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Gold has traded between support level $1,229 and $1,235 so far today…as of 7:15 am Pacific, bullion is up $1 an ounce at $1,233…Silver has added 14 cents to $17.34…Copper is up a penny at $3.07…Crude Oil is $1.39 lower at $80.70 while the U.S. Dollar Index is off one-quarter of a point to 85.59…

Gold’s next focus is the upcoming Federal Reserve’s meeting Tuesday and Wednesday…the consensus view is that the U.S. central bank will decide to wrap up its asset purchases under its third round of quantitative easing…clues are awaited regarding potential timing for its first interest rate hike…

Holdings in SPDR Gold Trust, the world’s top bullion exchange-traded fund, fell to their lowest since late 2008 this week in a sign of lingering bearish sentiment in the bullion market (a positive sign for contrarians)…interestingly, the fund this week recorded its biggest daily percentage drop in holdings in a year despite a bullion price jump to a 6-week high…some physical support for Gold came from continued strong sales in India due to festivals there…CNBC reported that a better Indian economy has contributed to increased buying of the metal in that country…

Saudi Arabia supplied the international and domestic market with 9.36 million barrels a day of Crude Oil in September, down from 9.688 million barrels a day in August, according to a report in The Wall Street Journal…however, the country’s overall production grew from 9.597 million barrels a day in August to 9.7 million barrels a day last month…the country can use storage, of course, to produce more Oil than it supplies to the market…market participants are still waiting for clarity on whether OPEC will collectively lower its Oil output goal when it meets November 27…some countries have called for the group to meet earlier to respond to the recent drop in prices…

Today’s Equity Markets

Asia

Asian markets were mixed overnight…China’s Shanghai Composite finished relatively unchanged at 2303…official data showed new home prices falling 1.3% on year in September, the first annual drop in nearly 2 years…the report heightened concerns over the country’s property market, which many experts say poses the single biggest risk to the economy…Japan’s Nikkei average, which was very volatile this week, surged 153 points overnight to close at a 2-week high of 15292…

Europe

European markets are down modestly in late trading overseas, thanks in part to reports of the first Ebola case in New York…preliminary growth data from the U.K. showed that GDP grew 0.7% in the third quarter, in line with forecasts in a Reuters poll…

North America

The Dow is up 14 points as of 7:15 am Pacific while the S&P 500 is unchanged at 1951…

Dow Updated Chart

The Dow’s recent reversal has formed a bullish engulfing pattern and RSI(7) has pushed above the RSI SMA(25) which indicates that the trend at the moment remains to the upside despite some weakness at the open this morning…

The TSX is up 12 points as of 7:15 am Pacific while the Venture is down 3 points at 806…a minor intra-day reversal could allow the Venture to eek out another weekly gain after closing at 810 last Friday…

This is encouraging to hear:  “Montreal is back, we’re open for business,” new Mayor Denis Cordere stated yesterday during a luncheon speech at the Québec Mining Exploration Xplor 2014 Convention in Montreal.  “It’s in Montreal’s best interest to make sure that the mining sector in Quebec flourishes, because when it goes bad for the industry, it’s going to go bad for the metropolis.”

Updated Venture Chart

The Venture chart is looking healthier after the Index hit a series of RSI(2) extreme lows during September and October…selling pressure has abated significantly, and the Venture’s next challenge is to overcome its 10 and 20-day moving averages (SMA’s) and have those reverse to the upside…support is at 800…

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

Continuous drilling at Garibaldi Resources’ Corp.’s (GGI, TSX-V) Silver Eagle discovery in central Sonora State, Mexico, is yielding encouraging signs as the company reported late yesterday that Phase 2 “continues to consistently intersect silicified and brecciated rock containing pods of semi-massive sulphides similar to the mineralized intercepts reported from earlier holes. Mineralization remains open in all directions.”  The first batch of assay results from this second phase of drilling are expected in the near future…

A Big Fish Swimming Around

A couple of items of particular note regarding yesterday’s GGI news underscore the growing significance of Silver Eagle and the dozen or so other targets at the Rodadero Project, many of them clustered within a 30 sq. km area from Silver Eagle to the south and east…

