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Gold hit a new 10-month low this morning, falling to $1,539 before recovering slightly…as of 7:15 am Pacific, bullion is down $9 an ounce at $1,549…Silver is off 12 cents at $26.86…Copper is flat at $3.34…Crude Oil is down 63 cents at $93.83 while the U.S. Dollar Index is off its highs but still up one-quarter of a point at 82.98…

There’s clearly a disconnect at the moment between the paper market in Gold (futures, ETF’s, stocks, etc.) and the physical market as many traders and investors have been chasing better returns in other assets, particularly given the 2000+ point climb in the Dow since November…a correction in the equity markets potentially could be the catalyst that lifts Gold out of its doldrums, and we’ve certainly seen examples over the past few years when bullion and Gold stocks have moved counter-cyclical to the equity markets…all reports suggest that strong physical accumulation of the metal continues which no doubt has helped cushion Gold’s price decline and kept it (so far at least) above critical support around $1,500 an ounce…according to UBS, “Our index of physical demand from India yesterday was well above average and one of the best days we’ve seen in months”…

Markets in China were closed today due to a public holiday, and will re-open Monday…UBS stated, “In February, Chinese investors came back from the week-long Lunar New Year holidays eager to take advantage of the much cheaper gold price…this time around, though, seasonal factors are not exactly in Gold’s favor…nevertheless, a strong response cannot be ruled out with certainty…after all, the experience of Q1 acts as a reminder that despite disappointments in the past year, the ability of physical demand to help cushion the downside cannot be fully ignored”…

Updated Long-Term Silver Chart

Critical support for Silver is $26 an ounce with the low $26 support zone holding four times since early 2011, even in the face of quite intense pressure and strongly trending markets…below is a long-term monthly chart from John…note that RSI(2) is currently at its lowest level since the Crash…$26 is also trendline support…the chart also suggests that Silver must also make a decision sometime this quarter whether to break above the down trendline in place over the last two years, or collapse below the pitchfork line which would imply a further drop to perhaps even the $20 level…take your pick as to which direction you believe Silver is headed…given the current extreme negative sentiment, our view is that critical support for both Silver and Gold will hold – for now at least – and a spring rally will ensue…what happens later is anyone’s guess…

TSX Gold Index Long-Term Monthly Chart

Gold stocks are being thrown overboard at the moment as evidenced by the action in the TSX Gold Index which has fallen 10% in just the last four sessions…so far this year, the Index is off 23% and it has dropped a whopping 35% since the late 2012 summer high…this compares with a 14% drop in the price of Gold itself during the same period…clearly, investors are trying to price in an ever steeper decline in bullion but what if that doesn’t happen?…throughout the history of this bull market, physical demand has often come to the rescue of Gold and it may do so again…note that there is a strong support band for the Gold Index between 225 and 240…RSI(2) is at an extreme low (1.06%)…on each of the three previous occasions when it has been at these levels, the Index has rallied significantly…the Gold Index is now beginning to recover after hitting a low in early trading of 226.56…

CDNX 5-Year Weekly Chart

Let’s move on now to the Venture Exchange which is in the midst of its 9th consecutive weekly decline, an event that has never occurred before at this time of the year…tracking the Venture over the past couple of years and trying to determine where the bottom might be has been a humbling experience…this has been a very deceiving market at times, but that’s the nature of bear markets…below is a 5-year weekly chart from John, the purpose of which is to try to identify at what point the current bloodletting can be expected to end (at least temporarily)…the evidence shows there’s a strong support area between 1027 and 1041, but the Index could also dip down to the support line of the pennant (the two previous lows did this) which is currently around the 980 level…from there a significantly rally could ensue…RSI(14) is at its lowest level since the Crash…

John: The CDNX 5-year weekly chart shows that it has formed a downsloping pennant since it peaked at 2465 early in 2011…the Index closed yesterday at 1039 which is within a strong technical support area between chart support at 1027 and the Fibonacci 23.6% level at 1041…other chart support levels are shown at 930, 810 and 680…an interesting point to consider here is what happened in Oct/11 and June/12 (thin mauve circles)…the chart shows at these times the Index dipped down to the support line of the pennant and then reversed to the upside…this could happen again if the present support area holds on a weekly basis…note that RSI(14) at 22% is at its lowest level since the Crash…CMF shows selling pressure is dominant and the trend remains strongly bearish…

