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Gold and Silver are firmer today, trying to gain some traction after sliding into oversold territory…as of 8:00 am Pacific, bullion is up $7 an ounce at $1,222 after climbing as high as $1,237…Silver is up 2 pennies at $17.75…Copper is flat at $3.07…Crude Oil has added 88 cents to $91.74 while the U.S. Dollar Index is off slightly at 84.64…

Silver’s price slump has caused the much-regarded Gold/Silver ratio to climb to 69, its highest level since June 2010…

The market’s worst fears regarding some important Chinese economic data were alleviated overnight as the HSBC/Markit preliminary gauge of factory activity for September actually surprised to the upside, rising to 50.5 from an August final reading of 50.2…expectations were for a possible contraction below 50, which is one reason metals took a strong hit yesterday…however, enthusiasm over the 50.5 number was restrained somewhat by factory employment which slumped to a 5.5-year low…

The improved outlook for manufacturers follows a weakening in China’s industrial production, energy consumption and fixed-asset investment in August…the housing market is also in a slump…these negative factors have been offset to an extent by strong growth in exports and solid performance in retail and services…still, many analysts are expecting Chinese economic growth this year to fall short of the country’s official target of 7.5%…over the weekend, at the Group of 20 meeting, Finance Minister Lou Jiwei repeated Beijing’s message that the government wouldn’t resort to broad-based stimulus measures…he added that Beijing was focused on several economic indicators and that a shortfall in one area wouldn’t necessarily force a major policy response…the government seems to be favoring targeted measures such as last week’s liquidity injections from the People’s Bank of China (PBOC)…

Favorable COT Structure

Yesterday’s updated COT report for the week ended September 16 provides encouragement – one excellent example being that for the first time since June 10, managed-money traders pushed their holdings to be net-short in Silver…so they haven’t been this bearish since Silver took off to the upside over the final three weeks in June…meanwhile, commercial traders continue to scale back their net-short positions in both Gold and Silver, and next week’s report (ending today) should be even more revealing…this sort of set-up typically indicates a reversal in prices is imminent, and indeed we’re seeing strength returning to precious metals today…it’s possible that yesterday was an important turning point for Silver as it reversed intra-day from its lows…

Chile Invests More Than $20 Billion To Revamp Copper Mines

How this all plays out should be very interesting – Chile’s President, Michelle Bachelot, has given clearance for state-owned Copper producer Codelco to invest $23.5 billion to revamp century-old mines that are running out of profitable ore…will this become another classic example of taxpayers’ money going down a bottomless pit?…Copper generates 20% of government revenue in Chile and 60% of all Chilean exports…Codelco’s costs have more than doubled over five years, in part due to falling grades…will more than $20 billion fix the problem?…we’ll see…

Russia Keeps Adding Gold Reserves

Russia continues to consistently add to its Gold holdings and has just about doubled its reserves since the 2007/2008 financial crisis…the figures suggest that Russia’s almost non-stop monthly increases have primarily come from the central bank taking in a significant proportion of the country’s domestic Gold output which averaged around 20 tonnes a month in 2013…Russia could surpass Australia this year and become the world’s second largest producer of Gold behind China…

Today’s Equity Markets

Asia

Japan was closed for a holiday but China’s Shanghai Composite added 20 points overnight to close at 2910 after the better-than-expected flash PMI report…

Europe

European markets are down significantly in late trading overseas…fresh data showed business activity in the euro zone slipped again in September, with growth in both the region’s manufacturing and services sectors slowing over the month…the flash composite PMI for the euro zone came in at 52.3 in September, according to data provider Markit, below a Reuters’ forecast of 53.5…that’s also a 9-month low…French data also confirmed that the economy stagnated in the second quarter of this year…

North America

The Dow is down 37 points as of 8:00 am Pacific…the TSX is 10 points higher while the Venture is off 3 points at 925…

TSX Gold Index Update

September has been an unusually brutal month for the TSX Gold Index, but often a month will finish in different fashion than how it started…through yesterday, the Gold Index was down 33 points or a whopping 16.3% for September vs. just a 5.7% drop in the price of Gold (from $1,288 to $1,215)…the Venture has fared a little better than the Gold Index, declining 9.4%…

Below is an updated 6-month Gold Index chart…RSI(14) conditions after yesterday’s 7th straight daily loss became even more oversold than what occurred near the end of the May when the Index hit a low of 166…the Index closed at 169 yesterday and has fallen significantly below its still-rising 200-day moving average (SMA), currently at 185…an even bigger gap has opened between the 50-day (196) and the current price, so conditions are ideal for a rally back up to these moving averages…

RSI(14) shows a 3-gradient drop and we’ll be watching for a possible move this week above the 3rd gradient…the Gold Index is up a point at 170 as of 8:00 am Pacific…

TSX Composite Index Chart

Below is an interesting TSX chart that shows how the combined 336-point plunge Friday and yesterday took the Index slightly below the bottom of an upsloping channel on the 1-year daily chart…this could very well be a “false” breakdown – it does require confirmation…so trading activity today and tomorrow will be important…keep in mind there is strong TSX chart support at 15000 and the Index is still within an upsloping channel on the 5-year weekly chart we posted yesterday…it seems the 15000 level is quite critical for the TSX, as the 915-920 area is for the Venture…

