BullMarketRun.com

Gold has traded between $1,246 and $1,259 so far today…as of 8:00 am Pacific, bullion is down $7 an ounce at $1,249…Silver is off 11 cents at $18.95…Copper is up a penny at $3.12…Crude Oil is $1.09 lower at $91.66 a barrel, while the U.S. Dollar Index has gained more than one-tenth of a point to 84.26…

HSBC sees potential for Gold to ease some more if a statement from the Federal Open Market Committee next week should be more hawkish than expected…HSBC attributes Gold’s 3-month low to a reassessment of U.S. interest rate expectations following a recent Federal Bank of San Francisco report…HSBC says the report suggests investors may be underestimating how quickly policy makers could raise rates…HSBC’s U.S. economic outlook is for growth in U.S. GDP to average 2.5% in the second half and for full-year 2015, with the forecast for next year below consensus estimates…still, HSBC sees potential for the Fed to start hiking in June 2015 as the labor market improves, forecasting a jobless rate of 5.5% by the end of 2015…

India’s trade minister, Nirmala Sitharaman, says the government is not considering an immediate cut in the country’s Gold import duty…New Delhi had hiked the import duty on the yellow metal last year to 10% to limit overseas purchases and trim its bloated current account deficit…however, a dramatic improvement in the deficit had raised market expectations of a duty cut…

U.S. District Judge David Campbell in Phoenix says he will rule in two weeks if a ban on the filing of new hard-rock mining claims near the Grand Canyon is bad public policy or protects cultural assets, water and the environment…the region surrounding Grand Canyon National Park is believed to contain as much as 40% of the known U.S. uranium resources…in 2012, former Interior Secretary Ken Salazar announced a 20-year ban on new mining claims that covered more than 1 million acres surrounding the Grand Canyon National Park…

Geopolitics Take Center Stage On Eve Of 13th Anniversary Of 9/11

In a high-stakes televised address to the nation tonight (9:00 pm ET), President Obama is under pressure to lay out a clear strategy for the administration’s campaign against ISIS, a group he not so recently dismissed as akin to a junior basketball team trying to play in the big leagues…

Almost two-thirds of respondents in a new Wall Street Journal/NBC News poll believe it’s in the nation’s interest to confront Islamic State, the well-funded terrorist group that has swept through Syria and northern Iraq and recently beheaded two U.S. journalists…the survey also found indications that more people were coming to believe the U.S. should play a more active role on the world stage, a shift from WSJ/NBC surveys earlier this year that found war-weary Americans wanting to step back from foreign engagements…the reports about the beheadings were the most closely followed news events in the U.S. in five years, according to the WSJ/NBC poll…

Meanwhile, eight weeks before the midterm elections, a new CNN/ORC International poll shows that voters in key geographic regions favor Republican candidates heading into November, highlighting significant challenges for Democrats trying to protect half a dozen vulnerable Senate seats and control of the chamber…

U.S. Dollar Index Updated Chart

The strengthening U.S. Dollar Index has had a lot to do with Gold’s weakness this month and the pressure as well on commodities and the Venture Exchange…the Dollar Index has hit a Fib. resistance level (84.50), which doesn’t mean it has peaked just yet but a near-term pullback to unwind temporarily overbought conditions wouldn’t be surprising…the Index has a history of sudden spikes like we’ve seen over the last six weeks…

We’ll continue to monitor the Dollar Index closely…below is a 2.5-year weekly chart…

Today’s Markets

Asia

China’s Shanghai Composite slipped 8 points overnight to close at 2318 as concerns about the country’s credit supply hurt sentiment…Premier Li Keqiang said yesterday that China’s money supply grew 12.8% in August, slower than July’s 13.5% growth and modestly below analysts’ expectations, Xinhua News Agency reported…

Japan’s Nikkei finished nearly 40 points higher overnight to close at 15789…

Europe

European markets are down moderately in late trading overseas…

North America

The Dow is off 34 points as of 8:00 am Pacific…the TSX is down 77 points while the Venture has retreated 3 points at 985 after posting a 3.5-point gain yesterday, its first winning session this month…

Venture Long-Term Intra-Day Chart

If you don’t already subscribe to Frank Holmes’ (free) weekly Investor Alert, we suggest you do by going to www.usfunds.com…while he doesn’t often comment specifically on the Venture Exchange, Holmes did recently include this intra-day chart for the 2+ year period beginning in January, 2012, that traders may find interesting:

“With the TSX Venture,” Holmes observed, “it’s generally smarter to sell rather than buy in the morning. Over the last two-and-a-half years, this is when prices tend to be high. There’s heavy volatility as the market is reacting to what might have happened since the previous trading day’s closing bell. Unless you really know what you’re doing in this particular market, if you buy in the morning, you can often expect to see your shares sink as the day unfolds.  The ‘safest’ time to buy would be in the late afternoon. The market has cooled somewhat and traders are gauging where things might be headed. The challenge during this time, however, is that volume has dipped and, as a result, spreads have widened.”