1) The potential of Rodadero becoming an important new mineral camp in this part of Sonora State has much greater credence after Garibaldi confirmed that a “leading international Silver and Gold producer” has signed a confidentially agreement with the company and has just completed a second visit to the project…this is obviously a major who must see something they like, not just at Silver Eagle but throughout this district where high-grade Silver, high-grade Gold and very elevated base metal values exist near-surface over a very broad area…something must also be feeding this…in addition, a privately-held Chinese company has also expressed interest in Rodadero and just completed a 2-day visit…

Keep in mind, Garibaldi is not new at this business – with the aid of hyperspectral data, which they’ve used very effectively at Rodadero, they identified the highly promising nature of the Temoris option they held several years ago…they then sold that option to Paramount Gold & Silver (PZG, NYSE and TSX) for cash and millions of shares…on the Temoris ground is where PZG discovered the richest part of its San Miguel deposit (Don Ese)…expect GGI to negotiate very shrewdly with any parties interested in Rodadero…they have a history of success in Mexico to back them up…in the case of Rodadero, GGI stressed yesterday that these “approaches” by other companies have been unsolicited…the potential of this situation – both on the ground and in the market – is explosive given the scale, high grades and near-surface nature of the Rodadero mineralization…

2) The discovery of surface mineralization (a zone including visible galena) 150 m north of SE-14-01 is significant in that it’s at a lower elevation than the discovery hole which may indicate the presence of feeder zones, perhaps even richer than what has been drilled into near-surface…also, the only Phase 1 hole that did not return significant results was collared slightly north of SE-14-01…so this surface discovery may make the area going to the north even more prospective than first thought…Phase 1 drilling showed the high-grade mineralized system widening to the south…

We’ll have more for our readers on GGI over the weekend from a fresh interview with President and CEO Steve Regoci that we’ll be conducting later today…

GGI is up 2 pennies at 19 cents as of 7:15 am Pacific…technically, it’s looking stronger than it has in several weeks…

TSX Gold Index

Speaking of producers, they staged an interesting turnaround late in yesterday’s session despite Gold’s modest drop…the TSX Gold Index rallied from 156.53 to close at 160, perhaps completing a double bottom low for October…there’s a bullish divergence RSI(14) and price on this 6-month daily chart…

Spectra7 Microsystems Inc. (SEV, TSX-V) Update

Spectra 7 Microsystems (SEV, TSX-V) has had a strong week, rebounding after announcing Tuesday that the company expects to report record quarterly revenue of approximately $1.7-million for the 3 months ended September 30, 2014…this represents an increase of 45% over the prior quarter and an increase of 170% compared with the same period last year…gross margins for the 3-month period ended Sept. 30 will exceed 80% up from 76% in the previous quarter and from 69% in the same period last year…the third quarter 2014 financial results indicate record quarterly revenue and gross margins for the company and continued strong product gross margins for the second consecutive quarter…

Technically, strong buy pressure has emerged in SEV and the 200-day moving average (SMA) is reversing to the upside…key resistance remains in the mid-80’s – a breakout through that area would be a very bullish development…as always, perform your own due diligence…

SEV is unchanged at 78 cents as of 7:15 am Pacific…

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

Gold has traded between a high of $1,246 and and low of $1,225 so far today…as of 8:30 am Pacific, bullion is down $13 an ounce at $1,228…we’ll see if it can hold support at $1,229 on a closing basis…Silver is up 4 pennies at $17.22…Copper has added 4 cents to $3.06 on some encouraging economic data…Crude Oil is $1.27 higher at $81.79…the government’s inventory report showed Crude inventories rose 7.1 million barrels in the last week, well above the expected 2.8 million barrels….the U.S. Dollar Index is up nearly one-tenth of a point to 85.85…

Investors may increase their net Silver purchases by as much as 1 billion additional ounces in various investment instruments over the next decade, according to a report issued by The Silver Institute…this would be on top of more than 860 million purchased as an investment since 2006, the report says…the report was produced by the consultancy CPM Group…the dollar value of the Silver market, which includes trading volumes on the major futures and options exchanges and clearing volumes of the London over-the-counter market, combined with newly refined Silver supply, stood at $5.1 billion in 2013, the report says…

At the close of 2013, at least 2.3 billion ounces of Silver were held in bars and coins around the world, according to CPM Group.  “Even in these days of precious metal price volatility, we are seeing areas of growth within the Silver investment arena,” says Michael DiRienzo, executive director of The Silver Institute. “This year’s progression in Silver exchange-traded funds, for example, suggests that investors are very keen to acquire and hold the white metal.”