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

Shortly before market open this morning, Prosper Gold Corp. (PGX, TSX-V) released results from the first 19 holes of its 2014 drill program at the Star Project in the Sheslay district…once again, a glaring lack of effective communication strategy on the part of Prosper in terms of a) explaining the significance of what’s evolving at the Star Project, and (b) the timing of the news, 20 minutes before market open which simply doesn’t allow investors enough time to properly digest results…we’ll comment more on Prosper tomorrow after we’ve had an opportunity to properly assess the numbers which at first glance do show the Star deposit extending to the north, northwest and northeast with higher grades near-surface occurring to the north…a significant system has been outlined over an area measuring 500 meters north-south and 350 meters east-west…BMR has extended an interview opportunity to Dr. Dirk Tempelman-Kluit, and we’re sure investors would appreciate his insight with regard to these results and the district in general…

PGX is off 6 cents to 19 cents as of 8:00 am Pacific – not necessary, given the results, but not surprising given how this news was packaged to investors with no market strategy behind it…leadership in the area will move toward Doubleview Capital Corp. (DBV, TSX-V) and Garibaldi Resources Corp. (GGI, TSX-V)…

Critical Elements Corp. (CRE, TSX-V) Update

We’ve been closely tracking Critical Elements Corp. (CRE, TSX-V) since early June when it was trading below 20 cents…on August 22, it hit a multi-year high of 40 cents which was the Fib. measured resistance level, and after a healthy correction that area is being tested again…

Last month the company announced that its low iron lithium concentrate has been successfully tested by ceramic and glass manufacturers…samples sent to multiple end-users for testing in May all tested positively…Critical Elements is now proceeding with plans to diversify its material output featuring at least three different products – tantalum concentrate, low-iron lithium concentrate, and battery-grade lithium carbonate…

Below is an updated 2.5-year weekly CRE chart from John…CRE is off 2 pennies at 37.5 cents as of 8:30 am Pacific…

Discovery Ventures Inc. (DVN, TSX-V) Update

Discovery Ventures (DVN, TSX-V) continues to aggressively push ahead on several fronts with its Willa-Max high-grade Gold-Copper Project in southeast British Columbia…among other developments, a surface exploration program commenced recently, and Micon International Ltd. is also updating and refining the geological modelling of the Willa resource…the interest in DVN has been driven by the obvious synergy of the the Willa combined with the Max mine and milling facilities Discovery negotiated to acquire at a bargain-basement price earlier this year…

Technically, DVN has been consolidating again recently after reacting at chart resistance around 40 cents…strong technical support exists at the 23-cent level which was a breakout point in June…RSI(14) has unwound to the 50% area…

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

Gold has traded between $1,210 and $1,218 so far today…as of 7:20 am Pacific, bullion is down $1 an ounce at $1,215…Silver is off its lows but down 5 cents at $17.74 (we have three Silver charts this morning)…Copper has slid a nickel to $3.08, a 3-month low ahead of manufacturing data tomorrow from top consumer China that is expected to show stalling factory growth in the world’s second-largest economy…Crude Oil is down 35 cents to $92.06 while the U.S. Dollar Index, on a record run and shooting for its 11th straight weekly advance, is flat at 84.69…strong resistance exists around 85…

Barclays’ analysis shows that 10% of global Gold production is cash-negative when using all-in sustaining costs…of those companies that were tracked, average cash costs in the second quarter were $717 an ounce, while “marginal” – or 90th percentile – cash costs were $988, Barclays says…the average all-in sustaining costs were $941, while marginal all-in sustaining costs were $1,285. “The main highlight of the recent data is that costs per ounce have not fallen with prices,” the bank says. “Much of the improvement we saw in costs over 2013 and in the beginning of 2014 was in head office costs, where there is declining room for improvement. At current Gold prices (which were around $1,220 to $1,230 as Barclays prepared its research note), we estimate that more than 10% of global production is under water – not an insignificant number.”

There were sales of 7.777 tonnes from the SPDR Gold ETF Friday, bringing holdings down to 776.440 tonnes…

Last week, we noted the launch of the Shanghai Gold Exchange’s international bourse with yuan-denominated contracts…Mineweb’s Lawrence Williams observed in an article this morning (www.mineweb.com), “It may make a slow start but aims to become the world’s biggest physical Gold exchange and is thus in itself a move towards reducing the influence of COMEX and the LBMA on global Gold trade and pricing and move the centre of gravity for this eastwards. Similar moves to set up new international Gold contracts in Singapore and Hong Kong will further accelerate the move in Gold trade to east Asia.”

Frank Holmes at www.usfunds.com points out that the ratio between Gold prices and global equities, as measured by the MSCI ACWI, has declined to its lowest level since September 2008…the low point is due to the unusual headwinds for Gold as of late (notably the surging U.S. Dollar Index) and the continued strength of equities…

This is a good sign – Gold traders have become the most bearish in three months, according to a survey from Bloomberg…

Today’s Equity Markets

Asia

China’s Shanghai Composite was off sharply overnight, declining 39 points to 2291…China’s finance minister, Lou Jiwei, said yesterday the country would not dramatically alter its economic policy because of any one economic indicator…the remarks came days after many economists lowered growth forecasts, having seen the latest set of weak data.  “The reality is people are not taking much comfort from China’s efforts to really stimulate the economy,” Dominic Schnider, an analyst at UBS Wealth Management in Singapore, said.  “The macro numbers have not been great for China, Europe and Japan. There’s disappointment in terms of growth momentum, in terms of the leading indicators, and obviously that’s weighing right now on the asset class.”

