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Gold fell as low as $1,204 this morning before rebounding and climbing as high as $1,221…as of 7:30 am Pacific, bullion is up $1 an ounce at $1,216 in the face of continued greenback strength…Silver is off 20 cents at $17.26…Copper is down 3 pennies at $3.04…Crude Oil is 82 cents lower at $93.77 while the U.S. Dollar Index continues its surge – off its high of the day (slightly above 86.20) but still up nearly one-third of a point at 85.89…

It seems the Dollar Index is determined to test the 88 Fib. measured resistance level, as John’s chart yesterday indicated, before a possible correction sets in, so a sustained turnaround in Gold and commodities may not come until then – this could occur in as little as a matter of days or sometime during October…but that’s a key area (88) to watch…it’s important to point out as well that 89 acted as strong resistance in 2008, 2009 and 2010 – so that “band” between 88 and 89 is where this Dollar Index surge can be expected to meet very stiff resistance and reverse…a turning point in the greenback could come as early as Friday if non-farm payrolls for September disappoint…on the other hand, Thursday’s ECB meeting and Friday’s U.S. jobs report could further demonstrate the widening gulf between the euro zone and U.S. economies, and push the Dollar Index even higher…but again, the 88-89 area should be the short-term high – that’s a logical target…

It has been encouraging that Gold has held up as well as it has – bullion may survive this current huge move in the Dollar Index potentially without hitting a new low…that remains to be seen…Gold, however, is still set to post its sharpest monthly loss since June 2013 and its first quarterly loss (about 9%) this year…overall short positions in Gold are at their highest since last year – perfect set-up for a major short-covering rally in the near future – while it’s also important to note that smart-money commercial traders have been significantly scaling back their net-short positions in recent weeks…

One imminent factor not in Gold’s favor is the the Chinese Golden Week holiday which begins tomorrow…some market participants say the absence of Chinese buyers may be felt in the Gold market via lower prices. “We have seen moderate demand from them in the $1,210-20 region over the last week and they have been an instrumental factor in the market not testing fresh cycle lows,” says MKS (Switzerland) of Chinese buyers. “The absence of their demand combined with a strong expected NFP (non-farm payrolls report) and general bear bias, we could be testing $1,180-$1,200 in the coming days. Another factor that may come into play is the riots in HK (Hong Kong), which could dramatically deplete domestic demand in that market, a prominent source of physical demand.”

Today’s Equity Markets

Asia

China’s Shanghai Composite gained 6 points overnight to close at 2364, its 6th straight daily advance and a 19-month peak to finish the quarter…HSBC’s China final manufacturing report for September came in at 50.2, unchanged form August…Japan’s Nikkei average slipped 137 points…a slew of Japanese economic data for August was mixed with household spending and industrial output coming in worse than expected, while retail sales beat forecasts…the Hang Seng Index hit a fresh 3-month low amid the largest civil unrest in that country since the 1960’s…

Europe

European markets are mixed in late trading overseas…today’s data dump included inflation, a key metric used by the ECB to gauge the strength of its economy…euro zone inflation slowed to 0.3% in September, largely as expected…it comes amid growing concerns that the region could be heading towards a long-term period of weak consumer price growth or even deflation…euro zone unemployment was unchanged from last month at 11.5%, also in line with expectations…

North America

The Dow is off 14 points as of 7:30 am Pacific…U.S. consumer confidence dropped in September after holding near a 7-year high for the last two months, the U.S. Conference Board reported this morning…the board said that its monthly Consumer Confidence Index fell to 86.0 from August’s revised reading of 93.4…

The TSX is down 17 points as of 7:30 am Pacific while the Venture, which has fallen in 17 out of the last 20 sessions, is off a point at 912…

U.S. Dollar Index vs. Venture

This long-term monthly chart shows how critical the performance of the U.S. Dollar Index is to the Venture trend…a surge in the greenback is typically problematic for the Venture, as we’ve witnessed over the last month, while a retreat in the Dollar Index (2006, 2007, much of 2009, the last half of 2010 into early 2011, mid-2012 and the last half of 2013 into 2014) is bullish…

After 11 straight weekly advances, the Dollar Index is getting “stretched” technically and a cleansing of overbought conditions – likely to begin sometime in October after a possible test of the 88-89 area – will certainly take some pressure off the Venture and create conditions for a potential strong rally…

U.S. Dollar Index vs. S&P 500

While the Venture under-performs when the greenback is hot, the S&P 500 typically enjoys riding the wave of a higher Dollar Index…a significant correction in the broader markets is not likely to occur until the Dollar Index cools off…

TSX Gold Index

Historically, the TSX Gold Index has shown the propensity to reverse sharply in October after a large September decline…interestingly, since 2010, October has also been the second-best month (behind August) for the Gold Index as you can see in this chart below…

The TSX Gold Index for September was down a whopping 16.3% through yesterday, and it’s off slightly again this morning on this final trading day of the month and quarter…so the producers have been hit even harder than the juniors in September…

Given the current extent of oversold conditions, the likelihood of a sharp turnaround at some point in October is high in our view…the very strong bearish trend has started to decline and a consolidation is now occurring on declining volume…note also the large gap that has opened up with the still-rising 200-day moving average (SMA)…

Newstrike Capital Inc. (NES, TSX-V) Update

Newstrike Capital (NES, TSX-V) is actually UP for the month of September and a bullish trend is clearly in place, so an October rally in Gold and Gold stocks could produce a significant breakout in NES above neckline resistance as shown below…recently, the company released a very robust Preliminary Economic Assessment for its Ana Paula Project in Mexico’s prolific Guerrero Gold belt…we urge readers to check it out as part of their due diligence…

NES is down 3 cents at $1.02 through the first hour of trading…

Blackbird Energy Inc. (BBI, TSX-V) Update

As we noted at the time (late August), Blackbird Energy (BBI, TSX-V) staged an important confirmed breakout through resistance at 30 cents, and BBI has held steady this month on strong volume…the company announced the acquisition of more ground in the Alberta Montney along with a transformational $35.5 million bought deal financing (Sept. 22)…

BBI is unchanged at 35 cents as of 7:30 am Pacific…below is an updated 2+ year weekly chart…

Note:  John, Terry and Jon do not hold share positions in NES or BBI.