Cannabix Technologies Inc. (BLO, CSE) Update

Keep a close eye on Cannabix Technologies Inc. (BLO, CSE) which we believe not only has upside potential over the near-term, but tremendous long-term possibilities as well…excitement over the company’s patent-pending marijuana breathalyzer technology drove the share price as high as 32 cents within 7 days of BLO trading on the CSE, but since then – on relatively low volume – the stock has gradually retreated to the 10-cent area, reducing the company’s market cap to just under $4 million…since the CSE listing, company officials have been focused primarily on BLO’s business model and behind-the-scenes efforts to roll this story out to the critical U.S. market…we believe they’re on track, and patient investors could be handsomely rewarded…as always, perform your own due diligence – management is very approachable…

Below is a chart of how BLO has traded since late June…a base appears to be forming around the 10-cent level (may have hit an important low yesterday at 9 cents), and note how the retreat from the 20-cent area has been on low volume…BLO is unchanged at 10.5 cents as of 8:00 am Pacific…

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

Discovery Ventures (DVN, TSX-V) continues to aggressively push ahead with its Willa-Max high-grade Gold-Copper Project in southeast British Columbia…yesterday, the company announced it recently engaged Micon International Ltd. to update and refine the geological 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 is temporarily consolidating after hitting the chart resistance outlined by John at 40 cents…the 20-day SMA, currently at 34 cents and not shown on this 2.5-year weekly chart, has provided strong support for DVN since its big move began near the end of May…there is also Fib. support at 30 cents…DVN is off half a penny at 34.5 cents as of 8:00 am Pacific…

Dolly Varden Silver Corp. (DV, TSX-V) Update

Dolly Varden Silver (DV, TSX-V), following the recent successful completion of a $5.7-million financing, has commenced a diamond drill program of up to 8,000 metres, or 20 holes, on the Dolly Varden Property in northwestern British Columbia…numerous untested epithermal and Eskay-Creek style targets will be drilled, and the program will also attempt to expand known Silver mineralization on the Torbrit-Red Point corridor where DV last year intercepted a 17.1-m interval grading 509 g/t Silver…DV closed yesterday at 12 cents, just slightly below its 200-day moving average (SMA) which has flattened out…keep in mind that most of the shares from the flow-through private placement completed at 12 cents over the summer will become free trading in mid-December…DV is unchanged at 12 cents through the first 90 minutes of trading…

Houston Lake Mining (HLM, TSX-V) Update

As we mentioned September 3, a company worthy of our readers’ due diligence is Houston Lake Mining (HLM, TSX-V) which broke out above a long-term downtrend line earlier this year, retraced to new support, and then powered higher again beginning in early August…after hitting a multi-year high of 16 cents September 2, a minor pullback occurred (to 10.5 cents) as predicted to unwind temporarily overbought conditions…HLM then quickly recovered on increased volume and hit another new multi-year high of 16.5 cents yesterday…

On September 2, HLM released results of two infill drill holes from its 2014 Phase II, 9-hole diamond drill program on the Pakeagama Lake pegmatite in Ontario…PL-011-14 intersected 1.68% lithium oxide (Li2O) over 104 m from 9.1 m to 104.7 m…PL-011-14, meanwhile, included a 12.8-m-wide high-grade lithium zone averaging 4.01% Li2O from 35 m to 47.8 m…results from 7 more holes are pending…

HLM President Trevor Walker stated, “These results with particular focus on the UIZ (high-grade) intercepts not only confirm grade from our maiden resource calculation but should increase the zone’s tonnage. These features of size and grade, combined with the pegmatite’s low inherent iron (less than 0.1 per cent iron oxide [see June 11, 2014, press release]) give HLM the confidence in its potential ability to economically produce a technical-grade quality spodumene product and/or concentrate that could appeal firstly to the established specialty glass and ceramics segment of the lithium market.  This could be possible in contrast to many others, who would require a sizable capital investment in order to remove and produce a low-iron product. We are pleased with these results and look forward to releasing pending assay results in the near future from the remaining drill holes on our phase II diamond drill program.” 