Japan’s Nikkei average, which touched a 7-year closing high Friday, fell 115 points overnight to close at 16206…

Europe

European markets are down slightly in late trading overseas…

North America

The Dow has declined 36 points as of 7:20 am Pacific…the TSX is off 52 points after a 200-point plunge Friday while the Venture has given up another 8 points to 947…as per John’s Saturday chart, a Venture band of support stretches from 918…this has all the makings of a “reversal week” with the emergence of very oversold conditions, so this is no time to push the panic button…

Geopolitics

In an audio recording distributed widely on social media yesterday, Islamic extremist group ISIS urged Muslims globally to launch attacks on civilians in member countries of a U.S.-led coalition opposed to their violent spread through areas of Syria and Iraq…in the nearly 42-minute long meandering propaganda speech uploaded to Twitter, ISIS spokesman Abu Muhammad al-Adnani encourages Muslims to kill “disbelievers” in countries supporting military action against the group in Iraq.  “If you can kill a disbelieving American or European – especially the spiteful and filthy French – or an Australian, or a Canadian, or any other disbeliever from the disbelievers waging war, including the citizens of the countries that entered into a coalition against the Islamic State…kill him in any manner or way however it may be,” said Adnani…

Meanwhile, former Secretary of Defense Leon Panetta said yesterday that he believes ISIS was able to flourish in part because the U.S. entered the conflict in Syria too late, saying the Obama administration should have armed the country’s moderate rebels earlier…Panetta, who served in the Obama administration from July 2011 to February 2013, said in an interview on CBS News’ “60 Minutes” that he was in support of arming the moderate Syrian rebels in 2012, along with several other members of the administration.  “I think that would’ve helped,” Panetta said. “And I think in part, we pay the price for not doing that in what we see happening with ISIS.”  According to CBS News, Panetta writes in his new book (“Worthy Fights”) that he, then-Secretary of State Hillary Clinton, the director of the CIA and the joint chiefs chairman all urged the President Obama to arm the rebels at a 2012 meeting…however, the President decided against it…

Gold Fever Continues In B.C. 

Yes, despite Gold’s recent setback, “Gold Fever” continues unabated in British Columbia where the recent Fraser River Gold Panning Championships were a huge success – in fact, the number of panners jumped by more than 20% to 158…

This major annual event, spearheaded of course by our friend Dan Moore (“Yukon Dan”) with the help of nearly three dozen volunteers and numerous corporate sponsors including BMR, draws participants of all ages and levels of experience from B.C. and elsewhere, and we’re elated that the 2014 version was such a big success…BMR sponsored two events – the “Grudge Match” (winner was Sam Tomelin who found all five Gold flakes in a time of just over five-and-a-half minutes – he had to pan out two ice cream buckets full of pay dirt) – and the “Hand in Hand” (winners were Dan Hadash and Alexandra Wasilewski)…congratulations to all participants in the many events!…

Meanwhile, the work that Yukon Dan has been doing over the years in the classrooms of British Columbia (we’re grateful the teachers’ strike there is now over, kids are back in school today), and elsewhere across the country, has drawn the much-deserved support of the likes of New Gold Inc. (NGD, TSX), Teck Resources Ltd. (TCK.B, TSX) and AME BC (Association for Mineral Exploration British Columbia), while BMR will be contributing everything it can to bring attention to this very worthwhile project to help it grow even more…what Yukon Dan is doing from the elementary to high school levels is hugely beneficial to the younger generation’s understanding and perception of the importance of mining, at a time when this sector needs all the support it can get…

A Set-Up For A New Wave To The Upside In Silver?

Below is a 10-year monthly Silver chart that puts the current action into clear perspective and shows where the metal can be expected to find strong support…

Silver has been in a “Wave 4” correction since hitting a high of nearly $50 an ounce in early 2011…according to Elliott Wave Theory, Wave #4 should not fall below the top of Wave#1…however, the reality is there is often a small overlap due to momentum…therefore, it’s expected that Wave #4 will find support within a band between $16 and $18.60…expect more consolidation before the start of Wave #5 to the upside which is typically a very powerful move and normally returns to the top of Wave #3…

TSX Updated Chart

The TSX Composite continues to trade within an upsloping channel, though RSI(14) at 59% has broken below a trendline in place since last summer and that certainly raises some concerns…strong support at the bottom of the channel (just over 15000) and the rising 200-day moving average (SMA) directly below it…

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

Above is a picture of Pat McAndless, P.Geo., from an issue of the Journal of Association of Professional Engineers and Geoscientists of B.C. (May/June 2007)…the highly respected and award-winning McAndless has been involved in mineral exploration for more than four decades, accumulating extensive knowledge and expertise in the evaluation of mineral properties…he has been a valuable mentor to many in his field over the years and has been directly responsible for significant discoveries leading to producing mines…so one cannot underestimate the significance of McAndless joining Doubleview Capital Corp. (DBV, TSX-V) recently as a senior adviser to the company’s board of directors…he’s a very important addition to an already strong technical team…