A slim majority of Swiss citizens said they would vote yes to force the Swiss National Bank to increase and hold on to their Gold reserves, according to the country’s first opinion poll…earlier this week, 20 Minuten, Switzerland’s largest daily newspaper, released the results of its online survey…according to the poll, which was conducted on October 15 and had more than 13,000 respondents, 45% to 39% said they would support the “Save Our Gold” initiative…however, the survey also apparently showed a high number of undecided voters…

Central Bank Gold Reserves

As Frank Holmes pointed out recently at www.usfunds.com, since 1993, the Swiss central bank has reduced its Gold holdings by a whopping 1,550 tonnes, the largest liquidation by any central bank as you can see in the chart below (China last reported its holdings in 2009 but is now believed to hold a much higher amount)…

Today’s Equity Markets

Asia

Asian markets were down modestly overnight…China’s Shanghai Composite slipped 23 points to 2302, hitting a new 1-month low…China’s HSBC flash manufacturing PMI rose to a 3-month high of 50.4 in October, above the bank’s final reading of 50.2 last month…however, the report highlighted issues in Beijing’s economy with factory output falling to a 5-month low…the data comes amid speculation of additional stimulus measures to boost growth after Q3 GDP fell to a 5-year low…Hongbin Qu, China chief economist, and co-head of Asian economic research at HSBC, stated to CNBC:  “While the manufacturing sector likely stabilized in October, the economy continues to show signs of insufficient effective demand. This warrants further policy easing and we expect more easing measures on both the monetary as well as fiscal fronts in the months ahead.”

Japan’s Nikkei average took a breather after yesterday’s strong advance and eased 57 points to 15139…the Nikkei has been extremely volatile this week with a 4% gain on Monday, a 2% decline Tuesday and yesterday’s 2.6% recovery…

Europe

European markets were up significantly today…euro zone PMI data was stronger than expected with composite PMI coming in at 52.2 in October, up from 52.0 in September…

North America

The Dow is up 244 points as of 8:30 am Pacific with sentiment bullish after heavy-equipment maker Caterpillar Inc. (CAT, NYSE) boosted its full-year profit outlook…the S&P 500 has climbed 27 points to 1955…

The TSX is up 160 points following yesterday’s sell-off that was triggered by the brazen terrorist attack at Parliament Hill and the National War Memorial that claimed the life of a Canadian soldier…by the grace of God, there wasn’t a massacre and the hero of the day was Sergeant-at-Arms Kevin Vickers who was able to kill the gunman, a Canadian turned Muslim extremist (police are still searching for other individuals potentially involved)…

The Venture is up 2 points at 810 through the first 2 hours of trading…

U.S. Dollar Index Updated Chart

Stubbornly, the U.S. Dollar Index continues to remain in overbought territory…this condition could persist for a while yet, we’ll have to wait and see…RSI(14) has dropped from nearly 90% on this 2.5-year weekly chart but appears to have stabilized above 70%…measured Fib. resistance is 88, a level we may yet see before a sustained correction sets in…the rapidly rising 50-day moving average (SMA) is providing support just beneath 85…

Graphene 3D Lab Inc. (GGG, TSX-V) Updated Chart

As John’s chart showed Tuesday, Graphene 3D Lab (GGG, TSX-V) has been gaining technical momentum recently…yesterday, it climbed 11 cents to close at $2.09…it opened higher this morning ($2.26), quickly surged to $2.39, retraced to $2.15 and is now up 20 cents at $2.29 as of 8:30 am Pacific…

We first mentioned this interesting but volatile play in mid-August, shortly after it made its debut on the Venture and climbed from a low of 40 cents to more than $1 in the first two trading sessions…

Below is another updated chart to help readers with their own due diligence – as always, we encourage investors to contact management and perform their own DD on any company they might be interested in…

After climbing as high as $2.56 in early September, GGG quickly retraced to the Fib. 38.2% level around $1.22 where the rising 50-day SMA currently sits…since then, GGG has been gradually climbing again before really kicking into gear late yesterday after pushing back above the $2 level…