Below is a 10-year monthly HLM chart…note the sudden increase in buy pressure after dominant sell pressure since late 2007…HLM is unchanged at 16 cents on light volume as of 8:00 am Pacific…

Constantine Metal Resources (CEM, TSX-V) Update

Constantine Metal Resources (CEM, TSX-V), which we first brought to the attention of our readers when it was trading under 20 cents this summer, continues to be a strong performer…yesterday, the company announced it has secured a large and prospective land package surrounding its Palmer VMS Project in Alaska…

On July 22 the company released results from the first two holes of a 10,000-m drill program at the Palmer…initial drilling intersected a thick lens of massive sulphides 150 m down dip of the lower edge of the South Wall zone, a major expansion of the zone to depth…hole CMR14-54 returned 22.1 m grading 2.48% Cu, 4% Zn, 24 g/t Ag and 0.39 g/t Au…if additional holes can return even better grades, then CEM could gain a lot more attention…

The current drilling is part of a $6.2-million (U.S.) budget for 2014 financed by partner Dowa Metals & Mining Co. Ltd. of Japan…Dowa is in the second year of an option agreement in which it can earn 49% in the Palmer project by making aggregate expenditures of $22-million (U.S.) over four years…at this early stage, Palmer hosts a 4.75-million-tonne inferred resource grading 1.84% Cu, 4.6% Zn, 0.28 g/t Au and 29 g/t Ag…

Below is an updated 2.5-year weekly chart from John…CEM is trading at levels not since seen 2011, a very bullish sign…note that there is measured Fib. resistance at 21 cents, which CEM appears to have overcome, followed by 31 cents (not shown on this chart)…the 20-day SMA, currently at 23.5 cents, has been providing rock-solid support since the beginning of June…good potential through the remainder of the year…CEM is up half a penny at 24 cents as of 8:00 am Pacific…

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

Gold has traded between $1,251 and $1,259 so far today…as of 7:45 am Pacific, bullion is unchanged at $1,255…Silver is 9 cents lower at $18.93…Copper has retreated 7 cents to $3.10…Crude Oil is 48 cents higher at $93.14 while the red-hot U.S. Dollar Index is flat at 84.33…the greenback is near July 2013 highs versus a basket of leading currencies, tracking rising U.S. yields after a San Francisco Fed study noted investors are pricing in a lower trajectory for interest rate rises than members of the central bank…

Top buyer China returned from a holiday yesterday but failed to provide any significant support to Gold prices, though premiums on the Shanghai Gold Exchange are slightly higher (steady in the $4 to $5 range) than they were early last week…meanwhile, demand from India remains subdued ahead of the Indian wedding and festival season, which typically falls in October and November, when it’s considered auspicious to buy the metal…

Zinc prices remain close to 3-year highs…production is expected to fall short of demand this year for the first time since 2007, according to Goldman Sachs…several large, aging mines are scheduled to close next year, and miners need higher prices to justify the cost of finding and developing new sources of metal…miners may not produce enough Zinc to meet the needs of steel companies and coin makers until 2018, analysts say…meantime, a rebound in the U.S. property market and soaring global auto sales are creating new demand for galvanized steel…Zinc is used in everything from steel coatings to car tires to sunscreen, and the metal has few substitutes…

“Peak Gold”? 

Miners have reached “Peak Gold“ in which production of the precious metal has hit its high as easy-to-mine Gold deposits become harder to find, according to Chuck Jeannes, CEO of Goldcorp Inc. (G, TSX), the world’s largest Gold miner by market capitalization…a Wall Street Journal report quotes Jeannes as saying that a falloff in supply will support the Gold price, but make mining it even harder and lead to further consolidation in the industry. “Whether it is this year or next year, I don’t think we will ever see the Gold production reach these levels again,” he declared. “There are just not that many new mines being found and developed.” 

In that context, it’s even easier to understand Agnico Eagle Mine Ltd.’s (AEM, TSX) $205 million buyout offer announced after yesterday’s close for Cayden Resources Inc. (CYD, TSX-V), an aggressive Mexican explorer which has demonstrated multi-million ounce potential with its El Barqueno concessions – a possible new world class Gold district – in Jalisco State…it’s an encouraging sign to see a major step up to the plate in the current environment to buy what it considers to be an undervalued asset…

“This acquisition is consistent with our long-term strategy of acquiring promising, early-stage Gold projects, where we can add value through focused exploration and mine building,” said Sean Boyd, President and CEO of Agnico Eagle. “This strategy has served us well in Mexico, and we believe that the Cayden properties are a very good fit with our existing southern operations and skill sets,” he added. 

Meanwhile, last night, Taseko Mines Ltd. (TKO, TSX) announced an all-share buyout of Curis Resources (CUV, TSX-V) which holds the Florence Copper Project in Arizona, midway between Phoenix and Tuscon (probable reserves of 340 million tons grading 0.36% total Copper (TCu) at a cut-off grade of 0.05% TCu)…Taseko already owned a good chunk of Curis, having conducted a $7 million private placement in CUV late last year at 60 cents to boost its interest to 17%…

Today’s Markets

Asia

China got back to business after a holiday Monday, but the Shanghai Composite traded in a narrow range overnight and closed essentially unchanged at 2326…investors essentially shrugged off trade data released yesterday that showed growth in China’s imports slowed for the second straight month in August…Japan’s Nikkei average was up slightly overnight to close at 15749…

Europe

European markets are off modestly in late trading overseas…concerns are mounting over an upcoming independence vote for Scotland…meanwhile, the European Union formally adopted a package of new sanctions against Russia late yesterday, but said their entry into force would be delayed to leave time to assess whether a cease-fire in Ukraine is holding…

North America

The Dow is down 84 points as of 7:45 am Pacific…the 10-year U.S. Treasury yield has hit a 6-week high…a report from the San Francisco Federal Reserve states that the public seems to expect more accommodative policy than members of the Federal Open Market Committee themselves…it also notes that the public “might not give enough weight to how dependent the central bank’s guidance is on both current and incoming data”.