Gold has traded between $1,214 and $1,224 so far today…as of 8:00 am Pacific, bullion is unchanged at $1,219…Silver is off a dime at $17.56…Copper is flat at $3.07…Crude Oil has reversed and is up slightly at $93.60 while the U.S. Dollar Index, which has posted a record 11 straight weekly gains, is off one-tenth of a point at 85.64…

Down 12% in Q3, commodities are poised for the biggest quarterly decline since the financial crisis…weak global growth data from Europe and China as well as a strong dollar have created severe headwinds for the asset class…

“Equities and a strong dollar are set to remain key hurdles for Gold amid a broader background of rising rates,” said analysts at Barclays in an analyst note published Friday…the firm is also maintaining its call that Gold prices will average $1,220 an ounce in the fourth quarter of 2014…

The fact that Gold has managed to hold above its 2013 lows amid a major surge this month in the Dollar Index is an encouraging sign, and a clue that an October rally could be in the works…bullion actually gained slightly last week as the Dollar Index, overbought technically at the moment, broke out above the 85 level (see updated U.S. Dollar Index charts below)…

Lower prices this month are fueling demand for U.S. Gold coins…sales of American Eagle bullion Gold coins have nearly doubled in September over total sales last month…

A couple of positive contrarian indicators regarding Gold…holdings of SPDR Gold Trust, the world’s largest Gold-backed ETF, fell 1.20 tonnes Friday to 772.25 tonnes, their lowest since December 2008…meanwhile, this is very encouraging – hedge funds and money managers have cut their bullish futures and option bets in Gold to their smallest since January in the week up to Sept. 23, according to the latest COT data…the ingredients are in place for an October rally, though perhaps not after another test of key support around $1,200…

Today’s Equity Markets

Asia

China’s Shanghai Composite gained 11 points overnight to close at 2359 despite a report that Chinese industrial profits fell in August by 0.6% from a year ago, a far cry from last month’s 13.5% rise…interesting developments in Hong Kong where pro-democracy protests are intensifying…the Hang Seng Index lost 2% overnight, falling to its lowest level in more than 2 months…the central bank stated that it will inject liquidity into the banking system if needed following the weekend’s violent clashes…the protests by the pro-democracy activists opposing Beijing’s election plan for Hong Kong have expanded to larger parts of Hong Kong today, with some roads blocked and banks and retailers in the affected areas shutting their doors…Japan’s Nikkei average added 81 points to finish at 16311…

Europe

European markets are down modestly in late trading overseas…more weak economic data out of the euro zone…an economic sentiment index posted a figure not seen since late 2013 and showed a deterioration from the month before…meanwhile, the European Commission’s estimates showed that inflation expectations for the bloc had also decreased…

North America

The Dow is off its lows of the day but down 85 points as of 8:00 am Pacific…the TSX is 88 points lower while the Venture has retreated 5 points to 914…

Kalimantan Gold Corp. (KLG, TSX-V)

Even in these challenging market conditions, there’s still hope for some stocks trading at just a penny – or companies with a potentially valuable resource…Kalimantan Gold Corp. (KLG, TSX-V) is higher again this morning after a huge move Friday when the stock closed up 7 cents to 8 cents (a gain of 700%) after the company released a maiden inferred resource of 47 million tonnes averaging 0.6% Cu for the Main Zone of its Beruang Kanan deposit in Indonesia…the estimate is based on assays from 74 diamond drill holes that were completed between 1998 and 2007 and then from 2012 to 2013…the mineral resource is contained within a near-surface, shallow-dipping and strongly mineralized system that extends over an area of 1,000 m (north-south) and 950 m (east-west) with depth extents ranging from surface to between 100 m and 350 m below surface…mineralization remains open in multiple directions…KLG, with about 175 million shares outstanding, is up half a penny at 8.5 cents as of 8:00 am Pacific…

Doubleview Capital Corp. (DBV, TSX-V) Update 

Encouraging news from Doubleview Capital Corp. (DBV, TSX-V) this morning with the company announcing that it has drilled 7 more holes at the Hat Property…while assays are still pending, geologists must have seen something they liked in the core as Doubleview boldly stated that “the Lisle Zone discovery has been extended laterally and to depth”…

A key factor of course will be grade – have they been able to find higher grades within the Sheslay “red stock”?…the fact that respected geologist Pat McAndless has entered the picture – he’s now the company’s senior technical adviser – is a sign to us that there could certainly be very good news to come from the Hat…McAndless has a track record of nailing down deposit types like this and we don’t believe he’d take on the Hat Project if he didn’t see strong upside…

The Hat is already showing impressive volume potential with nearly 1 km separating important drill holes HAT-06 and HAT-08…the discovery of higher Copper and Gold grades in this system could be a major catalyst for DBV and the district as a whole…Doubleview has been able to advance this property systematically through each round of drilling, thereby increasing the odds, in our view, that this next set of assays and more drilling could provide the major breakthrough investors are hoping for…

This DBV weekly 3-year chart shows a bullish primary trend with a rising 300-day moving average (SMA) forming part of the exceptional chart support at 15 cents…DBV opened lower to successfully test that support again this morning, but has since stabilized and is now off 1.5 cents at 16 cents as of 8:00 am Pacific…

Cannabix Technologies Inc. (BLO, CSE) Update

Cannabix Technologies (BLO, CSE) has enjoyed a strong month, both fundamentally (see Sept. 9 news) and on the market side as interest in this company continues to grow in the United States as predicted…