RSI(14) unwound from extreme overbought conditions from mid-September to mid-October, finding support at the 50% level, and is now on the upswing again…

 

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

Calibre Mining (CXB, TSX-V) has been one of the top-performing exploration plays over the last several months, attracting a major new investor (Peter Lassonde) and reporting success at its projects in Nicaragua – some of which are promising JV’s with partners B2Gold Corp. (BTO, TSX) and Iamgold Corp. (IMG, TSX)…

The recent pullback in CXB is not totally surprising given the very overbought RSI(14) conditions that emerged in September…the stock hit a nearly 2-year high of 20 cents last week and has now retreated to an area of significant Fib. and chart support that includes the rising 100-day SMA at 13 cents…CXB is unchanged at 13.5 cents as of 8:30 am Pacific…

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

We continue to keep a close eye on Newstrike Capital (NES, TSX-V) which has really outperformed the sector over the last couple of months, and can certainly be considered a potential takeover candidate…

On September 15, Newstrike released a very robust Preliminary Economic Assessment for its Ana Paula Project in Mexico’s prolific Guerrero Gold belt…we urge our readers to check that out as the projected capital costs are relatively low and the IRR is 47.5% with a 2-year payback…the deposit at Ana Paula can be described as having a high-grade core, surrounding by a lower grade envelope of Gold and Silver mineralization…the high-grade nature of this Gold mineralization starts just below surface and extends to approximately 700 m deep…

(It’s worth noting that the geologist who has played a key role at Ana Paula, the highly respected Dr. Craig Gibson, is also busy overseeing Garibaldi Resources Corp.’s (GGI, TSX-V) Rodadero and La Patilla projects in Mexico…with Gibson’s proven insight and ability to identify a discovery and put a resource together, we see very positive developments in the works at both Rodadero and La Patilla).

Getting back to Newstrike, it appears to have formed a head-and-shoulders reversal pattern but critical resistance, which it has not been able to overcome yet, is around the $1.20 level…as of 8:30 am Pacific, NES is resting at its 50-day rising SMA, off 3 pennies at $1.01…

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

Gold has traded between $1,241 and $1,250 so far today…as of 8:20 am Pacific, bullion is down $5 an ounce at $1,244…Silver has retreated 32 cents to $17.19…Copper is flat at $3.03…Crude Oil is 53 cents lower at $81.96 while the U.S. Dollar Index has added one-quarter of a point to 85.63…

Gold demand from India picked up significantly ahead of the approaching Diwali festival, analysts and traders have reported…Diwali, the festival of lights observed by the country’s Hindu population, occurs tomorrow and is an auspicious time for buying Gold…India, in turn, is the world’s second-largest Gold buyer behind China.  “Demand in India has noticeably strengthened ahead of this year’s Diwali, especially after Gold prices traded around the year’s lows during the month or so before this key festival,” said Joni Teves, analyst with UBS.  India-related activity was especially strong last week, although abating some since as prices recovered and the holiday approaches, meaning that much of the Diwali-related buying has already taken place…

Barclays on the November 30 referendum on Swiss National Bank Gold reserves (the initiative would prohibit sales of Gold reserves, require Gold to be physically held in Switzerland and require Gold to be 20% of SNB assets):  “The 5-year phase-in would limit volatility, though passage of the initiative likely would raise the long-term equilibrium price for Gold, in our view.” 

ISIS-Inspired Terrorism Hits North America 

Breaking developments out of Ottawa where there has been a terrorist incident at Parliament Hill this morning…many details are still sketchy but multiple gunmen opened fire at Parliament (and nearby buildings, 3 separate shootings apparently), shooting 1 soldier (standing guard at the National War Memorial, now fighting for his life) and spraying an estimated 30 shots inside the government building just 2 days after a terror attack in Quebec shook the nation…one of the gunmen has been killed…Parliament Hill is on lockdown (along with the Canadian Embassy in Washington as a precaution) and a statement, or an address to the nation, is expected at some point today from Prime Minister Stephen Harper who was quickly whisked away from Parliament Hill this morning to an undisclosed location…SWAT teams are active in the Ottawa downtown core, and NORAD has been placed on heightened alert…