U.S. Jobless Claims Jump

The number of Americans filing new claims for unemployment benefits rose to its highest level in four months last week, suggesting the labor market recovery lost some steam in March…initial claims for state unemployment benefits increased 28,000 to a seasonally adjusted 385,000, the highest level since November, the Labor Department said on Thursday…it was the third straight week of gains in claims. Coming on the heels of data yesterday showing private employers added the fewest jobs in five months in March, the report implied some weakening in job growth after hiring accelerated in February…the non-farm payrolls report for March is due tomorrow…

Bank Of Japan Moves Aggressively With Stimulus

The Bank of Japan is pulling out all the stops to get the economy out of deflation, its new governor said, after the central bank introduced aggressive easing measures today that will double the monetary base over two years…markets welcomed the news, pushing bond yields to an all-time low and boosting share prices with the Nikkei average climbing more than 2%…at his inaugural policy board meeting, Haruhiko Kuroda convinced the nine-member panel to agree to a major expansion of government bond purchases, including buying longer-term debt, which is designed to drive down longer-term rates…the BOJ also broke free from some self-imposed limits that the previous leadership adhered to…

Today’s Markets

The Dow is regaining ground lost during yesterday’s sell-off…as of 7:15 am Pacific, the Dow is up 53 points to 14604…the TSX, after experiencing its worst trading day of the year, is off its early lows this morning but down 16 points at 12406…the Venture has declined 13 points to 1026…in Asia, China and Hong Kong were closed today but the Nikkei, as mentioned, soared 2.2% to a 4.5-year high after unprecedented moves were announced by the Bank of Japan…European shares are mildly lower in late trading after comments made by the ECB President Mario Draghi curbed investor sentiment…Draghi told a press conference that the ECB cannot replace the lack of capital in Europe’s banking system and cannot compensate for any lack of action by governments…monetary policy would remain accommodative, he added…the euro fell sharply against the dollar…the European Central Bank kept its benchmark interest rate unchanged at 0.75%…a Reuters poll of 73 economists had expected the rate to remain unchanged despite record euro zone unemployment of 12%…

Contrarian Call – HXD Updated Chart

We’ve recently highlighted the possible opportunity in the HXD double-short ETF when it was trading in the $7.60’s and $7.70’s as a defensive measure against a possible TSX pullback…indeed, the HXD spiked higher yesterday, climbing 34 cents to $8.18, and it traded as high as $8.29 in early trading today…resistance is strong around $8.40, and a retreat by the HXD to around the $8 level as the TSX recovers some lost ground is highly likely based on chart patterns…

Gold fell as low as $1,563 this morning, on top of yesterday’s sell-off, but has started to stabilize…as of 7:20 am Pacific, bullion is flat at $1,576…Silver has rebounded after dropping briefly below $27 an ounce…it’s now up 4 cents at $27.30…Copper is unchanged at $3.37…Crude Oil is 73 cents lower at $96.46 while the U.S. Dollar Index is off one-quarter of a point at 82.64…

Gold Views

UBS attributes much of yesterday’s weakness in Gold to sell stops triggered on Comex, but notes exchange-traded fund outflows are also occurring again…“Physical demand, out of Asia in particular, was quick to respond to the sub-$1,600 move”, UBS stated…“Our physical flows to India indicated above-average demand, indeed the strongest we’ve seen since early January…SGE (Shanghai Gold Exchange) volumes yesterday were also higher on the day at about 12 (metric) tons, although this hardly compares to the strong appetite seen in February…Overall, physical buying volumes so far have not been large enough to offset the selling…Some physical buyers are also likely sitting back to see if there’s more conviction to this move lower, opting to wait for prices to stabilize”…