The TSX is up 7 points while the Venture has added 4 points to 989 through the first 75 minutes of trading…

Garibaldi Resources Corp. (GGI, TSX-V) Update

As Garibaldi Resources (GGI, TSX-V) gears up for first-ever drilling at the Grizzly in northwest B.C.’s Sheslay District, company President & CEO Steve Regoci could not help but be highly encouraged at yesterday’s news of Agnico Eagle’s buyout of Cayden Resources which highlights the immense opportunities that do exist in Mexico…

As drilling continues at GGI’s Silver Eagle discovery, approximately 90 km northwest of Agnico Eagle’s La India mine which went into commercial production earlier this year, Regoci told BMR that his team is not only focused on expanding the high-grade open-pit potential of Silver Eagle, but exploiting what they see as a large-scale district opportunity and the emergence of a new mineral camp at Rodadero.

“Our guys are exceptionally excited by the nature of the mineralization and the clustering effect down there at Rodadero,” Regoci stated.  “I actually consider that this in fact a new mineral belt.  La Tortuga and Tarichi to the east and southeast of Silver Eagle have an awful lot of sampling done down there.  It’s more Gold than Silver, though even there we have exceptionally high-grade Silver.  But the Gold numbers are surprising.  You see the transition from the west to the east.  As you move toward the east you get more Gold than you do Silver, and it’s prolific.  So it’s going to be interesting to figure out exactly where we are in the system…what we feel is, we’re looking at high-grade near-surface, but it has the potential that there’s something very large and significant feeding this system which is kilometers wide in every direction.”

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

Drilling started nearly four months ago at Prosper Gold’s (PGX, TSX-V) Star Project, so initial results could come almost anytime now…as we’ve stated repeatedly, the Star is an exceptional property with the potential to deliver stellar results that would confirm the world class potential of the entire Sheslay district…and if there’s anyone who can figure out this geological puzzle, it’s Dr. Dirk Tempelman-Kluit whose last project of course was the multi-million ounce Gold discovery at Blackwater that’s now in the hands of New Gold Inc. (NGD, TSX)…

Given historical results, plus the results of Prosper’s first phase of work completed late last year, there’s little doubt that the Star has massive tonnage potential with the opportunity as well for higher grade zones given the cooked-up nature of the rocks in this district…with a current market cap of only $8 million, the upside potential in PGX is huge in our view…several months ago, Tempelman-Kluit and President and CEO Pete Bernier invested about a combined $600,000 of their own money as part of a PGX private placement at 50 cents…

Technically, Prosper is showing clear signs of forming a bottom around strong support at 25 cents…SS is very oversold while RSI(14) on this 2.5-year weekly chart may have hit a low at 30% with a possible bullish “W” emerging…

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

Boxxer Gold (BXX, TSX-V), after recently announcing the closing of an over-subscribed private placement that hauled in $620,000 at 4 cents, announced another raise last Thursday – smaller ($150,000) but above the market price at a nickel…so we’re watching this a little more closely…

On August 18, BXX broke out above a long-term downtrend line after announcing very encouraging “visuals” from the first hole completed at the company’s DOK Project (JV’d with Continental Precious Minerals Inc. – CZQ, TSX) – 30 miles due south of the Grizzly…

As we cautioned previously, while the visuals from this first hole look quite promising, the likelihood of a lengthy economic intersection right off the bat would be quite remote in our view…we would define success for BXX and CZQ as finding a trail of mineralization that they can follow, one that warrants additional drilling…visuals can also be very deceiving at times but the geologists behind this are well respected…

Boxxer has more paper (over 300 million shares O/S) than any shredder could handle, but BXX is worth keeping an eye on in the event there’s a pleasant surprise out of DOK, plus the company has some other interesting projects on the go including one in Idaho that we suggest readers take a look at…

Below is a 3-year weekly BXX chart…the technical set-up is intriguing with very strong support at 3 cents and a band of resistance between a nickel and 7 cents…one advantage of so many shares outstanding is liquidity for investors – especially if something big were to unfold…BXX is up half a penny at 4.5 cents as of 7:45 am Pacific…

Ascot Resources Ltd. (AOT, TSX-V) Update

A Fib. support level at $1.90 continues to hold for Ascot Resources (AOT, TSX-V) in a consolidation phase following 12 winning sessions out of 13 between August 11 and August 27…the minor pullback from a multi-year high of $2.40 August 28 was certainly not surprising after such a powerful run…

Ascot continues to drill aggressively with three rigs at its Premier Property that covers more than 100 sq. km near Stewart and includes the past producing Premier high-grade mine…this is a potentially very prolific fundamental play in our view…historic work and recent Ascot drilling indicate a system where mineralization is focused in a structural zone with widths ranging from 30 m to 150 m, with a known strike length of over 1,600 m and a dip length of up to 1,200 m…

Below is an updated 1-year daily chart…buy pressure has been intense since mid-July, and a temporarily overbought RSI(14) condition appears to have been cleansed…as always, perform your own due diligence…

Note:  John and Jon both hold share positions in GGI and PGX. 