As DBV reported August 15, McAndless has commenced analysis of the data on the Hat Property and will be involved with management’s geological team in developing an extensive and strategic exploration plan for the Hat…we strongly suspect that an individual with such an impressive track record would step out of “retirement” (he was previously Vice-President, Exploration for Imperial Metals) and attach his name to the Hat Project only if he had an unusual degree of confidence that he could play a pivotal role in proving up an economic resource…he has a keen eye for finding higher grade zones, and we remind our readers that drill hole HAT-12 reported by DBV in mid-May (from a depth of 146 m to 436 m) passed through “the top section of a syeno-gabbro intrusion (Sheslay red stock) that has not previously been recognized in the district.”  That was an important development (could prove to be highly significant) overlooked by many investors, and some more holes have been drilled since then with results pending…the question is, what’s the potential size and shape of this red stock intrusive that could also host higher grades?…McAndless and the rest of the DBV team is attempting to determine that…

The latest DBV chart shows the emergence of a fresh bullish trend after a healthy basing period around strong chart and Fib. support in the mid-teens and the rising 300-day moving average (SMA)…there is evidence of new support at 20 cents, just above the rising 200-day SMA, and DBV could really get interesting with McAndless’s insight and proven ability to find higher grade zones as the company gears up for more drilling…

Garibaldi Resources (GGI, TSX-V) Update

News is certainly due from the Sheslay district, so we’ll be keeping a close eye on potential developments there this week…Prosper Gold Corp. (PGX, TSX-V) has been drilling since May, and updates are also expected soon from Doubleview and Garibaldi Resources Corp. (GGI, TSX-V) which is gearing up for first-ever drilling at the Grizzly…in addition, GGI of course has a “tiger by the tail” in Mexico where Phase 2 drilling is following up on an important high-grade near-surface discovery at the Rodadero Silver-Gold Project in Sonora State…both the Grizzly and Rodadero could be “transformational” for Garibaldi given the scale of these projects, their discovery potential and how they may be able to attract the interest of majors…keep in mind, GGI has already pulled off one big deal in Mexico and they have a wide assortment of strengths and advantages to continue to build shareholder value…

Technically, the long-term GGI chart (10-year monthly), which we updated last Monday, continues to show continued steady accumulation with strong support around current levels and a primary bullish trend gaining strength…

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

Newstrike Capital (NES, TSX-V), with GGI’s Dr. Craig Gibson playing an instrumental role on the ground, has been bucking the overall trend recently and is threatening to break out above a neckline (timing is uncertain) as shown in this 2+ year weekly chart from John…last week, 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…we’ll comment more on NES in the near future…

Newstrike is up another 7 cents to $1.18 as of 7:20 am Pacific…

Agnico Eagle Mines Ltd. (AEM, TSX) Update 

The TSX Gold Index is down again this morning for the 7th day in a row and the 12th day out of 15 this month…

If the chart for Agnico Eagle Mines (AEM, TSX) is any guide, the bloodletting on the Gold Index should soon end…just below $34 in early trading today, AEM has declined to its rising 300-day SMA and has touched its Fib. 38.2% retracement level of $33.63…RSI(14) is also at previous support on this 2+ year weekly chart…so while some minor additional weakness is possible – including a drop to Fib. support at $31 – the current weakness should be embraced, in our view, not feared…a turnaround out of these oversold conditions appears close at hand…

Silver Short-Term Chart

Extreme oversold levels (less than 1%) are now showing up in the RSI(2) in this 6-month daily chart after Silver broke previous support around $18.60…the metal has reversed all of its gains recorded in June and early July, and then some…the new trading range for the short-term is expected to be $16 to $18.60…

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…

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

TSX Venture Exchange and Gold

Handling and managing volatility is an investor’s biggest challenge, especially in the very speculative junior resource market.  This month has certainly been a test of resolve and nerves for many of us with an unexpected significant drop in commodities and a Venture Exchange that finished August on a very strong note but is now suffering the consequences of a surging U.S. Dollar Index which has driven Gold to more than an 8-month low.

The good news is, the Dollar Index can’t defy the Law of Gravity.  Now on an amazing 10-week binge, this is the most enduring greenback run on record.  The Dollar Index is now pushing against stiff resistance around the 85 level and is clearly temporarily overbought.  Momentum traders could take it higher still, with Gold as a result testing support at modestly lower levels, but now is not a wise time to be a “follower” as sudden reversals in these markets are likely close at hand.  Be patient, don’t panic, and look for opportunities in high-quality situations where fearful investors are making mistakes.

Below is a 1.5-year Venture chart that should comfort investors concerned about the drop below the 970-980 support zone.  The Index closed Friday at 955, a 33-point fall for the week (volume was tepid, a positive sign) which has taken the Venture’s RSI(14) on the 1-year daily chart to its lowest point of the year, well into oversold territory.  That’s a signal to be looking for buying opportunities – historical patterns have demonstrated that, time and again.  Yes, the Index could back off some more but don’t succumb to the “fear factor”.  Fear and greed do rule the markets.  As a famous saying goes, be fearful when others are greedy; be greedy when others are fearful.

This 1.5-year weekly Venture chart shows the formation of an important symmetrical triangle and a support band between 918 and 955.  The uptrend line from last year’s low of 859 currently intersects just above 920.  Keep in mind, the 200-day and 300-day moving averages continue to rise, and brief drops below these SMA’s during primary uptrends in any market are not unusual.