Commerzbank, meanwhile, says “we do not anticipate that the current price weakness among precious metals will last for any length of time, and expect to see higher prices again in the near future…Commerzbank sees some positive influences for Gold, starting with March U.S. Mint sales of 62,000 ounces of Gold coins that is nearly the same as March of a year ago, when 62,500 were sold…“Year-on-year sales of U.S. Silver coins actually surged by 32% to 3.36 million ounces”, Commerzbank says…“In addition, the Istanbul Gold Exchange reported that Turkey had imported 18.26 tons of Gold in March, the highest amount for eight months…According to data released by the World Gold Council, Turkey was the world’s fourth-largest consumer of Gold in 2012…

In The Bearish Corner, Societe Generale:  “End Of The Gold Era”

The price of Gold has reached “bubble territory” and stands to fall 15% by year’s end, Societe Generale Head of Commodities Research Michael Haigh said yesterday on CNBC…”We’ve been bearish Gold for a couple of months now…Coincidentally, we put out our longer report today looking at the end of the Gold era right before we saw a 1.5% selloff…We see the trigger for the unfolding coming from the macro side…What’s considered to be the non-fundamentals for oil and grains and base metals are actually the fundamentals for Gold, so the trigger from the Gold decline we see is coming from the non-fundamental side, i.e., real interest rates rise, stronger dollar, moderate GDP growth, etc…So it’s a macro-driven downdraft that the other elements are going to react to…Haigh said that as economic data shows improvement, Gold as a shelter will suffer…

Credit Suisse Group AG Cuts Gold Forecast

Global government stimulus has cut the likelihood of further banking and liquidity crises and reduced the need for a protection of wealth, Credit Suisse Group AG wrote in a report today…the bank cut its 2013 Gold forecast by 9.2% to $1,580 and lowered its Silver estimate by 11% to $28.50…“Silver, although it has a much larger component of industrial demand, is likely to be weighed down by the slow slide we forecast in Gold”, Credit Suisse analysts wrote…

Of course there are very strong arguments against the idea that we’re at the “end of the Gold era” and we’ll update and review the bullish case for Gold in the days ahead…

Updated Copper Chart

Copper continues to be under pressure (now trading at an 8-month low) for simple demand/supply reasons…inventories monitored by the London Metal Exchange are the highest in nearly a decade since October, 2003…as one analyst stated, “Base metals are telling a story about global growth which is not reflected in U.S. equity markets, for example…there is limited physical demand and no shortage of supply…the rise in LME stocks is simply a reflection of this” (Guy Wolf, macro strategist at Marex Spectron Group in London)…

On the positive side, below is a 2.5-year weekly chart from John that shows Copper is deeply oversold at the moment and has support near current levels…RSI(2) is now at an even more extreme low than it was back in November and June of last year – just prior to significant moves to the upside…

Private U.S. Jobs Report Disappoints

Private-sector job creation in the U.S. was considerably less than expected in March, indicating that the labor market’s improvements could begin stalling…a joint report this morning from ADP and Moody’s Analytics showed 158,000 new positions, well below economists’ expectations of 200,000…the report serves as a precursor to Friday’s non-farm payrolls report, so the miss could cause economists to lower their projections…much of the job creation came from small businesses of less than 50 employees, which added 74,000 positions, while large companies added 47,000 and medium-sized firms hired 37,000…as has been the case throughout the economic recovery, the service sector led the recovery in jobs, adding 151,000…

Today’s Markets

The Dow has retreated 40 points through the first 50 minutes of trading today…the TSX is off 60 points while the Venture has lost another 7 points and is at 1062…Asian markets were mostly lower overnight, though Japan’s Nikkei average surged 359 points or 3% on expectations of aggressive monetary stimulus from the Bank of Japan’s highly anticipated policy meeting that ends tomorrow…European shares, meanwhile, are moderately lower in late trading overseas…the ECB holds its policy meeting tomorrow…

TomaGold Corp. (LOT, TSX-V) Chart Update

TomaGold (LOT, TSX-V) and Quinto Real Capital (QIT, TSX-V) have managed to hold up reasonably well as they continue drilling at Monster Lake in northwest Quebec where an important discovery was made in late February…where these stocks go from here will depend entirely on the next set of results which should come sometime this month after drilling resumed March 12…given current market conditions, the wisest strategy we believe is to wait for more results and re-asses the opportunity at that point…if the numbers exceed expectations, and there’s a gap-up after a halt, there still should be an opportunity to participate in another leg-up in this play…as always, perform your own due diligence…LOT is off a penny at 26 cents on light volume through the first 50 minutes of trading today…