Excitement over the company’s patent-pending marijuana breathalyzer technology (BLO is a first-mover in this space, no one else has what they’re developing) drove the share price as high as 32 cents within 7 days of BLO trading on the CSE in late June…over the summer, company officials were focused primarily on BLO’s business model and behind-the-scenes efforts to introduce this technology and the BLO story to the critical U.S. market…the proof is there that BLO is on track…

Below is a chart of how BLO has traded since late June on the CSE (trading volumes on the OTC are picking up significantly)…you can see how the retreat from the 20-cent level was on low volume (good sign) and how the the recent breakout occurred on very robust volume…the 10 and 20-day moving averages (not on this chart) have reversed to the upside, and these rising SMA’s should provide strong support going forward…importantly, the 50-day SMA has flattened out and appears ready to reverse – that’s always a bullish sign…

BLO is up half a penny at 18.5 cents in early trading…

Mission Ready Services Inc. (MRS, TSX-V)

An interesting company to put on your radar screen…Mission Ready Services (MRS, TSX-V) was up 7 cents last week to 37 cents after announcing that it has been awarded a $1.5 million contract to perform research and development for “next generation” body armor for the U.S. Marine Corps…MRS announced a $3.5 million financing at 25 cents per unit earlier this month…as always, perform your own due diligence…MRS is off a penny at 35 cents as of 8:00 am Pacific…look for support at the rising 10 and 20-day SMA’s at modestly lower levels…

U.S. Dollar Index 2.5-Year Weekly Chart

The move in the U.S. dollar since July has been parabolic, allowing it to hit a 4-year peak against a basket of major currencies…plenty of important economic data, culminating in the release of September non-farm payrolls, could influence the Dollar Index positively or negatively this week…

This 2.5-year weekly chart paints an excellent picture of how powerful the greenback has been since touching long-term support at 79 in the second quarter…at 84%, RSI(14) is now clearly “stretched” and at some point – probably early in this upcoming quarter – current overbought conditions will need to be cleansed…

The Dollar Index has cleared all Fib. resistance levels from 80.31 to 84.52…it’s possible it could run further over the near-term to test the next measured Fib. resistance at 88 before a correction sets in…

34-Year Monthly U.S. Dollar Index-Gold Comparative Chart

This long-term U.S. Dollar Index-Gold comparative chart going back to 1980…what happened just recently is that the Dollar Index broke out above an RSI(14) trend line (it’s now at 65% as you can see near the top of this chart) as well as a triangle formation on the chart in place for over 8 years…this explains the power of the current move in the greenback – a major trend change, suggesting the Dollar Index will likely ultimately challenge its long-term downtrend line above the 95 level…that process could take two or three years – who knows – but the bulls have really grabbed control of the greenback…

Silver Short-Term Chart

Since the beginning of last month, Silver’s RSI(2) on this 6-month daily chart has spent most of its time in oversold conditions below 30, reversing the extreme overbought situation that persisted through much of June…at a minimum, an October rally up to previous Fib. support (now near-term resistance) around $18.60 seems very possible…

Silver Long-Term Chart

The next obvious major support for Silver is $16, a level it breached during the 2008 Crash but reclaimed as support in late 2009 as you can see in this 11-year monthly chart…the $17.50 area – holding up at the moment – provided good support during a basing period in 2010 before the metal took off to the upside…the $16 to $17.50 area, then, is where Silver should rebound from…

Note:  John and Jon both hold share positions in BLO.  Jon also holds a share position in DBV.

TSX Venture Exchange and Gold

After a horrible September so far, the Venture stabilized Friday after testing important support and closed up 8 points for the day to finish the week at 919.  The Index has given up ground in 16 out of 19 trading sessions this month (a loss of 10.3%) and last week’s drop totaled 36 points.   By comparison, the TSX Gold Index has plunged 15% this month while Gold itself is down only 5.4%.  The TSX Composite is off 3.8% while the Dow is virtually unchanged.

So what’s happening?  The surging U.S. Dollar Index, which is on a record run, has clearly been the main factor in putting a damper on Gold and commodities in general this month, and this has certainly inflicted pain on the Venture which tends to move in the opposite direction of the greenback.   Technically, the Venture found support at an uptrend line this past week going back to last year on its 1.5-year weekly chart.  It’ll be very important for the Index to hold that support.  Given some of the extreme oversold conditions that emerged last week, relief should be on the way as September ends and October begins.  On a short-term basis, the Dollar Index – having posted 11 straight weekly gains – is due for a correction, though that doesn’t rule out a “momentum” move a little higher first.

The Venture’s RSI(14) on this 1.5-year weekly chart is near previous support and the formation of a bullish “W” in the coming week would be encouraging.  You can see the symmetrical triangle that is now in place, providing a likely range for the Venture over the near to short-term before a move either above or below the triangle occurs.

Venture 5-Year Weekly Chart

The Venture’s recent breakdown below an RSI(14) uptrend in place for more than a year was a warning of increased downside risk.  In situations like this, with sentiment very negative and the Index still maintaining a rising 200-day moving average (SMA), the possibility for a very sudden and powerful reversal definitely exists.  This will depend on how Gold and commodities behave, and there are reasons for optimism with regard to Gold as we examine further below.

Gold

Gold held important support last week, and actually posted a $3 gain for the week with a close of $1,219, despite a jump of nearly a full point in the Dollar Index (in the previous 3 weeks, Gold tumbled a total of $72).

The COT structure is more favorable for Gold than it has been in quite some time with commercial traders significantly reducing their net short positions.  It’s almost always a losing strategy to bet against the commercials.  Whey they ramp up shorts, it’s time to be concerned.  When they do the opposite, you can be confident that Gold is likely headed higher.

This 6-month daily chart for Gold shows how short-term oversold conditions likely peaked at the beginning of last week – RSI(14) and the ADX indicator demonstrate this – just above strong support for bullion around $1,200.    There’s every indication that this market is overdone on the downside with a reversal in the works.