Fundamentals are important and what the Venture needs right now – what investors could really use – is a “confidence booster”, a success story on the exploration front.  We’re confident there is one (or more) on the way.  Stay tuned and keep the faith.

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.

Gold

Continued strength in the greenback put more pressure on Gold and commodities in general last week, with bullion dropping another $12 an ounce to $1,216 after previous weekly drops of $40 and $20.  Short-term technical indicators are certainly flashing “overbought” for the Dollar Index and “oversold” for Gold, though a brief near-term test of the $1,200 support area for bullion certainly can’t be ruled out as we indicated in this space last weekend.  In fact, one possibility is that “big money” may attempt to push Gold slightly below levels that trigger stop-loss orders, with smart traders then swooping in at their prey like sharp-eyed eagles.   That’s when bullion could stage a sudden and dramatic reversal.

Commercials have significantly reduced their net short positions recently, according to the latest COT data, and that’s another sign that Gold is nearing an important low.  Betting against the commercials is almost always a losing strategy.

Below is a 6-month daily Gold chart with classic oversold conditions.  RSI(14) is even more oversold than it was in late May/early June, just prior to a $100 advance in the metal.  -DI has either peaked or is in the late stages of peaking.  Again, momentum traders will attempt to push Gold down further – greed in reverse – and they may succeed, but the downside is limited in our view based on the current conditions that are nearing extreme levels.

Silver fell 82 cents last week, after a 58-cent plunge the previous week, to finish at $17.79 (updated Silver charts Monday morning).  Copper added 2 pennies to $3.13.  Crude Oil was up 14 cents to $82.41 while the red-hot U.S. Dollar Index climbed a full point to to 84.80.

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 $1,214 and $1,229 so far today…as of 8:30 am Pacific, bullion is down $8 an ounce at $1,217…Silver is off 54 cents at $17.98…Copper is flat at $3.12…Crude Oil is $1.09 a barrel lower at $91.98 while the U.S. Dollar Index is up nearly half a point to 84.70 en route to its 10th straight weekly advance…strong resistance exists around 85 on the Dollar Index, so a pullback from temporarily overbought conditions can be expected soon…

Bullion’s decline has kept its 14-day RSI(14) below 30 for 9 straight days, signaling oversold conditions and the growing likelihood of a near-term rebound…there are also signs of a pick-up in demand from China…volumes for the benchmark spot contract on the Shanghai Gold Exchange this week averaged nearly 50% more than the average this year, the latest data show…

The launch of the Shanghai Gold Exchange’s international bourse with yuan-denominated contracts this week is the first in a slew of bullion contracts expected in Asia, including Singapore and Hong Kong, before the end of the year as the region aims to have pricing power as the top consumer of the metal…China’s efforts have the best chance of success, say market players, as it has a huge home market…with imports of over 1,000 tonnes of Gold last year and local production of about 400 tonnes, China consumes over a third of global supply…a successful take-up of the exchange could see Gold priced and paid for in yuan rather than the U.S. dollar, challenging the traditional dominance of London and New York in trading…

On Silver: Tom Kendall, the head of commodities research at Credit Suisse in London, told Bloomberg, “The perception is that Silver will do well, and should outperform Gold as the economic recovery strengthens.  Belief in Silver’s dual properties, as a financial asset and also as an industrial metal, appears to remain strong.”

While money managers hold the least bullish bets on Silver since they were net short on June 10, demand for the metal from solar panel makers is seen rising to a record this year by CPM Group, a New York-based researcher…demand from jewelry and silverware makers will climb 4.3%, according to CPM…

Today’s Equity Markets

Asia

Japanese stocks rose overnight to their highest closing level in nearly 7 years, reacting positively to Scottish voters’ rejection of independence from the U.K., while the yen hit a fresh post-financial-crisis low against the dollar…

China’s Shanghai Composite jumped 13 points to close at 2329…more liquidity boosting measures from China…late yesterday, the PBOC cut the 14-day repo rate by 20 basis points to 3.5% to ease short-term borrowing costs for banks…traders also said the PBOC injected $1.3 billion into money markets this week…the move comes days after the PBOC was believed to have pumped $81 billion into China’s top five banks…

Europe

European markets were modestly higher today with investors breathing a sigh of relief that Scotland will remain part of the U.K. as secession opponents won 55% of the vote versus 45% who sought independence…

North America

The Dow has hit another new record high this morning…plenty of investor enthusiasm for Alibaba’s (BABA, NYSE) market debut after China’s e-commerce giant priced its initial public offering at $68 a share…it opens in just a few minutes and could pop out of the gate with an immediate gain of around 40%…

The TSX is off nearly 100 points through the first 2 hours of trading…the TSX Gold Index is down for the 6th straight session and has fallen in 11 out of 14 trading days so far this month – highly unusual for September…oversold conditions in the Index have clearly emerged…the Venture, meanwhile, is off 2 points at 964…

Cannabix Technologies Inc. (BLO, CSE) Update

Cannabix Technologies (BLO, CSE) is finishing another strong week on a positive note…what is crucial and has us particularly excited right now about BLO is that the American audience is just beginning to discover this story…the U.S. is where BLO is aiming for market penetration, in terms of both the equity side and the business model…and once the American media gets to know this company, watch out…