A counter-terrorism source told Fox News that there was a spike in Islamic State-related online chatter focusing on Canada in the days leading up to this morning’s attack…in addition, the FBI is asking all field offices to raise their alert posture and reminding them of a recent bulletin urging vigilance in the wake of ISIS chatter calling for attacks on U.S. military and law enforcement personnel…

Yet another example of how much more dangerous the world has become – Monday’s first fatal terrorist attack on Canadian soil, a cowardly act against 2 Canadian soldiers that killed one of them, was carried out in Quebec, involving an Islamic militant and a follower of ISIS…on social media, Martin Rouleau went by the names Ahmad Rouleau and Abu Ibrahim AlCanadi, where he posted comments recently regarding the war in Syria and the rise of the Islamic State…he was described as a convert to Islam, and over the summer attempted to fly to Turkey…the attack came a month after Abu Muhammad Adnani, a spokesman for the ISIS terrorist group, urged followers to kill Canadians, suggesting they single out a victim and “run him over with your car.”  Predictably, Rouleau was declared a “martyr” by ISIS extremists…the National Post reported that a Canadian member of ISIS who goes by Abu Khalid Al Kanadi urged others to “follow the footsteps of our brave brother Martin Rouleau who took revenge for Canadian military aggression in our lands.”  Does Justin Trudeau have a “root causes” explanation here?…our highly capable CF-18’s, which Trudeau made a disgusting phallic joke about recently, can’t get there soon enough to help eradicate this evil…

Gold In Euros

Expressed in euros on this 5-year weekly chart, Gold appears to be on the verge of a potential breakout after appearing to bottom in early January…this will be worth watching closely in the weeks ahead…

Euro Updated Chart

The euro itself has been clobbered since peaking at 140 during Q2…this is a major reason why the U.S. Dollar Index has been so strong which in turn contributed to Gold’s recent sell-off in terms of the greenback (though it has strengthened against the euro)…the euro is trying to emerge out of oversold territory but needs to bust through important resistance (previous strong support) at 128…a breakout above the downtrend line, currently putting pressure on the euro, would be the next major challenge…fundamentally, something needs to change in the euro zone in order for this battered currency to gain traction and reverse its downward spiral…a lower currency, however, carries certain advantages as the Japanese, Canadians and others have discovered…

Today’s Equity Markets

Asia

Japan’s Nikkei average surged nearly 400 points or 2.64% overnight to close at 15196…reports that the European Central Bank is considering buying corporate bonds lifted sentiment…the move would add to covered bond purchases the bank began this week and, some analysts believe, may be a step closer to full-blown quantitative easing…China’s Shanghai Composite fell 13 points to finish at 2326, a 1-month low ahead of HSBC’s flash manufacturing PMI report for September due tomorrow…

Europe

European markets are up modestly in late trading overseas…

North America

The Dow and S&P 500 are both up marginally as of 8:20 am Pacific…U.S. consumer prices rose very slightly in September as energy costs fell broadly, painting a weak inflation picture that should give the Federal Reserve ample room to continue to keep interest rates at historic lows for an extended period…the Labor Department reported this morning that its Consumer Price Index edged up 0.1% last month after declining 0.2% in August…economists polled by Reuters had forecast consumer prices being flat in September…the CPI increased 1.7% in the 12 months through September after a similar rise in August…

S&P 500 Updated Chart

After a nearly 10% correction, the S&P 500 has had a bullish follow-up to last week’s hammer reversal that occurred after an intra-day low of 1821…the fact the index has reclaimed the 1900+ area is encouraging, along with a potential bullish crossover in the SS and an apparent peak in the -DI which is now in decline…RSI(14) is also showing increased up momentum after bouncing off previous support…

The TSX is off 85 points as of 8:20 am Pacific while the Venture is down 3 points at 821…Prosper Gold Corp. (PGX, TSX-V) climbed as high as 9.5 cents and is now up a penny at 8.5 cents after reporting final results from its 2014 drill campaign at the Star Cu-Au Porphyry Project in the Sheslay district…hole S049, drilled in the heart of the Star deposit, returned an impressive 324 m grading 0.44% Cu and 0.22 g/t Au for a CuEq grade of 0.57% including 180 m of 0.71% CuEq from just beneath the collar of the hole to 184 m…the deposit is open for expansion laterally and at depth with higher grades evident in the core of the discovery and going north after this year’s drilling…the Star may ultimately connect with the Star North porphyry target (800 m away) which, disappointingly, has yet to be drill-tested but shows similar geological, geophysical and geochemical signatures…Prosper’s hard work – on multiple fronts, not just on the ground – has just begun…there’s no denying the potential of this project to host a world class discovery…