Silver fell 13 more cents last week to close at $17.66 (updated Silver charts tomorrow morning).  Copper fell 6 pennies to $3.07.  Crude Oil gained $1.13 a barrel to $93.54 while the U.S. Dollar Index broke above resistance at 85 to finish at 85.62.

The Seeds Have Been Planted (And Continue To Be Planted) For The Next Big Run In Gold Stocks

There’s no better cure for low prices than low prices. The great benefit of the collapse in Gold prices in 2013 is that it forced producers (at least most of them) to start to become much more lean in terms of their cost structures. Producers, big and small, have started to make hard decisions in terms of costs, projects, and rationalizing their their overall operations. Exploration budgets among both producers and juniors have also been cut sharply. In addition, government policies across much of the globe are making it more difficult (sometimes impossible) for mining companies to carry out exploration or put Gold (or other) deposits into production, thanks to the ignorance of many politicians and the impact of radical and vocal environmentalists (technology has made it easier for groups opposing mining projects to organize and disseminate information, even in remote areas around the globe). Ultimately, all of these factors are going to create a supply problem – think about it, where are the next major Gold deposits going to come from?  On top of that, grades have fallen significantly just over the past decade.

The “Big Picture” View Of Gold

As Frank Holmes so effectively illustrates at www.usfunds.com, the long-term bull market in Gold has been 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, has had a huge impact on bullion and will continue to support prices.   Despite Gold’s largest annual drop in three decades in 2013, the fundamental long-term case for the metal remains solidly intact based on the following factors:

• Growing geopolitical tensions, fueled in part by the ISIS terrorist group and a highly dangerous and expansionist Russia under Vladimir Putin, have put world security in the most precarious state since World War II;
• Weak leadership in the United States and Europe is emboldening enemies of the West;
• Currency instability and an overall lack of confidence in fiat currencies;
• Historically low interest rates
• Continued strong accumulation of Gold by China which intends to back up its currency with bullion;
• Massive government debt from the United States to Europe;
• Continued net buying of Gold by central banks around the world;
• Flat mine supply and a sharp reduction in exploration and the number of major new discoveries.

Deflationary concerns around the globe and the prospect of Fed tapering had a lot to do with Gold’s plunge during the spring of 2013 below the technically and psychologically important $1,500 level, along with the strong performance of equities which drew momentum traders away from bullion. The June 2013 low of $1,179 was the bottom for Gold in our view. Extreme levels of bearishness emerged in the metal last year. With the long-term bull market remaining intact, we expect new all-time highs in Gold as the decade progresses. Inflationary pressures should eventually kick in around the globe after years of ultra-loose monetary policy and the reluctance of central banks to increase interest rates.

Gold has traded between $1,212 and $1,232 so far today…as of 7:30 am Pacific, bullion is down $8 an ounce at $1,214…Silver is up 3 cents at $17.53…Copper is flat at $3.06…Crude Oil is 52 cents higher at $93.05 while the U.S. Dollar Index, on track for a record 11th straight weekly gain, has surged more than one-third of a point to 85.57…the move through stiff chart resistance around 85 demonstrates the extent of the greenback’s current powerful momentum which continues to apply pressure on Gold…

Commerzbank this morning expressed concerns over the fact that Chinese Gold imports from Hong Kong remain subdued…they failed to point out, however, that imports out of Hong Kong are increasingly becoming less reliable as a guide for determining Chinese demand…it’s important to keep in mind that China has started to allow Gold imports through its capital Beijing, in a move that helps keep purchases by the world’s top bullion buyer more discreet…the opening of a third import point after Shenzhen and Shanghai is threatening Hong Kong’s pole position in China’s Gold trade, as the mainland can get more of the metal it wants directly rather than through a route (Hong Kong) that discloses how much it is buying…so less emphasis has to be put on Hong Kong net Gold exports to China…Commerzbank reported this morning that analysts cite data from Hong Kong’s Census and Statistics Department showing China imported only 27.5 metric tons of Gold on a net basis from the former British crown colony in August. “This puts net imports only slightly above the previous month’s low level, which constituted the lowest figure since June 2011,” Commerzbank stated. “Chinese net Gold imports from Hong Kong have totaled 497 tons since the beginning of the year, 33% down on the corresponding period last year. Chinese Gold demand looks set to fall well short of last year’s total even if it picks up in the next few months.”

Today’s Equity Markets

Asia

Asian markets were mixed overnight following Wall Street’s worst day in 2 months…China’s Shanghai Composite posted a slight gain to close at a fresh 18-month peak for the third consecutive session…nuclear power firms led the gains on local media reports that nuclear projects may be restarted…in Japan, the Nikkei average declined by slightly less than 1% to close the week at 16230…

Europe

European markets are mixed in late trading overseas…

North America

After experiencing their biggest single-day losses since July 31, the Dow up 66 points as of 7:30 am Pacific while the S&P 500 has added 5 points to 1971…

The U.S. economy grew at its fastest pace in 2-1/2 years in the second quarter and activity was broad-based, in a bullish signal for the remainder of the year…the Commerce Department this morning raised its estimate of GDP to show the economy expanded at a 4.6% annual rate in Q2…the best performance since the fourth quarter of 2011 reflected a faster pace of business spending and sturdier export growth than previously estimated…

Meanwhile, U.S. consumer sentiment finished September at its strongest in more than a year on growing optimism about the economy and a more favorable outlook on future income…this morning’s Thomson Reuters/University of Michigan’s final September reading on the overall index on consumer sentiment finished at 84.6, the highest since July 2013, up from 82.5 at the end of August…