Tinka Resources (TK, TSX-V) Update

Tinka Resources (TK, TSX-V), which we first brought to our readers’ attention early last fall when it was trading in the 60’s and 70’s, has impressively bucked the trend in junior resource stocks over the last six months as it continues to churn out positive results from its 100% owned Colquipucro project (Ag-Pb-Zn) in west-central Peru…however, some weakness has started to appear in the chart with a divergence between RSI and price, and a break below the upsloping channel appears increasingly likely as a possible correction sets in…as of 7:20 am Pacific, TK is unchanged at $1.11…

Note: John., Jon and Terry do not hold positions in LOT or TK.

Gold is being pushed lower this morning after failing to gain any momentum after recently moving above the $1,600 level…as of 7:15 am Pacific, bullion has retreated $16 an ounce to $1,583 and could certainly re-test the $1,550 area as we suggested over the weekend…Silver, which is at its cheapest compared to Gold since mid-August, is off 42 cents at $27.60…Copper continues to weaken, falling below the technically important $3.40 level and hitting a 7-month low…it’s currently down 4 pennies at $3.36…Crude Oil is down 65 cents at $96.42 while the U.S. Dollar Index is up nearly one-fifth of a point at 82.88…

TD Securities expects Gold to fare better than most other metals during this second quarter as U.S. economic data, it believes, will start falling short of expectations…the firm sees potential for a correction in U.S. equities with a “risk-off” mentality returning to the market…“This should continue to be a negative influence on base metals and the industrial precious metals, but Gold should benefit as it is considered a safe-haven asset,” TDS stated…“Also, a weaker recovery in the U.S. will focus attention back on a Fed that is happy to maintain its easing monetary policy regime and continue open-ended quantitative easing (QE) – another Gold positive”…

Updated Dow Chart

The fact the Dow is due for a correction is very evident in the 1.5-year weekly chart from John that shows an extended overbought RSI(14) condition…this can’t continue for much longer, though the Dow still has room to move a little higher with a Fibonacci analysis giving a “target” of just over 14700 – about 75 points higher than where the Dow is at this morning…very strong potential support exists at 14000…there’s still plenty of cash sitting on the sidelines, and the twin benefits of a recovery in the housing sector and an energy boom in the U.S. cannot be underestimated…in otherwords, any correction could be relatively short-lived unless something comes out of the blue from the euro zone, China or somewhere else…bulls do have history on their side…keep in mind that April has traditionally been the best month of the year for U.S. equities, which have posted an average monthly gain of 2.7% in the last 20 years…the Dow hasn’t logged a decline in April since 2005…

Earnings season begins shortly and this holds potential for tripping up the market on a short-term basis…according to a report in the Wall Street Journal this morning, 86 companies in the S&P 500 issued negative guidance as the first quarter drew to a close for what they expect to report in earnings for that period…just 24 issued positive guidance…at 3.58 negative updates for every positive one, that is by far the highest ratio since FactSet began tracking such data in 2006…according to Thomson Reuters, this is a ratio not seen since 2001…

Today’s Markets

The Dow has hit another all-time high in early trading today, thanks in part to a better-than-expected factory orders report…as of 7:15 am Pacific it’s up 75 points at 14652 while the S&P 500 is up 9 points at 1571, very close to its all-time intra-day high set October 11, 2007…Canadian markets continue to under-perform…the TSX is flat, due to lower commodity prices, while the Venture has slipped 7 points to 1083, a new 3.5-year low…Asian markets were mixed overnight with Japan’s Nikkei average, driven lower by a stronger yen, slipped another 131 points to close at 12003…the Bank of Japan begins a two-day policy review tomorrow with bold stimulative measures expected, but the Nikkei already factored a lot of that in with a 19% first quarter gain…China’s Shanghai Composite fell 6 points to 2228…European shares pushed higher today after slightly better-than-feared euro zone manufacturing data…Markit’s euro zone Manufacturing Purchasing Managers’ Index (PMI) fell in March to 46.8 from 47.9 in February, slightly better than a preliminary estimate of 46.6, with the Cyprus bailout crisis yet to take a toll on the region’s factory activity…unemployment data for the euro bloc was also released showing its highest rate since the union began in 1995 – 19.071 million people were out of work in February (12% of the workforce) in the 17 nations that use the single currency…the European Central Bank meets Thursday…