B.C. Lowers Tax Rate For LNG Sales

British Columbia has lowered its tax rate for liquefied natural gas sales, following extensive negotiations with oil and gas companies like Shell and Petronas, which are looking to site multi-billion-dollar LNG plants in the province…the tax will be set at 3.5% after capital costs are recovered, which is below the “up to” 7% rate announced in a proposed LNG tax framework earlier this year…the rate will rise to 5% in 2037…the lower tax rate – and how LNG proponents appraise it – will be key in determining whether Canada becomes a competitor to the U.S., Australia, Qatar and other jurisdictions looking to supply Asian buyers with the liquefied form of natural gas…there are no less than 13 proposed LNG plants on Canada’s west coast to export gas to Asia, including projects led by Exxon Mobil and Chevron…one Venture company that stands to benefit immensely from this potential LNG boom is Highbank Resources (HBK, TSX-V) with its Swamp Point North aggregate project that’s rapidly moving into the production phase with projected 2015 fiscal revenues of $27 million and an estimated $11 million pretax profit as per the company’s most recent news release…

Cannabix Technologies Inc. (BLO, CSE) Update 

An important step for Cannabix Technologies (BLO, CSE) whose common shares have been made eligible for book-entry delivery and depository services of the Depository Trust Company to facilitate electronic settlement of transfers of its common shares in the United States…DTC eligibility means that a public company’s securities can be deposited through DTC, the largest securities depository in the world which holds over $35-trillion worth of securities on deposit…

Becoming DTC eligible provides Cannabix shareholders various benefits that include reducing the time for stock deposits and withdrawals into brokerage accounts while eliminating the inherent risks associated with the loss and replacement of physical stock certificates…additionally, companies that are approved for DTC electronic transfers often experience higher trading volumes in their stock given the additional accessibility and availability of shares for trading…most large U.S. broker dealers and banks are DTC participants…

Technically, BLO appears to have found a bottom during the overall market mayhem witnessed during the first half of October…buy pressure now appears to be replacing sell pressure…the most aggressive accumulation we’ve seen this month in BLO on the CSE occurred yesterday as the stock climbed as high as 10.5 cents on volume of 643,000 shares…volume has averaged over half a million shares per day since about mid-September as the company inches closer to unveiling its initial Cannabix Marijuana Breathalyzer prototype…

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

Mission Ready Services (MRS, TSX-V) has been a superb performer this month, jumping over 50% on the strength of new contracts and the successful completion of a $4 million financing…the company provides solutions to the global defense, security and first-responder markets in the areas of cleaning, logistics, maintenance, program management and client representation…

Technically, MRS has been climbing an upsloping channel since the beginning of August and confirmed a breakout last week above resistance in the mid-30’s…there’s now new chart support at 36 cents while the nearest measured Fib. resistance is 48 cents which was touched yesterday…

MRS is unchanged at 46 cents as of 8:20 am Pacific…

Crude Oil Updated Chart

While a relief rally seems very probable, Crude Oil is clearly in the tight grips of an overall downtrend that’s not likely to end anytime soon for fundamental and technical factors, barring some sort of unexpected “Black Swan” event that could significantly disrupt supplies…the turning point in WTIC began in July and the downside action accelerated after a breach of important support this month at $90…strong resistance now exists between the mid-$80’s and the $90 level…

The HOD – Looking At Crude In Reverse

This bear ETF shows a major change in the Crude Oil market – in this 7-year monthly chart, note the steadily decreasing sell pressure in the HOD (TSX) since 2011, the breakout above a downsloping wedge this month and the potential for a near-term breakout above long-term RSI(14) resistance just above 50%…this simply doesn’t bode well for Crude Oil prices in the coming months, and those who buy the “dead cat” bounce could get hurt severely…