Dallas Fed President Richard Fisher, speaking yesterday, said a rate hike could occur in the spring of next year – one of several reasons for yesterday’s nervousness in equity markets…helping drive the losses were signs of deepening tensions between Russia and the West following a report that a draft law in Russia could open the door for courts there to seize foreign assets in Russian territory…back-and-forth sanctions over the conflict in Ukraine has curtailed economic growth in Europe, a major trading partner with Russia…investors remain concerned about the continuing risk of recession in Europe and about the possibility that Chinese growth may be slower in coming months than it was in past years…they’re also focused on Russia and concerned about developments in the Middle East…sometimes, however, markets do like to climb a wall of worry…

Technically, where do things stand with the S&P 500?…below is a 1-year daily chart from John that shows how the S&P is now trading within the lower half of a well-defined uptrend channel with RSI(14) approaching previous support around 35%…nothing to be alarmed about here with strong chart support at 1900 which coincides with the rising 200-day moving average (SMA)…the S&P has had a habit of briefly dipping below its 50-day moving average (SMA), currently at 1976, and then quickly reversing to the upside…

S&P 500 1-Year Daily Chart

TSX 1-Year Daily Chart

The chart for the TSX paints a somewhat more complex picture, and certainly reflects the weakness in commodities which makes up a significant part of the Index…unlike the S&P 500, the TSX has broken below an upsloping channel in place for more than a year and a longer-term negative RSI(14) with price is a concern…RSI(14) is now clearly oversold at 22%…the Fib. 61.8% retracement level is 14733, about 100 points above the rising 200-day SMA…a bearish -DI/+DI crossover earlier this month foreshadowed weakness in this market…a rally out of oversold conditions could certainly occur at anytime but the TSX has some work to do to regain its footing…it’s up 50 points through the first hour of trading today…

Venture-Gold 3 Year Weekly Chart

This 3-year weekly Venture–Gold comparative shows how the Venture RSI(14), which broke below an uptrend line on this particular chart earlier this month, has now landed at previous support at 31% (will it hold?)…there continues to be a high correlation between the Venture and Gold, though the Venture has generally been out-performing the metal since late last year…this fact suggests that Gold made an important low in late June, 2013…

The Venture is up 2 points at 913 as of 7:30 am Pacific after 9 straight losing sessions…

Venture 15-Year Daily Chart

This very long-term daily chart shows something amazing – the Venture’s RSI(14), at just 14.3%, is now at one of its most oversold points in 15 years, essentially matching the June 2013 low and within a whisker of the lows seen during the 2008 Crash…this doesn’t mean the RSI(14) and the Index can’t still go lower, but these extreme low RSI(14) levels have consistently occurred at opportune buying points over the last 15 years as you can see on this chart (and the reverse is also true when this indicator pushes above 70%)…

Columbus Gold Corp. (CGT, TSX-V) Update

Columbus Gold (CGT, TSX-V) continues to show technical strength as well as progress on the ground with 3 drill rigs now in operation at the Montagne d’Or Gold deposit (Paul Isnard Project) in French Guiana…as reported by the company last week, the current phase II program is scheduled to be completed by the end of October/early November…

Recent results from hole MO-14-167 (38.6 m grading 4.48 g/t Au) were highly impressive and demonstrate the potential for exceptional grades and widths in the principal UFZ zone…

The Montagne d’Or deposit hosts an inferred resource of 140.1 million tonnes grading 1 g/t Au for a total of 4.3 million contained ounces…an updated estimate is expected following completion of the current drilling which is being financed by Nord Gold NV…this is part of a minimum $30-million (U.S.) exploration and development program pursuant to which it can earn a 50.01% interest in Montagne d’Or and the Paul Isnard mineral claims by completing a bankable feasibility study no later than March, 2017…

Meanwhile, the company reported at the beginning of this week that a “prominent” U.S. investor has agreed to acquire approximately 9.9% of Columbus Gold, representing the entire private placement ($5.36 million at 40 cents per share) on amended terms from those announced a few weeks ago (this includes a reduction in the size and price of the offering, and no warrant component)…proceeds will be used in part to fund an extensive drill program at the company’s Eastside Gold discovery in Nevada…

CGT dipped to an intraday low of 43.5 cents Wednesday before recovering yesterday to close at 48 cents…

Note the bullish “W” in the RSI(14) and the attempt now to gain traction and breakout above the recent downtrend line which the rising 200-day SMA is nearly intersecting…as always, perform your own due diligence…

CGT is off 2 pennies at 46 cents as of 7:30 am Pacific…

Cematrix Corp. (CVX, TSX-V)

If you’re looking for something other than Gold to invest in at the moment, you may wish to do some research on cellular concrete and Cematrix Corp. (CVX, TSX-V) which announced yesterday that it has secured its largest contract yet ($6.8 million) to boost this year’s total contracted work to a record $14.7 million…record revenues are great but hopefully that can also translate into some earnings momentum…CVX reported earnings of less than $100,000 in Q2 after a Q1 loss of over $700,000…Cematrix provides cellular concrete product for many applications in oilsands, oil and gas facilities, and infrastructure projects throughout Canada…

“This is a truly historic day for our company,” stated Jeff Kendrick, CVX President & CEO in yesterday’s news release.  “The results we are achieving today from a revived oil sands and refinery construction market, together with the growth of the infrastructure market throughout Canada and the United States, are a testament to the dedication of the Cematrix team and our unwavering belief in our product and solutions. Some of these projects are years in the making as we work with our customers from the design phase of each project including thermal modelling, through to the final pouring of our product,” he added.  

What’s encouraging about this 2+ year weekly chart is the uptrend support line…CVX jumped a nickel yesterday to close at 19 points on one of its highest volume days ever (372,000)…there is chart resistance at 20 cents…some backfilling could occur here but this is a situation worth keeping an eye on for long-term investors…CVX has 34 million shares outstanding…

CVX is unchanged at 19 cents through the first hour of trading…

Note:  John, Terry and Jon do not hold share positions in CGT or CVX.