BLO’s patent-pending marijuana breathalyzer technology – rapidly proceeding to the prototype stage – is something the average person on the street,  even those who strongly support the legalization of marijuana, can understand, appreciate and rally behind…Cannabix is a first-mover in this space – no one else has what they’re developing – and law enforcement’s need for a roadside marijuana breathalyzer is obvious with more and more “drugged” drivers on the street…this cutting edge breath-analysis technology may also find high demand in certain workplace environments…

As always, perform your own due diligence…we see a management team that is highly capable, careful, prudent and market savvy…

Technically, BLO has broken out of a 2-month downtrend that started shortly after its powerful debut on the CSE in late June…strong support has formed in the mid-teens…

BLO is up a penny at 18 cents as of 8:30 am Pacific…

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

We’ve been bullish on the prospects for Cailbre Mining (CXB, TSX-V) since the early summer when John noted an important breakout above 6 cents and a 2-year downtrend channel…on Wednesday, the company announced a strategic $2 million private placement (25 million units at 8 cents per unit) with Franco-Nevada Corp. (FNV, NYSE) chairman Pierre Lassonde which will give him an 11.2% equity stake in Calibre on an undiluted basis (in July, B2Gold increased its equity ownership in CXB by exercising common share purchase warrants for proceeds to Calibre of $500,000)…

Calibre is very active with excellent geological prospects in Nicaragua including the Eastern Borosi Project which was recently optioned by Iamgold Corp. (IMG, TSX)…drilling continues; encouraging initial Phase 1 drill results were released a couple of weeks ago…Eastern Borosi hosts Gold-Silver resources in two deposits and a series of well-defined low-sulphidation epithermal Gold-Silver targets…approximately 3,000 m of diamond drilling in this program will test approximately 3 km of strike length of previously identified Gold-Silver-bearing structures in this prolific district…

Below is an updated 2.5-year weekly CXB chart…next major resistance is 15 cents…

CXB is off half a penny at 13 cents as of 8:30 am Pacific…

Great Lakes Graphite Inc. (GLK, TSX-V) Update 

This was purely a technical observation the other day – Great Lakes Graphite (GLK, TSX-V) was looking very bullish at the 9-cent level, and immediately took off to the upside on impressive volume…today’s close will be important as it may (or may not) confirm a breakout above resistance at 12 cents…RSI(14) at 58% on this 2+ year weekly chart is showing strong up momentum…as always, perform your own due diligence…

GLK is off 1.5 cents at 11.5 cents as of 8:30 am Pacific…

Falco Resources Ltd. (FPC, TSX-V) Update

We’ve been keeping an eye on Falco Resources (FPC, TSX-V) for several months now, in part due to our familiarity with the Rouyn-Noranda area where FPC is very active with a lot of promising ground…as we mentioned Tuesday, if you’re looking for a quality play in the junior resource sector, this certainly fits into the top 10% elite category…

As always, perform your own due diligence…obviously Sean Roosen has, and he likes what he sees…last Friday, Falco appointed Roosen as a director and chairman of the board…the appointment followed an announcement by Osisko Gold Royalties Ltd. (OR, TSX) late last month that it intends to increase its ownership interest in Falco to 14.99%…

John’s Tuesday chart on FPC showed the good possibility of a retracement into the 60’s following a sharp move higher Monday when the stock hit 78 cents…note the uptrend line, the rising and supporting 200-day SMA and the gap support in the mid-60’s…the primary trend is bullish, so any pullback should be viewed as an opportunity here…

FPC is down 2 pennies at 64 cents as of 8:30 am Pacific…

Balmoral Resources Ltd. (BAR, TSX) Update

Balmoral Resources (BAR, TSX), which has had a good week, has been one of the few bright stars on the exploration front this year…however, it was just a matter of time before an extended overbought RSI(14) condition started to unwind which is what began late last month…

BAR’s rising 100-day SMA, just below $1.50, is providing support (beneath that, the Fib. $1.29 level) with measured Fib. resistance and the 50-day SMA in the high $1.60’s…news will determine if BAR can push past resistance and climb to a new all-time high…lots of drill results to come from the company’s Grasset nickel discovery, where drilling continues, and the Martiniere Gold Property where a 20-hole summer program was recently completed…

BAR is off 6 cents at $1.59 as of 8:30 am Pacific…

Note:  John and Jon both hold share positions in BLO.  

7:30 pm Pacific

Cannabix Technologies Inc. (BLO, CSE) has made a significant move higher since our piece a week ago yesterday (September 10) in Morning Musings, but we encourage you to think very big about this one as it’s a company – and a story – with massive potential appeal in the United States in particular.  To this point they’ve only barely scratched the surface of the American market, the benefits of which are just now beginning to be felt.   Much, much more to come, we believe.

Today’s close of 17 cents gives the company a very modest market cap of only about $7 million.  While there are of course risks, the potential upside with Cannabix is truly immense.  This is a technology and a story that the average person on the street (and the media) can understand, appreciate and support.

After a low-volume retreat over a couple of months to a low of 9 cents September 9, Cannabix began to wake up after news that day including the fact the company signed a “collaboration” agreement with Field Forensics Inc. to develop a roadside test kit for use with the Cannabix marijuana breathalyzer technology which is rapidly proceeding to the prototype stage.  Field Forensics is a highly reputable company growing its networks through homeland security, the military and police departments.  We expect the relationship between Field Forensics and Cannabix to be very mutually beneficial.

