the chart at 27.5 cents…CRE will likely soon need to pause and catch its breath, though we will continue to watch it closely…

Mineral Mountain Resources (MMV, TSX-V)

We’ve mentioned Mineral Mountain Resources (MMV, TSX-V) on at least a couple of occasions recently as we’re quite intrigued by the land package the company has assembled in South Dakota…the company has consolidated eight former high-grade Gold deposits in the Keystone mining district, so this is certainly a story worthy of our readers’ due diligence…technically, the stock is looking enticing and has strong support at 25 cents, just a penny below Friday’s close…the 100-day (SMA), currently at 20 cents, has just recently reversed to the upside after a decline that started in late 2011…MMV has just over 93 million shares outstanding but its project in South Dakota is likely strong enough to give this play more upside potential than downside risk at current levels…below is an updated 2.5-year weekly chart from John…

Notes: John and Jon both hold positions in RBW, PPP and RJX.A.

TSX Venture Exchange and Gold & Silver

The Venture Exchange enjoyed another strong week, thanks to an open-ended QE3 program unveiled by the Fed, and hit its highest level in nearly four months by closing at 1318.  For the week, the Venture gained 41 points or 3.2% on increased volume (very important) and once again outperformed the broader equity markets (the Dow was up 2%, the S%P advanced 1.9%, the Nasdaq rallied 1.5% while the TSX climbed 1.9%).    The Venture has a lot of catching up to do.  It’s only posting multi-month highs while the Dow and the S&P are at multi-year highs which underscores the extent of destruction that was inflicted upon the speculative junior resource sector during the 2008 Crash.

With Q3, combined with stimulus from other central banks around the world including of course the ECB, and the growing likelihood of an Obama victory in November, the fundamentals going forward into 2013 are highly supportive of commodity prices and potentially massive gains in Gold and Silver.    The U.S. Dollar, meanwhile, is in serious trouble, technically and fundamentally.  This is all great news for the Venture Exchange which of course is very commodity sensitive and has a strong inverse relationship with the greenback.

The Venture has started what we believe is going to be, at the very least, a multi-month uptrend with the 10 and 20-day moving averages (SMA’s) providing support as they did during QE1 and QE2.  So watch for occasional pullbacks to these SMA’s, currently at 1272 and 1255, respectively, and treat any weakness accordingly.  The primary trend now is up.

Between now and the end of October, it seems reasonable that the Venture Exchange will challenge the 1500 level – a 14% advance from Friday’s close – where it will meet resistance (likely temporary) in a declining 300-day moving average.  The 1,000-day SMA is also parked at 1500.  But what’s particularly interesting about this market is that the 1,000-day has flattened out and should reverse to the upside by sometime next month.  That would be a highly significant and bullish technical development considering the 1,000-day has been in decline now for four years.

Below is an updated CDNX chart from John (4-month daily) that paints a picture for the week ahead.  If the bulls have enough strength to immediately take this market through resistance at 1325, which they probably do, then that area will immediately become new support as the Index pushes higher to initially test early May resistance around 1360.  The declining 200-day SMA is at 1400.  Bottom line:  The primary trend is very bullish and the possibility of a massive move to the upside can’t be ruled out over the coming months.  There is still a lot of cash sitting on the sidelines waiting to come into this market.  One or two very significant new discoveries, combined with some takeovers and higher commodity prices, would pour high-octane fuel on the fire.  The risk-reward ratio with the Venture is more attractive now than it has been since the summer of 2010.

Gold

Christmas came early for resource investors Thursday as Fed Chairman Ben Bernanke delivered the gift that will keep on giving – QE3 with a new twist, open-ended and linked to sustained improvement in the labor market.  For many traders and investors, this was surprisingly aggressive as previous rounds of so-called quantitative easing had set ending dates.

The fact that the Fed’s decision came less than two months before the U.S. elections was hardly a coincidence in our view and shows how manipulative the Fed has become.  Obama got elected in 2008 thanks in large part to a plunging stock market and a financial crisis in September and October.  He’ll likely get re-elected this November thanks in part to a rising stock market fueled by the Fed’s actions (the Republicans have also run a horrible campaign – Romney simply can’t sell the conservative message – and that could also result in the Democrats regaining control of both houses of Congress as they did in 2008).  This is significant for Gold because Democratic control in Washington, led by the most liberal American president in history, is not going to focus on shrinking the size of government which means the debt is going to continue to pile up until another economic crisis hits that forces historical change.

Below is John’s 6-month daily Gold chart that shows temporarily overbought conditions, so we do expect bullion to pause when it meets the resistance band between $1,800 and $1,900.  The $1,730 area is now new support.  Ultimately, however, look for Gold to push past $2,000 an ounce by early 2013 at the latest.

As long as the Fed keeps printing money faster than rabbits can make bunnies, Gold is going to continue to climb and climb.  Below you can see the strong correlation since 1984 between the rising U.S. monetary base and Gold’s growing value.

Gold jumped $36 for the week to $1,771.  Silver added $1 to close at $34.68.  Copper gained a whopping 23 cents to finish at $3.80.  Crude Oil jumped $2.58 to close at $99 while the struggling U.S. Dollar Index fell by more than a full point to 78.83.

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.

Below is a very revealing 4.5-year chart from John that you won’t see anywhere else – it shows how the CDNX and Gold have performed through each round of the Fed’s “QE” programs.

As you can see, the Venture Exchange is well positioned right now for a MAJOR move to the upside through the remainder of 2012 after QE3 was announced Thursday.  Starting in July, both the Venture and Gold correctly began to anticipate new stimulus measures from the Fed and the bullish signals got stronger in August.  And not only is the Fed putting the pedal to the metal, but so too is the European Central Bank as well as other global central banks. The Perfect Storm has probably arrived.

While many investors had anticipated a new round of easing, the Fed’s declaration that its bond-buying effort will be open-ended and linked to sustained improvement in the labor market was surprisingly aggressive. Previous rounds of so-called quantitative easing had set ending dates.

During QE1 and QE2, the Venture shot up into strong overbought territory and stayed there for a while.  At the moment, RSI(14) on this long-term weekly chart sits at just 49.54 which leaves plenty of room for a move higher in the Index.  Trading volumes have picked up considerably in recent days and that’s very bullish.  We’ll have more on the Venture in our Week In Review And A Look Ahead later today.

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