Gold has traded between $1,206 and $1,225 so far today, reversing with the decline in equities driven in part by reports that Russia is considering a measure that would allow its courts to seize foreign assets – a long-held fear of investors…as of 8:30 am Pacific, bullion is now up $1 an ounce at $1,218…Silver has retreated 19 cents at $17.49…Copper is off 3 cents to $3.05…Crude Oil is unchanged at $92.83 while the surging U.S. Dollar Index, continuing its record run, shot up to about 85.50 this morning but has since pulled back to 85.30 for a gain of one-fifth of a point…the Dollar Index is gunning for an incredible 11th straight weekly advance (see updated chart below) and although it’s already in overbought territory, a confirmed breakout above critical 85 resistance would attract even more momentum traders…it’s possible we may have seen a short-term “top” this morning but we’ll just have to wait and let the market tell us what direction it wants to go…

Gold demand in India is picking up ahead of the “Festival of Lights” (Diwali) on the 23rd of October…reports say that importers are shipping in Gold through official routes estimated to reach 80 tonnes this month, ahead of retail demand and at what they consider cheap prices…it has also been reported that 50 tonnes of Gold were smuggled this month over a 10-day period across the Indian borders…the Indian marriage season starts in November and lasts through to May next year…what also may help Indian Gold demand is that the monsoon season turned out to be better than expected for farmers, creating a good harvest…Indian farmers are sizable Gold buyers…watch for Indian as well as Chinese demand to increase further in the event Gold dips below $1,200 an ounce…

Yet another opinion on Gold – Citi Research has trimmed its price forecasts for most precious metals, describing itself as most upbeat on palladium…Gold, according to Citi, is expected to be under pressure in the fourth quarter, but by 2016 they see the average price rising again.  “We downgrade our near-to medium-term Gold price assumptions, marking-to-market the current spot environment,” Citi said in one of several research reports on the metals released today…Citi’s 2014 average forecast was revised to $1,275 an ounce from $1,300 previously, while the 2015 forecast was trimmed to $1,225 from $1,365…the 2016 forecast is now listed at $1,300, compared to $1,380 previously…

U.S. Dollar Index Update

The greenback has soared in recent weeks as a strengthening U.S. economy has prompted investors to wonder if the Federal Reserve will raise interest rates sooner than expected…the dollar climbed to a nearly 6-year high against the Yen today while gains against the euro were even sharper, with the common currency sinking to its weakest level (just below $1.27) since November 2012…the appreciating value of the dollar on the world foreign exchange markets has been a significantly bearish development for many raw commodities, one of the main factors in the sharp declines this month in both Gold and the Venture…this big divergence between U.S. and European monetary policy is not likely to end anytime soon, though the Dollar Index is clearly in overbought territory and at some point in the near future (immediately or fairly soon) will need to correct significantly in order to cleanse its current overbought conditions…

Analysts and traders pointed to Tuesday’s weak euro zone business activity data, coupled with further dovish comments from ECB President Mario Draghi, as fresh catalysts for the Dollar Index which is threatening to overcome critical resistance around 85…Draghi yesterday repeated that the ECB is open to using further unconventional policy measures to head off the threat of perilously low inflation…

Yesterday’s close above the 85 point level may have been a “false” breakout or a “bull trap”, so we have to be careful here…where the Index closes tomorrow will be critical…

Today’s Equity Markets

Asia

China’s Shanghai Composite was up slightly overnight…reports overnight that Chinese President Xi Jinping is considering replacing the head of the central bank has sparked expectations among some traders for looser monetary policy in the world’s second-largest economy…meanwhile, Japan’s Nikkei average climbed over 200 points to close at a new 7-year high of 16374…

Europe

European markets were down sharply today…

North America

The Dow has plunged nearly 200 points as of 8:30 am Pacific…the number of Americans filing new claims for unemployment benefits rose less than expected last week, suggesting an acceleration in job growth in September…meanwhile, the Commerce Department said durable goods orders, items ranging from toasters to aircraft that are meant to last three years or more, dropped 18.2%…that was in line with expectations (it partially reversed July’s aircraft-driven 22.5% surge) but represented the largest decline since the series started in 1992…

The TSX is 168 points lower as of 8:30 am Pacific while the Venture has fallen 8 points to 916…a very important support band for the Venture is between 915 and 920, so the balance of this week is going to be critical in terms of a potential reversal or a further breakdown…keep in mind that today is also month-end and quarter-end “settlement” which can often contribute to added selling…RSI(14) on the daily Venture chart is already at its most oversold point since the spring of last year when Gold collapsed to just below $1,200 an ounce…

Calibre Mining Corp. (CXB, TSX-V) Update

Calibre Mining (CXB, TSX-V) pushed higher yesterday after reporting the second set of assays from ongoing drilling at its Eastern Borosi Gold-Silver project which is being financed under an option agreement with Iamgold Corp. (IMG, TSX)…22 of 30 planned Phase 1 drill holes have now been completed with assays received for 12 of them…yesterday’s new high-grade intercepts results included 6.50 m grading 16.88 g/t Au and 20.95 g/t Ag in GP14-010 (within that interval, 1.82 m grading 45.79 g/t Au and 32.39 g/t Ag)…that was the first-ever drill hole on the Vancouver Gold-Silver vein system located 250 m southeast of the high-grade Gold discovery on the Guapinol structure…

Technically, we became very bullish on CXB when it broke out above a 2-year downtrend channel in June…CXB is now up against the chart resistance that John outlined earlier at 15 cents while RSI(14) is in overbought territory at 78%…

CXB is unchanged at 14 cents through the first 2 hours of trading…

Pine Cliff Energy Ltd. (PNE, TSX-V) Update

Interesting chart – with but one brief exception, Pine Cliff Energy (PNE, TSX-V) has remained within the parameters of an upsloping channel over the past 2 years with its 200-day moving average (SMA) providing tremendous support as you can see below…