Gold has traded between $1,252 and $1,273 so far today…as of 8:30 am Pacific, bullion is down $14 an ounce at $1,254, a 3-month low…Silver is off 20 cents at $18.99…Copper is up 3 pennies at $3.20…Crude Oil is off $1.24 a barrel to $92.05 while the U.S. Dollar Index has added another one-tenth of a point to 83.99…

Gold has Fib. support at $1,259 and chart support at $1,240…it’ll be interesting to see if physical demand picks up this week, especially if prices weaken further…geopolitical tensions potentially could give bullion a lift or at least keep it from falling further in the face of a strong U.S. Dollar Index that seems to want to move higher and test resistance levels…the greenback and buoyant equity markets are the biggest factors pressuring the yellow metal at the moment…

A positive contrarian indicator – hedge funds and money managers decreased their bullish futures and option bets in Gold for a third consecutive week to the lowest since June, according to the latest statistics from the Commodity Futures Trading Commission…

The ECB’s easing efforts late last week are widely seen as a mixed blessing…while Gold can benefit from greater investment demand as traders often seek hard assets as a hedge against excessive monetary stimulus, the policy shift can also weaken the euro and strengthen the dollar, making bullion more expensive for buyers who use other currencies…

Close to 20% of Chile’s largest Copper mines will be closed or reconverted by 2025, as the country faces a challenging scenario, marked primarily by falling ore grades and rising costs at its aging mines…while the country produced 5.8 million tons of Copper last year, 20% of that figure (1.2 million tons) came from operations that are facing closure or conversion in the next 10 years…according to local paper El Mercurio (in Spanish), while the country produced 5.8 million tons of Copper last year, 20% of that figure (1.2 million tons) came from operations that are facing closure or conversion in the next 10 years…

Today’s Equity Markets

Asia

Trading volumes were light in Asia overnight with markets in China, South Korea and Taiwan shut for the mid-Autumn Festival…

August trade numbers released today show China’s export engine continues to steal market share in global trade…China’s goods sold abroad rose 9.4% from a year earlier, slower than July but well above the pace of global trade, which the International Monetary Fund estimates will expand 4% this year…China’s imports, however, fell an annual 2.4%, missing estimates for a 1.7% increase…still, the country’s trade surplus rose to $49.8 billion, well above forecasts for $40 billion…

Japan’s Nikkei average snapped a 2-session losing skid with a gain of 36 points despite disappointing revised GDP data…Japan’s economy contracted in the second quarter at the fastest pace since 2009, dealing a blow to Prime Minister Shinzo Abe’s efforts to re-energize the economy with pro-growth steps…revised data showed that the country’s GDP contracted an annualized 7.1% in the April to June quarter from the previous three-month period as businesses as well as consumers retrenched after the government raised the sales tax…preliminary figures showed a 6.8% decline…

Updated Shanghai Composite Chart

The clear breakout in China’s Shanghai Composite has to be considered bullish for global stocks generally and the outlook for the Chinese economy…based on this weekly chart going back to the spring of last year, it appears the Shanghai is on its way to the 2500 level – another 7.5% jump from current levels…John correctly called the breakout in late July when the Shanghai completed an inverted head and shoulders pattern and closed above the neckline…

Europe

European markets were mixed today…upbeat trade data for July from Germany – a 4.7% surge in exports which beat expectations and was the biggest rise since May 2012…

North America

The Dow is down 10 points as of 8:30 am Pacific…

After warning about the risk of a temporary sell-off in stocks back in July, Goldman Sachs today upgraded its outlook on equities to “overweight, expecting a push higher for stocks in both the near and medium-term…”We upgrade equities to overweight over three months…we expect earnings growth, dividends, and high risk premia to support returns,” Goldman’s global investment team, which includes Peter Oppenheimer and Anders Nielsen, said in a research note released this morning…on July 25, the investment bank downgraded equities to “neutral” for the three months ahead…in 10 sessions from July 25 to August 7, the Dow fell more than 700 points or 4.4% before rebounding after touching its rising 200-day moving average (SMA)…

The Financial Times (Robin Harding) reported today that the Federal Reserve’s “forward guidance on future interest rates has come up for debate after a stream of central bank officials declared the current wording needs to change.  In the past few days, officials from every part of the rate-setting Federal Open Market Committee – hawks and doves, regional presidents and Washington governors – have called for new language.  Their remarks could mean a move at the September FOMC meeting in 10 days, although there is little consensus yet on new wording, so a shift might have to wait until next month.”