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.  We believe they’re on track, and evidence of that is growing by the day.  Trading volumes are also beginning to pick up on the OTC where BLO trades under the symbol “BLOZF” (the stock became “piggyback” eligible for trading in the U.S. Sept. 6 with important DTC eligibility in the works).

Below is a chart of how BLO has traded since late June.  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.

As always, perform your own due diligence.  Management, of course, is crucial, and Cannabix in our view has a smart team that’s careful, prudent, and market savvy.  BLO of course is still a very speculative opportunity but quality management always helps reduce the risk.  This is a company keenly focused on building a business with a niche product that clearly has outstanding potential to fill an important need for law enforcement and many workplace environments.

Note:  Both John and Jon hold share positions in BLO.

Gold has traded between $1,215 and $1,227 so far today…as of 7:35 am Pacific, bullion is unchanged at $1,223…Silver is off 4 cents at $18.48…Copper is down 3 pennies at $3.13…Crude Oil has retreated 53 cents to $93.89 while the U.S. Dollar Index is down more than one-third of a point to 84.34…

Gold’s slide to an 8+ month low has brought it within sight of a cluster of critical chart support lines near its 2013 low, so the $1,200 area down to the $1,180’s is certainly key from a technical perspective…there are encouraging signs of a slight pick-up in physical demand out of China where premiums have climbed to $5 to $6 an ounce…

Interesting report from Bloomberg this morning…buyers of Silver exchange traded products are betting nearly $12 billion that big speculators are wrong about the outlook for prices, which have drifted to more than a 1-year low…ETP holdings are up 1.5% since mid-July to 19,898.8 metric tons, nearing a record reached in October, data compiled by Bloomberg show…at the same time, money managers shrank bullish wagers by 95%, government data show…to protect against the risk of lower prices, producer Coeur Mining Inc. (CDE, NYSE) has hedged about a third of its output at $18 an ounce – a move that may come back to haunt them…

Retail investors, who account for 80% of U.S. ETP purchases, expect long-term growth to spur industrial demand for Silver in everything from solar panels to electronics…for now, the commodity is the worst-performing precious metal this year…in what’s likely a positive contrarian sign, money managers and other large speculators – often overly bullish or bearish at the wrong time – have reduced their bullish bets on New York Silver for 8 straight weeks, the longest contraction in 17 months, according to the latest COT data…hedge funds have dismantled bullish positions that in July were the biggest since 2010…

“Unlike Gold, buyers of Silver ETFs are not the momentum players,” said Peter Jankovskis, who helps oversee $3.1 billion as co-chief investment officer of Lisle, Illinois-based OakBrook Investments LLC.  “You will see people holding Silver for a much longer period of time compared with Gold,” Jankovskis told Bloomberg.  “Last year, the ETF investors did not flee like you saw in Gold ETFs.”

China is giving foreign investors direct access to its Gold market for the first time today as the largest-consuming nation seeks to exert more influence over prices while boosting the yuan’s global use…the Shanghai Gold Exchange is now trading contracts in the city’s free-trade zone that are linked to its domestic spot market and available to about 40 international members including Goldman Sachs Group Inc. and UBS AG…access was previously limited to some Chinese subsidiaries…

Geopolitics

Australian police have thwarted an alleged ISIS plot to abduct and behead a member of the public as officers detained 15 people in the nation’s largest- ever anti-terrorism operation…authorities carried out the pre-dawn raids in Sydney today after receiving intelligence that a senior ISIS member was urging supporters in Australia to carry out “demonstration killings”, Prime Minister Tony Abbott told reporters…

Today’s Equity Markets

Asia

Asian markets were mixed overnight but China and Japan both posted gains…the Shanghai Composite edged 8 points higher to 2316…Chinese new home prices rose just 0.5% on year in August, compared with July’s 2.5% rise, according to the National Bureau of Statistics…on a monthly basis, prices posted their fourth consecutive decline, exacerbating worries about a correction in the real-estate market on the back of declining sales and a glut of supply…

The Nikkei average climbed 179 points to close above 16000, a new 8-month high as the yen weakened to a 6-year low against the greenback…

Europe

European markets are up significantly in late trading overseas…a lot of eyes are on Scotland where an independence vote is being held today…a total of 4.29 million, or 97% of the electorate, have registered to vote, the largest electorate Scotland has ever seen…the result of today’s historic referendum is expected early tomorrow with the opinion polls in the past two days suggesting it’s going to be extremely close…

North America

The Dow has surged to yet another record high while also passing Fib. resistance at 17150…as of 7:35 am Pacific, the Dow is up nearly 90 points at 17244…

Fed officials yesterday repeated their vow to keep interest rates pinned near zero for a “considerable time” after the central bank ends its stimulus program…some traders worried that removing that language would signal a more hawkish stance on monetary policy…but most officials, 14 out of 17, said they continue to believe the first increase in short-term interest rates will occur in 2015…this is a modest shift from June’s projections, when 12 officials pegged the first rate increase to occur next year…

The International Monetary Fund has become the latest group to warn on risk taking and equity valuations, as prices in “virtually all major asset classes” now look stretched, it stated…following in the footsteps of the Federal Reserve and the OECD, the IMF said pricey valuations coupled with flat volatility are now a cause for concern…

The TSX is off 12 points while the Venture is down 1 point at 972 as of 7:35 am Pacific…