This is a company that has been growing by strategic acquisitions, and earlier this week PNE reported that it had closed a $60 million prospectus offering of 29.3 million shares at a price of $2.05 per share…in late August, the company announced that it had entered into a binding agreement to acquire certain shallow natural gas assets in Alberta and Southern Saskatchewan from a senior oil and gas producer for cash consideration of $100-million…

PNE is down 4 cents at $1.71 – 21 cents above its 200-day – as of 8:30 am Pacific…technically, the bullish trend is showing some weakness at the moment and another test of the 200-day could be in the cards…as always, perform your own due diligence…

Alabama Graphite Corp. (ALP, TSX-V)

We’ve had some readers request this  – Alabama Graphite (ALP, TSX-V), which came out with news yesterday, has been a strong performer this year as it advances two flagship projects in the heart of a past producing region in Alabama…as always, perform your own due diligence…

Technically, the overall bullish trend here is quite powerful with strong support in the mid-20’s and a band of resistance between 29.5 cents and the March high (not shown on this 5-month daily chart) of 31.5 cents…from a long-term perspective, ALP has overcome resistance at its 1000-day moving average (SMA) which is very encouraging looking ahead into 2015…

ALP is off half a penny at 27.5 cents as of 8:30 am Pacific…

Note:  John, Terry and Jon do not hold share positions in CXB, PNE or ALP.

Gold has traded between $1,216 and $1,227 so far today…as of 7:15 am Pacific, bullion is down $3 an ounce at $1,220…Silver is off a dime at $17.68…Copper is flat at $3.07…Crude Oil is 37 cents lower at $91.18 while the U.S. Dollar Index has surged more than one-third of a point to 85.03 as it tests important resistance around the 85 level…

Interesting observation by Mark Hulbert this morning: There’s “only one time in the past 30 years when the HGNSI (Hulbert Gold Newsletter Sentiment Index) got any lower than it is today. That came in June 2013, when the HGNSI fell to minus 56.7%. As you can see from the accompanying chart, Gold soon – within a matter of a couple weeks – began a rally that, by late August, had tacked more than $200 on to the price of an ounce of Gold.”

Gold may experience a short-covering bounce in the near-term, prompting UBS to keep its 1-month price forecast at $1,250 an ounce, but with the expectations that rallies will be sold, the Swiss bank said today that it’s lowering its 3-month forecast by $100 to $1,200.  “Expectations of a stronger U.S. dollar, increasing focus on Fed (Federal Reserve monetary policy) normalization and its exit path, the absence of inflation risks, as well as rising (U.S.) Treasury yields all conspire to drag Gold lower,” said Edel Tully, strategist, and Joni Teves, analyst at UBS…

Investor and writer Dennis Gartman claimed this morning that India may challenge China to reclaim the spot as the world’s #1 Gold consumer, assuming that a report in the Hindustan Times is correct…the newspaper carried a report yesterday estimating that 50 metric tons of Gold was smuggled into the country in the previous 10 days amid a surge for demand during the festival season…the smuggling is to avoid the government’s import restrictions, including a 10% duty and so-called 80-20 rule that require 20% of all imports to be re-exported as a finished product…the smuggling supposedly occurred on land routes due to tightened airport security.  “If this report is even nearly true rather than wholly true, it shall mean that India is putting China to test once again as the world’s largest consumer of Gold,” Gartman stated…

Today’s Equity Markets

Asia

China’s Shanghai Index rallied to more than a 1-year high overnight, surging 35 points to close at 2344…sentiment rose after the International Monetary Fund said it expects growth to be well above 7% in 2015…

Europe

European markets are mixed in late trading overseas…traders are hopeful for a more accommodative stance by the ECB after weak business data from Germany…

North America

The Dow is down 13 points as of 7:15 am Pacific…sales of new U.S. single-family homes surged in August and hit their highest level in more than 6 years, offering confirmation that the housing recovery remains on course…the Commerce Department reported this morning that sales jumped 18% to a seasonally adjusted annual rate of 504,000 units…that’s the highest level since May 2008 and marks the second straight month of gains…

The TSX is off 69 points while the Venture has slid 3 points to 922 as of 7:15 am Pacific…

Venture Chart Update

This 1-year weekly Venture chart shows RSI(2) has hit an extreme low of 2.72%, a level not seen since December’s bottom of 884 which was immediately followed by a powerful move to the upside…the ADX indicator shows -DI at a previous high, so an imminent turnaround appears to be in the works here – especially with strong support between 915 and 920 (an area to watch carefully)…

Columbus Gold Corp. (CGT, TSX-V) Update

Columbus Gold (CGT, TSX-V) is showing technical strength as well as progress on the ground with 3 drill rigs now pounding away at the Montagne d’Or Gold deposit (Paul Isnard Project) in French Guiana…as reported by the company last week, there are approximately 10,500 m in 46 holes remaining in the current phase II program which is scheduled to be completed by the end of October/early November…

The Montagne d’Or deposit hosts an inferred resource of 140.1 million tonnes grading 1 g/t Au for a total of 4.3 million contained ounces (an updated estimate is expected by year-end)…the current drilling is being financed by Nord Gold NV as part of a minimum $30-million (U.S.) exploration and development program pursuant to which it can earn a 50.01% interest in Montagne d’Or and the Paul Isnard mineral claims by completing a bankable feasibility study no later than March, 2017…recent results from hole MO-14-167 (38.6 m grading 4.48 g/t Au) were highly impressive and demonstrate the potential for exceptional grades and widths in the principal UFZ zone…

Meanwhile, the company reported Monday that a “prominent” U.S. investor has agreed to acquire approximately 9.9% of Columbus Gold,  representing the entire private placement ($5.36 million at 40 cents per share) on amended terms from those announced a few weeks ago (this includes a reduction in the size and price of the offering, and no warrant component)…proceeds will be used in part to fund an extensive drill program at the company’s Eastside Gold discovery in Nevada…