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

Gold has traded between $1,246 and $1,256 so far today…as of 8:00 am Pacific, bullion is up $5 an ounce at $1,252 at it attempts to push through a critical resistance band between $1,240 and the low $1,250’s…Silver has added 17 cents to $17.60…Copper is up 4 pennies to $3.03 as China’s Q3 growth slightly exceeded expectations…Crude Oil has gained 46 cents a barrel to $83.17 while the U.S. Dollar Index is up nearly one-quarter of a point to 85.27…

Gold holdings by ETF’s have fallen despite recent strength in the precious metal, according to Commerzbank…Gold extended last week’s multi-week highs today after holding up yesterday even though ETFs tracked by Bloomberg posted net outflows of 8.9 metric tons that was the result of an outflow from the world’s largest such ETF, SPDR Gold Shares…Commerzbank notes this was the largest single day outflow from the ETF in a year…

“Given the numerous risks on the market, we are surprised that there is still any substantial retreat at all from Gold ETFs,” Commerzbank stated. “It might, though, also be the result of forced selling to cover losses elsewhere. It remains to be seen, however, whether the price increase of Gold is sustainable. Physical demand in Asia has not after all really started to pick up much again. According to industrial sources, the Reserve Bank of India is not going to relax restrictions on Gold imports further. The relatively high level of Gold imports in September in the run-up to the holiday season could therefore soon ease off again. In our view…an increase in demand for Gold in Asia is a must if a sustained price recovery is to occur.”

Interesting comments from Mineweb’s Lawrence Williams who counters the Commerzbank statement that “physical demand in Asia has not after all really started to pick up much again.”  In an article this morning (www.mineweb.com), Lawrence noted, “Indeed the latest weekly figures from the SGE could be seen as particularly strong given that the markets were closed for half the period due to China’s Golden Week holiday. While the total for the two weeks at around 68 tonnes may not seem spectacular, given that these purchases were actually made in only five days (September 29^th and 30^th and October 8^th, 9^th and 10th) due to the long holiday market closure could suggest that Chinese demand is indeed soaring enormously.”

Today’s Equity Markets

Asia

China’s Shanghai Composite declined 17 points overnight to close at 2339…a slew of Chinese economic data painted a mixed picture…China’s economy grew last quarter slightly above expectations but nonetheless at its slowest pace since the depths of the global financial crisis…this raises fresh concerns over global growth prospects and increases the likelihood Beijing may introduce broader stimulus measures…GDP in the world’s second-largest economy expanded 7.3% in the third quarter from the same period a year earlier, its weakest performance since the first quarter of 2009, when growth was just 6.6%…meanwhile, September industrial input grew 8% on year, beating estimates, but retail sales and fixed-asset investment both missed expectations…

Europe

European stocks are up sharply in late trading overseas… stocks jumped and the euro sank on news the European Central Bank is considering buying corporate bonds – a move that would beef up its program aimed at stimulating the continent’s sickly economy…the Financial Times reported that no specific plan had been discussed, one person familiar with the matter said, and there is no timetable yet for when such a step may be considered…earlier, Reuters reported that the central bank may decide on the matter as early as December and could begin buying early in 2015…

North America

Better-than-expected earnings from Apple set the stage for a higher open on Wall Street this morning…the Dow is up 97 points as of 8:00 am Pacific while the S&P 500 has fared even better, surging 23 points to 1927…

The latest Politco Battleground Poll of likely voters in key House and Senate races finds that 50% say the nation is “off on the wrong track” while just 20% say things are “generally headed in the right direction.” A remarkable 64% say things in the U.S. are “out of control” while just 36% say the U.S. is in “good position to meet its economic and national security challenges.” Whether Republicans will be able to seize on voter dissatisfaction in the upcoming mid-term elections (and gain control of the Senate) remains to be seen, but this is clearly not good news for President Obama whose job performance numbers continue to deteriorate over his mishandling of a host of issues…a very rocky final 2 years of the Obama Presidency at the very least would likely mean continued high volatility in the markets, but opportunity for savvy investors…

The TSX continues its rally, up another 130 points as of 8:00 am Pacific after posting triple digit gains in each of the past 3 sessions…the Venture has added 10 points to 821 – a 6.8% increase over last week’s low…