U.S. Dollar Index Chart Update

The surging U.S. Dollar Index, which has been instrumental in pressuring Gold, is aiming for a remarkable 10th straight weekly advance but it has hit John’s initial Fib. target as well as chart resistance near 85, so a “cooling off” period is certainly warranted…the ADX indicator also shows +DI may have peaked, for now at least, just above 40…RSI(14) is in overbought territory at 81% on this 2.5-year weekly chart…a brief correction, followed by another challenge of resistance, could be in the works…

Euro Chart Update

Gold has been dropping with the euro recently but the euro is approaching strong support at 128 while RSI(14) is the mirror image of the Dollar Index – oversold at 22%…a recovery in the euro will be supportive of bullion…

TSX Gold Index Update

This long-term monthly chart gives a valuable “Big Picture” view of the TSX Gold Index and provides a strong case for an important low late last year at 149.29…

A bullish ascending triangle has formed and what would be critical from a technical perspective is if the Index were to push above its downtrend line in place for nearly 3 years…RSI(14) has been following an uptrend line, established after the 149 low, and is now testing that support…critical chart resistance is 210 as John has pointed out on numerous occasions…

Boxxer Gold Corp. (BXX, TSX-V) Update

More intriguing visuals reported yesterday from Boxxer Gold Corp. (BXX, TSX-V) from the second and final hole completed at the DOK Property, immediately south of the Sheslay district…it’s always wise to be cautious about visuals, no matter how encouraging they may seem, and Boxxer stated yesterday that assay results from the first hole aren’t expected yet for another few weeks…

The second hole, with a core length of 424.9 m, intersected visible occurrences of chalcopyrite mineralization from a core depth of 36.6 m to 389.5 m…trace bornite was noted to occur in the core from 57.3 m to 110.3 m and from 389.5 m to 424.9 m (end of hole)…mineralization observed in DOK-2014-02 is hosted in alternating strongly potassic and phyllic altered volcanics of the Stuhini group and multiple quartz monzonite intrusives…
hydrothermal biotite and gypsum veining, as well as disseminated and fracture controlled pyrite and magnetite, occur in variable concentration throughout the core…

Gypsum veining, an abundance of which was observed in the first hole, is formed by cool fluids, often late stage, and can be found throughout a porphyry environment from the core (as the hydrothermal system collapses) to the outermost fringe…the extent of gypsum veining is an encouraging sign but not necessarily directly linked to mineralization…trace bornite is certainly a positive indicator…

BXX is up half a penny at 4 cents as of 7:35 am Pacific while JV partner Continental Precious Minerals (CZQ, TSX) is 4 cents higher at 49.5 cents…

Fairmont Resources Inc. (FMR, TSX-V) Update

Fairmont Resources (FMR, TSX-V) announced this morning that it has commenced channeling at the Buttercup property in Quebec…this work, originally unplanned, was conceived upon the completion of the access road after excellent exposure of bedrock was uncovered during road construction…channeling will provide additional material for analysis and testing…Fairmont says it anticipates completing more than 400 m of channeling over approximately two weeks of fieldwork…FMR is up 1.5 cents at 29.5 cents as of 7:35 am Pacific…

Dios Exploration Inc. (DOS, TSX-V) 

Interesting results from Dios Exploration (DOS, TSX-V) yesterday nearly doubled the stock price on a closing basis on total volume (all exchanges) of 3.6 million, one of the highest volume days ever for DOS…the company reported it has made a significant fieldwork discovery at its AU33 Property in central Quebec – a hydrothermal-magmatic breccia pipe was found and yields up to 37 g/t Au and 14 g/t Ag, associated with bismuth and molybdenum…those are the highest grades ever returned from the property and that discovery is about 3.5 km from the main Heberto Gold showing…

The Heberto showing returned up to 5.18 g/t Au over 5 m (true width) in channel sampling (previous results) and is composed of disseminated pyrite along small quartz-sericite stringers in a quartz diorite…Heberto is coincidental with a weak 1-km long north-south IP conductor near the margin of a sub-circular magnetic anomaly, itself enclosed within a low magnetic one…the company said exploration will focus on drilling the Heberto targets and neighbouring hydrothermal-magmatic breccia pipes but gave no timeline for that…DOS is up another penny at 6.5 cents as of 7:35 am Pacific…

Critical Elements Corp. (CRE, TSX-V) Update

We’ve been closely tracking Critical Elements Corp. (CRE, TSX-V) since early June when it was trading below 20 cents…on August 22, it hit a multi-year high of 40 cents which was the Fib. measured resistance level…the confirmed breakout above Fib. resistance at 30 cents has served as new support as predicted…an overbought RSI(14) condition has been cleansed, so it’s possible CRE could be gearing up for a fresh advance though more basing is possible first…

On August 14 the company announced that its low iron lithium concentrate has been successfully tested by ceramic and glass manufacturers…samples sent to multiple end-users for testing in May all tested positively…Critical Elements is now proceeding with plans to diversify its material output featuring at least three different products – tantalum concentrate, low-iron lithium concentrate, and battery-grade lithium carbonate…

Below is an updated 2.5-year weekly CRE chart from John…CRE is off 1 penny at 32.5 cents as of 7:45 am Pacific…

 Note:  John, Terry and Jon do not hold share positions in BXX, FMR, DOS or CRE.