The TSX is down 41 points as of 8:30 am Pacific…the TSX Gold Index has touched its rising 200-day SMA for the first time since climbing above it in mid-June…the Gold Index, down 4 points in early trading today, is off 8.9% in just the first five trading sessions of September…

The Venture is off 8 points at 987…RSI(2) on the Venture’s 1-year daily chart has fallen to extreme oversold levels seen only a couple of other times this year at other important lows…

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

John is seeing signs of encouragement in the chart for Doubleview Capital (DBV, TSX-V), and there are good reasons to expect the Sheslay District to heat up again very soon with news pending on several fronts…critical support appears to have held around the 15-cent level and the 300-day SMA…RSI(14) is showing increasing momentum with an uptick in volume last week as well…DBV is off a penny at 17 cents as of 8:30 am Pacific…

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 this morning hit a new multi-year high of 56 cents – a couple of pennies above a Fib. resistance level but within the impressive upsloping channel…

Recently, 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 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 in early October – just something to be aware of, 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…as of 8:30 am Pacific, CEX is off 2 cents at 53 cents…

Silver Short-Term Chart Update

This 6-month daily chart shows how extreme RSI(2) conditions in Silver persisted for most of June as the metal made a rapid move to the upside…a necessary unwinding of that overbought situation has since occurred with the metal actually surrendering almost all of its gains since its low of $18.61 near the end of May…support around $19 is expected to hold…

Silver Long-Term Chart

This 11-year monthly chart better illustrates the strong support Silver has at and just slightly below $19…the metal broke out above one important downtrend line in the second quarter, and that’s also what’s providing support around current levels…RSI(2) closed last week at 23% – note the higher lows in this indicator over the past year…

Also note how the SS may have bottomed with a low bullish “W”…Silver is sluggish but continues to look highly attractive from a long-term perspective around current levels…

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

Grouse Mountain, British Columbia

As we prepare to focus even more on the geological prospectivity of British Columbia in the coming days and weeks, including of course the prolific Sheslay and Stewart districts in the northwest, hiking up Grouse Mountain – overlooking Vancouver from the north – is a great way to ready oneself for a property site visit…

We also believe our readers will enjoy this 15-picture slide show taken from Grouse on this clear, hot day in Vancouver (slide show works best with the latest version of Adobe Flash Player)…

[aslideshow effect=”fade” play=true playframe=false controls_play=true]

[/aslideshow]

From Grouse Mountain, British Columbia

TSX Venture Exchange and Gold

The Venture took some momentum into September with a 7-session winning streak – the Index hit a monthly high of 1027 on the final day of August – but had a disappointing first week of the new month with four straight losing sessions and a drop back below the 1000 level.  For the week, the Venture lost 29 points to finish at 995, thanks in large part to two bad days in particular – Tuesday and Thursday.

Curiously, the way a month begins for the Venture is often not how it ends.  We’ve seen many examples of this over the years.  In fact, just in 2014, January, February, March, June, July and August all finished quite differently than they started.  That’s quite remarkable and gives us hope that we’ll still see a very strong September despite the bumpy start.  We’re convinced that a lot of money is sitting on the sidelines – some great drill results would quickly inspire investors.  On that note we’re looking for leadership from northwest British Columbia and some specific situations in other jurisdictions.  More on that in the coming days.

Below is the updated 6-month daily Venture chart.  What are the technicals trying to tell us now?

In late August, the Venture gained momentum when it broke above a short-term downtrend line.  Chart resistance was pointed out at 1027 and 1039.  While the Index fell below various Fib. levels last week, it did find support at the top of that downtrend line which is also just a few points above the rising 200-day moving average.  The Venture has not fallen below its 200-day SMA since finally pushing above it at the very beginning of January.

Below the 200-day, of course, is the Great Wall of Support between about 970 and 980 – an area of very strong resistance for many months last year which has successfully been tested on several occasions since March (the rising 300-day SMA, not shown on this chart, is 968).

Venture 5-Year Weekly Chart

Despite last week’s slide, the Venture still remains well within the parameters of a primary uptrend as shown in this updated 5-year weekly chart.  Note the string of higher lows the Venture has made since bottoming at 859 in June of last year.  The Index has also been out-performing Gold which is a positive sign, a clear change in trend from the period beginning in early 2011 to mid-2013.

RSI(14) on this 5-year weekly chart is once again testing the uptrend line around 50% which has held as critical support after serving as resistance since mid-2011 (major trend change).  A modestly overbought condition in the RSI that emerged in March when the Index hit 1050 gradually unwound to this new support.