Lakeland Resources Inc. (LK, TSX-V)

Another early-stage uranium exploration play in the Athabasca basin to watch closely is Lakeland Resources Inc. (LK, TSX-V) which announced a month ago it’s in the process of negotiating a final agreement, expected to be concluded by April 30, for the purchase of eight properties that are considered by the company to be “significantly prospective and under-explored”…as part of the transaction, David Hodge will be appointed President and CEO of Lakeland which currently has approximately 22 million shares outstanding…the company says the deal for the uranium projects will involve about 7.5 million shares, some cash plus a royalty to the sellers…LK climbed to a 52-week high of 14 cents on the news March 1 before pulling back to test support near 7 cents…long-term moving averages are in bullish alignment…below is a 2.5-year weekly chart from John that gives us confidence that LK could be an out-performer this year…as always, perform your own due diligence…LK is up half a penny at 9 cents on light volume in early trading today…

Madalena Ventures Inc. (MVN, TSX-V) Chart Update

Madelana Ventures (MVN, TSX-V) is an interesting oil and gas play with steadily increasing cash flow that we first brought to our readers’ attention late last year after its acquisition of Online Energy Inc. which provided MVN with an entry into the domestic exploration and production space…it also gave MVN the opportunity to ramp production and cash flow while continuing to develop and grow its international assets and business plan…technically, the stock is looking healthy with the rising 100-day moving average, currently at 35 cents, providing support for the last several months…MVN closed yesterday at 36.5 cents…below is a 2.5-year weekly chart…

Note:  John, Jon and Terry do not hold share positions in LK or MVN.

Gold , coming off its back-to-back quarterly losses for the first time since 2001, is beginning a new month and quarter on a quiet note…as of 7:30 am Pacific, bullion is down $2 an ounce at $1,596…Silver is off 33 cents at $27.97…Copper is flat at $3.40 where it’s trying to hold support…Crude Oil, which has posted four consecutive weekly gains, has retreated $1.10 to $96.13 while the U.S. Dollar Index is down one-quarter of a point at 82.77…

Today’s Markets

Asian markets were weaker overnight with Japan’s Nikkei average, which climbed a whopping 19% in Q1, falling to a three-week low as it lost 263 points or just over 2% to close at 12135…all eyes tomorrow will be focused on Bank of Japan’s highly-anticipated policy meeting…new central bank chief Haruhiko Kuroda is expected to come out with guns blazing by introducing significant new additional stimulus measures such as longer-term government bond purchases to inflate the economy…China’s Shanghai Composite fell 3 points to 2237 as it hovers around its low for the year…Chinese factory output expanded at its fastest pace in almost a year in March, but the rise was slower than most economists had predicted, suggesting that China’s economy may not rebound as quickly as many had hoped…China’s official Purchasing Managers Index, released this morning, rose to 50.9 in March from 50.1 in February…the strength and extent of China’s recovery hinges on when the central bank tightens monetary policy after loosening policy last year and increasing credit supply to induce an economic rebound…European markets were closed today for an extended Easter break…in North America, the Dow is up slightly in early trading to begin the new quarter after posting its best first quarter since 1998 thanks in part to an improved housing market, an energy boom and healthy corporate profits (the second and third quarters of 1998 featured a significant correction before the market rebounded to finish the year higher)…as of 7:30 am Pacific, the Dow is 7 points higher at 14586…the pace of expansion in the U.S. manufacturing sector unexpectedly slowed in March, according to an industry report released this morning…the Institute for Supply Management (ISM) said its index of national factory activity fell to 51.3 from 54.2 the month before…the reading was shy of expectations of 54.2 according to a Reuters poll of economists…however, U.S. construction spending rebounded in February as both public and private outlays increased, bolstering views of faster economic growth in the first quarter…auto sales and the March jobs report are also due this week….the TSX has declined 25 points after the first hour of trading while the Venture is down 2 points at 1097…