CGT is off 4 pennies at 45 cents through the first 45 minutes of trading…note the bullish “W” in the RSI(14) and the unconfirmed breakout above the recent downtrend line with a rising 200-day moving average (SMA)…

Prosper Gold Corp. (PGX, TSX-V) Update

The most disappointing aspect of Prosper Gold Corp.’s (PGX, TSX-V) news on its Star Project yesterday was not so much the drill results but the weak way in which they were presented…there was an obvious lack of any market strategy/support or effort to positively influence investors’ understanding/perception of how this very large and promising project is progressing (it simply did not do justice to the work on the ground)…six dry, short sentences preceded a table of drill results that were recklessly thrown into the market less than 30 minutes before the opening bell…after just 15 minutes, the stock was down 8 cents or 32% on volume of less than 200,000 shares before most shareholders even had a chance to see the news, let alone properly digest it…with the stock immediately off sharply, most investors just assumed the results must have been poor…end of story…

The first sales yesterday were from Canaccord which again dictated the stock’s direction and has been allowed to heavily influence the Prosper market since mid-July…was this the best the company could do after 4 months of silence?…did Prosper really put its best foot forward and “go to bat” for its shareholders yesterday?…the answer to each of those questions is a resounding “no”, and certain investors responded to the company’s perceived apathy by sending the stock to a new all-time low…displayed prominently on the homepage of the Prosper web site are the words “Exploration”, “Discovery” and “Wealth”…in this business, in the competitive arena of the public markets during very challenging times in this particular industry, if you’re not able to communicate well – if you can’t “sell” your story with enthusiasm to investors – you’re on the path to wealth destruction, not wealth creation…in addition, the cost you will pay in terms of dilution to your stock to raise more capital (at lower prices) will be severe…there is no questioning the talent of Prosper’s technical team – Dr. Dirk Templeman-Kluit is recognized as one of the very best in his field – but yesterday demonstrated the company’s inherent weaknesses on the market and communications side of the equation, and that’s a key pillar in our view that’s clearly missing with PGX (and many other companies for that matter)…

Yesterday’s results nearly doubled the north-south extent of the Star deposit as defined previously by Firesteel Resources Inc. (FTR, TSX-V), and also revealed the discovery of an area of near-surface higher-grade material (holes S040, S045 and S048) as the system expands to the northwest, north and northeast…you don’t get intercepts reported yesterday like 288 m grading 0.33% Cu and 0.15 g/t Au, 257 m grading 0.31% Cu and 0.17 g/t Au, 198 m grading 0.38% Cu and 0.19 g/t Au, and 661 m grading 0.22% Cu and 0.11 g/t Au without the very strong prospect of a mine in this part of northwest British Columbia…yes, no “glory hole” yesterday, but investors witnessed an unnecessary steep plunge in PGX…

The emergence of a possible higher-grade starter pit area that requires follow-up was demonstrated in holes S048 (77 m @ 0.78% Cu and 0.55 g/t Au from 2 m to 79 m), S045 (107 m @ 0.77% Cu and 0.41 g/t Au from 12 m to 119 m) and S040 (42 m @ 0.81% Cu and 0.17 g/t Au from 4 to 46 m)…the lateral distance between S040 and S048 is approximately 125 m, north-northwest of S024 last year that returned 312 m grading 0.37% Cu and 0.24 g/t Au…

Between Firesteel and Prosper, nearly 40 holes have now been drilled into a central mineralized zone at the Star porphyry measuring 550 m north-south and 350 m east-west…geologists we spoke to yesterday gave “back-of-the-envelope” estimates of approximately 200 million tonnes at this point, though we caution that no NI-43-101 resource estimate has been carried out yet at the Star…

Keep in mind, the Star is just one of several large porphyry targets on this property…does the Star Project have world class billion-tonne potential with the prospect for a high-grade starter pit? – absolutely, which is why Prosper’s $5 million market cap is so absurd…

Continuity to the north is implied by a wide range of data collected by Prosper…in terms of drill results, all we’ve seen so far (historically and over the last year) is from the Star porphyry…below is a map that puts just part of the Star Project into perspective (Star North is nearly 1 km from the Star)…one important area you don’t see on this map is Pyrrhotite Creek, a distinct multiple target system 4.5 km to the southwest of the Star target…based on yesterday’s news, which lacked clarity in terms of a “road map” for investors for the immediate future, more drill results appear to be on the way – how many, and from where, is a mystery…

This map is taken from the Star Project presentation on Prosper’s web site.

Contact Exploration Inc. (CEX, TSX-V) Update

Contact Exploration (CEX, TSX-V) has been one of our favorite oil and gas plays since 2013, and last month hit a new multi-year high of 56 cents – a couple of pennies above a Fib. resistance level but within an impressive upsloping channel…

In late August, the company reported net income of nearly $1.1 million for the quarter ended June 30, more than double net income for the same period last year…recently, Contact also successfully completed drilling at three new Kakwa (Alberta Montney) wells, and these look promising…it’ll be interesting to see the initial 30-day production volumes (CEX holds a 25% working interest)…CEX remains very active on other fronts in the Montney and elsewhere…

Keep in mind that stock from a $10 million financing (39 cents non-flow-through, 44.5 cents flow-through) a few months ago becomes free trading early next month – just something to be aware of, as we mentioned previously, but good news from the Montney could drive enough volume in the stock to clean up any paper that comes into the market from the PP…

Below is an updated 2.5-year weekly CEX chart…resistance and support areas are clearly identifiable, and the stock remains in an upsloping channel since the summer of last year (currently near the bottom of that channel)…as of 7:15 am Pacific, CEX is unchanged at 47 cents…

Note:  John, Terry and Jon do not hold share positions in CGT, PGX or CEX.