The Q2 decline that took the Venture to superb support at 968 May 20 came on light volume, and accumulation (CMF indicator) has remained steady and strong.  We’ve seen the most extended period of healthy accumulation in a few years.  This is a very bullish dynamic, and includes a +DI/-DI crossover at the beginning of this year.  Those who gave up on this market during the 8% retreat from 1050 to the May low made a profound miscalculation.  Astute investors have a great chance to cash in big over the next couple of months in particular before the possibility of a more substantial correction late in Q4 or very early in 2015 to unwind overbought conditions that may ensue.

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

Gold took a $20 hit last week, falling through support in the $1,270’s, to finish at $1,268.  There is Fib. support at $1,259 and strong chart support at $1,240.  Bullion stabilized at the end of the week following the announcement of the ECB stimulus and a much weaker than expected U.S. jobs report for August.  Bullion has actually held up quite well in the face of an accelerated move in the U.S. Dollar Index.  Expect the greenback to climb further, but the Americans are no more interested in a runaway currency than any other country.

As we approach the 13th anniversary of the horrific 9/11 attacks, and as the evil, hate-filled ISIS group continues its rampage in Syria and Iraq with an eye on also carrying out terrorist attacks on Western soil, the world is actually a more dangerous place now than it has been in decades.  A much more belligerent Russia and an obvious lack of Western leadership (will President Obama or others finally rise to the challenge?) are also contributing significantly to the growing possibility of “Black Swan” geopolitical events across broad areas of the globe.  Geopolitical tensions should provide a floor of support for bullion and perhaps even ignite a dramatic rise, though that’s not how we’d like to see Gold charge higher.

President Obama will address the nation Wednesday to explain “what our game plan is going forward” in the “fight” against ISIS.  That should be an interesting speech.  But this is not just a fight against ISIS, as many people are sugar coating it.  This is war.  To win this war will require effective leadership and raw power from the United States, Great Britain, and a strong coalition including participation from Arab countries.  The war on terrorism began September 11, 2001, and it’s not going to end anytime soon – no matter how “war weary” Americans are.  It’s not a war that the West can afford to lose.

Playing into this global instability theme is a grab for resources – Oil, metals, even water.  The Chinese understand this very well, as do the Russians and others (ISIS is funding itself partly through the seizing and selling of Oil).  Gold is an important part of the equation here.  China is flexing its muscles, efficiently carrying out a strategy to back its currency with Gold and secure a supply of strategic metals/resources.

Below is John’s 6-month daily Gold chart.  Historically, September is the metal’s best month of the year – so we’ll see if a turnaround kicks in shortly.  A bullish “W” has formed in the RSI(14), which is encouraging, but sell pressure needs to abate and physical demand from Asia in particular needs to pick up.

Silver fell 27 cents last week to finish at $19.19.  Copper gave up 2 pennies, closing at $3.17.  Crude Oil gave up $2.67 a barrel to finish at $93.29 while the U.S. Dollar Index climbed more than a point to end the week at $83.76.

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 is firmer but off its highs of the day after a weaker than expected U.S. jobs report this morning that has temporarily cooled off the greenback…as of 8:00 am Pacific, bullion is up $5 an ounce at $1,266 – still down more than $20 for the week, however…Silver is up 2 pennies at $19.08…Copper is unchanged at $3.15…Crude Oil is down 41 cents at $94.04 while the U.S. Dollar Index has eased one-fifth of a point to 83.72 (see updated charts below)…

SPDR Gold Trust, the world’s largest Gold-backed exchange-traded fund, said its holdings fell 4.78 tonnes to 785.73 tonnes yesterday – the biggest one-day drop since mid-April…in the physical markets, buying has picked up slightly in Asia due to lower prices…premiums in China rose to about $4-5 an ounce from $3 in the previous session…a pick-up in physical demand from both China and India is going to be crucial in order to put a solid floor of support underneath Gold prices, especially in light of a bullish U.S. Dollar Index…

While August 2014 sales of the U.S. Mint American Eagle Gold bullion coins more than doubled from a year ago, year-to-date sales of the coins have declined almost 54%…American Silver Eagle coin sales are also down significantly from last year, U.S. Mint data reveals…

September is historically Gold’s best-performing month of the year, returning just over 2% on average since 1969 but it has fallen as much as 2% already this month when it touched a 3-month low yesterday…

On The Geopolitical Front

Seeking to counter Russian aggression, NATO leaders – including Canada – approved plans today to post several thousand troops in Eastern Europe who could quickly mobilize if an alliance country in the region were to come under attack…NATO Secretary General Anders Fogh Rasmussen said the new unit would send a clear message to potential aggressors, namely Russia…

Confronting another pressing international crisis, Rasmussen said NATO stands “ready to help” Iraq fight back against a violent militant group, but noted that the Iraqi government has not made any such request…President Obama and British Prime Minister Cameron have been pressing their NATO counterparts to join a coalition of nations that could degrade Islamic State militants…