Venture Chart -The 2-Year Trend Reversal Pattern

While the broader equity markets have been performing extremely well this year, the Venture of course has been in the tank with a drop of 10% on top of sharp declines in 2011 and 2012…this highly speculative market has shown an uncanny ability to deceive and humble experienced traders and investors, especially recently with eight consecutive weekly losses and by far the worst February on record…what we thought was a bottom early last summer (1154) turned out not to be a bottom as the Index fell below 1100 in March and closed Thursday at 1099…support levels to watch are around 1090 and 1027, the 2009 early summer low…on a positive note, there is a divergence between RSI(14) and price which means that a genuine turnaround may not be far off…in addition to weakness in Gold, this market has been hurt by a challenging overall regulatory environment for companies plus a lack of major discoveries/success stories to get investors excited…historically, however, it’s typically times like this – when sentiment levels are so negative – that offer unusual opportunities…the most powerful up-legs are born out of the times of deepest despair…what also gives us hope is an interesting chart from John that shows the Venture has a pattern of important trend changes every couple of years, and a new 2-year period is just beginning…note how the RSI(14) on this long-term monthly chart went from 70 (high risk) to below 30 during the Crash (low risk), back up to 70 by late 2010/early 2011, and has fallen back down to just above 30…history tells us that while we don’t know exactly where the bottom will be, now is when investors (those thinking beyond just tomorrow or next month) should be the most eager to accumulate positions in good quality juniors in anticipation of a turnaround…

Updated Silver Charts

Long-Term Silver Chart

John’s updated long-term Silver chart (11-year monthly) shows a market approaching a moment a decision during this second quarter…Silver will either break above the down trendline which has been in place since 2011, or fall below important support…we believe the bias is to the upside based on RSI and the strong support that has held in the mid-$20’s for more than two years…

Silver Short-Term Chart

The short-term Silver chart (9-month daily) shows that over the near-term we can expect trading to continue to remain within the support band between $28 and $29.60…selling pressure has turned to weak buying pressure based on the CMF(20)…Silver needs to climb above its EMA(20), currently at $28.92, for momentum to shift in its favor…

Another Opinion On Silver

Standard Bank is cautious regarding Silver for 2013 due to weak demand/supply fundamentals that could put downward pressure on prices as the year unfolds…writing in its latest Precious Metals Definer note, the bank said last week that it believes China’s above-ground Silver inventory is currently “as high as 18 months of fabrication demand, up from 16 months at the start of 2012 and only 4 months in 2009″…this is of interest because, as with most other metals, China has been the major source of demand growth for the metal since 2009…according to Standard Bank, China was still a net importer of Silver in 2007…in 2010, however, it became a net exporter of the metal as a result of growing demand and changes in export tax rebates…”During 2010 the country imported an average of 298mt per month…In addition, China added another 288mt per month of Silver from mine supply and scrap, leaving the total monthly supply of metal at 586mt in 2010…In contrast, China’s average monthly fabrication demand in 2010 was only 330mt per month, implying a monthly surplus of 256mt per month in the local Chinese market during that year”, the bank writes…”By implication, this had to be taken up by investment demand or stockpiled by fabricators…Even though China’s imports have slowed from 298mt per month in 2010 to 166mt per month in 2012, the decline in imports was still not enough to stop the rise in metal within China”…

Wildcat Silver (WS, TSX) Updated Chart

Gold Stocks – HUI Chart Update

An 11-year monthly HUI chart shows a potential bottom was formed in March at 337.29 (the HUI is down slightly in early trading today at 354.62)…a re-test of that low this month certainly can’t be ruled out, but keep in mind that a spring rally in the producers has occurred quite often…in fact, between 2001 and 2012 the average gain in the HUI has been nearly 7%…

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