Today’s Equity Markets

Asia

Asian markets were under some pressure overnight but China’s Shanghai Composite bucked the trend, jumping another 20 points (the sixth consecutive daily advance) to close the week at 2326…that’s the Shanghai’s best level since March 2013…

Europe

European markets are mixed in late trading overseas after rallying strongly yesterday on the stimulus measures announced by the ECB…

North America

The Dow is down 37 points as of 8:00 am Pacific…

U.S. job growth slowed to its lowest level of the year in August, a stumble for labor markets that had delivered a string of steady gains over the prior six months despite uneven economic growth…non-farm employment advanced a seasonally adjusted 142,000 last month, the Labor Department reported this morning…the unemployment rate, obtained via a separate survey of households, ticked down to a seasonally adjusted 6.1% in August from 6.2% in July…the jobless rate has fallen 1.1 percentage points since August 2013, when it was 7.2%…economists surveyed by The Wall Street Journal had expected payrolls to rise 225,000 and the jobless rate to fall to 6.1%…

The TSX is 51 points lower while the Venture is flat at 995, several points above its rising 200-day moving average (SMA)…

U.S. Dollar Index – What’s Happening? 

Broadly speaking, commodities tend to move inversely to the dollar, so Gold, Crude Oil and other commodities have certainly been under pressure due to the rapid rise of the U.S. Dollar Index which has been driven by an out-performance of the U.S. economy vs. Europe in particular, and diverging monetary policies between the two…

U.S. Dollar Index Short-Term Chart

As we noted previously, the recent breakout above the RSI(14) downtrend line was a significant technical development and the Dollar Index immediately accelerated, powering through three Fib. resistance levels…while RSI(14) is now is overbought territory at 77% on this 2.5-year weekly chart, momentum is clearly on the side of the Dollar Index…at a minimum, we expect a test of the 84.5 Fib. resistance and likely the 2013 high of 84.96…this could certainly be followed by a swift correction to unwind overbought conditions…

U.S. Dollar Index Long-Term Chart

From a long-term perspective (34-year monthly chart), the Dollar Index is still in a primary downtrend and only a confirmed breakout above the mid-90’s would change that…what’s interesting, though, is that an RSI(14) breakout has occurred above a downtrend line in place for the last several years – this is additional evidence that the greenback’s strength at the moment has to be taken seriously…

TSX Updated Chart

John’s next measured Fib. resistance level for the TSX is 15800, more than 200 points above yesterday’s close…however, this 6-year monthly chart shows RSI(5) at rather alarming overbought levels (95%) for an extended period – this could continue for a while longer, but not much longer before a correction sets in to unwind overbought conditions…the 50-day SMA, currently near 15400, has been a strong supporting moving average since the summer of last year…

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

Calibre Mining (CXB, TSX-V) 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; initial Phase 1 drill results were released earlier this week…highlights included 4.8 m grading 25.7 g/t Au and 35.2 g/t Ag (GP14-003), 6 m grading 14.4 g/t Au and 14.5 g/t Ag (GP14-002), and 1 m grading 39.9 g/t Au and 132.0 g/t Ag (GP14-001)…

The first six drill holes of the initial 30-hole program have tested the Guapinol Gold-Silver vein system over a strike length of 350 m and to a depth of 100 m…mineralization remains open down plunge from the reported intercepts and potential exists for additional mineralized zones along the strike of the Guapinol structure…

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…

In early July, CXB provided an encouraging update with regard to its Minnesota Gold Project JV in Nicaragua with B2Gold Corp. (BTO, TSX)…B2Gold also increased its equity ownership in CXB to approximately 15.2% by exercising common share purchase warrants for proceeds to Calibre of $500,000…

Technically, John noted how CXB broke out above a 2-year downtrend channel near the end of June – a very bullish development…RSI(14) at 69% continues to climb an uptrend line on this weekly chart, and an important breakout above 7.5 cents recently occurred…CXB is currently consolidating in an area of chart resistance, and is unchanged at 10 cents as of 8:00 am Pacific…

Barisan Gold Corp. (BG, TSX-V) Update

Improved results reported by Barisan Gold (BG, TSX-V) yesterday at its Upper Tengkereng Project in Indonesia…hole UTD-008, in fact, is the best hole drilled so far, returning the highest grades intercepted over the entire length of a hole as well as the longest intercept above 1% CuEq of any hole drilled to date at Upper Tengkereng…UTD-008 included 506 m of 0.7 g/t Au and 0.6% Cu (1.1% CuEq at current market prices) from 188 m to 694 m…drilling continues; the high-grade zone outlined so far appears to be approximately 700 to 800 m deep starting from surface and contains three distinct types of mineralization stacked one on top of the other…

Technically, BG is strengthening with a breakout above a downtrend line in place for all of this year…strong chart support at 15 cents, and John has outlined the measured Fib. resistance areas…BG is unchanged at 19.5 cents through the first 90 minutes of trading…

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