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

In a merger that will consolidate the companies’ interests in the Deep Basin, Donnycreek Energy Inc. (DCK, TSX-V) has entered into an arm’s-length definitive arrangement agreement with Contact Exploration Inc. (CEX, TSX-V) whereby Contact and Donnycreek will merge to form a new, amalgamated corporation (Kicking Horse Energy Inc.) on the basis of 0.075 of a common share of Kicking Horse being issued in exchange for each outstanding Contact share and 0.600 of a Kicking Horse share being issued in exchange for each outstanding common share of Donnycreek…the merger will represent an exchange ratio of 8 Contact shares for each Donnycreek share, representing a value of $2.96 for each Donnycreek share based on the issue price of Contact shares in a $20 million bought deal financing announced by CEX today at 37 cents…it all adds up to some serious dilution at a time when Oil prices are in a fresh primary downtrend, not an uptrend, though clearly there are certain synergies between the two companies…Donnycreek has responded vigorously to the merger news but Contact is down 6 cents to 37.5 cents as of 8:00 am Pacific…

VIX “Fear Index’ Update

We’re not sure we’ve seen the “high” yet in this cycle yet for the VIX (the Volatility Index for the S&P 500) which shot up to 31.06 last week when stocks were getting hammered…it has since retreated to 18.57, an area just above the August high…this is a very volatile gauge of investor fear…it’s generally positive for stocks when the VIX holds at or below 25…last week’s reading of 31.06 was the highest since the summer of 2011…

TSX 5-Year Weekly Chart

The TSX is bouncing off RSI(14) support on this 5-year weekly chart but resistance exists between 14700 (the 200-day SMA) and the 15000 level where the index broke down from an upsloping channel in place since the summer of last year…

Venture 5-Year Weekly Chart

After falling through 3 important support levels (970, 920 and 860), the Venture finally gained its footing at the 800 support…a re-test of that area in the near future should be expected as such would be normal, healthy technical behavior…as long as accumulation (buy pressure) doesn’t reverse into sell pressure on this weekly chart, last week’s low may indeed hold…RSI(14) is clearly oversold but that in itself is no guarantee we’ve seen a market bottom…

Gold 20-Year Monthly Chart

This 20-year monthly chart demonstrates how important it is for Gold to hold critical support at the Fib. $1,185 level (a triple bottom low) which also corresponds with an uptrend line going all the way to the beginning of the bull market nearly 14 years ago…a confirmed breach of this support, especially on the monthly chart, could force bullion down to the next major Fib. support (50%) around $1,000…interestingly, RSI(14) and SS have both broken above their downtrend lines which is encouraging…fundamentally, demand from Asia will be key in order to protect the $1,200 area…

Graphene 3D Lab Inc. (GGG, TSX-V)

We first mentioned Graphene 3D Lab (GGG, TSX-V) in mid-August, shortly after it made its debut on the Venture and climbed from a low of 40 cents to more than $1 in the first two trading sessions…

This is merely an updated chart to help readers with their own due diligence – as always, we encourage investors to contact management and perform their own DD on any company they might be interested in…

After climbing as high as $2.56 in early September, GGG quickly retraced to the Fib. 38.2% level around $1.22 where the rising 50-day SMA currently sits…since then, GGG has been gradually climbing again and closed yesterday at $2.00…it’s down slightly in early trading today…

RSI(14) has unwound from extreme overbought conditions, finding support at the 50% level, and is now heading higher again…

GGG is down 3 pennies at $1.97 as of 8:00 am Pacific…

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

Gold has traded between $1,235 and $1,250 so far today…as of 8:00 am Pacific, bullion is up $6 an ounce at $1,244…Silver has gained 12 cents to $17.39…Copper is off 4 pennies to $2.99…Crude Oil is 81 cents lower at $81.94 while the U.S. Dollar Index has retreated nearly one-fifth of a point to 85.11…

Traders are citing a modest increase in physical demand from Asia as a key factor in Gold’s climb from an October 6 low in the $1,180’s, just above the 2013 double bottom…technically, as John’s chart showed Saturday, Gold is now trading within an important resistance band between $1,240 and the low $1,250’s…a confirmed breakout through the $1,250’s would likely trigger considerable short-covering and drive Gold closer to the $1,300 level…

Hedge funds and money managers increased their bullish futures and option bets in Gold in the week up to October 14 after 8 consecutive weekly declines, according to the latest Commodity Futures Trading Commission report…meanwhile, SPDR Gold Trust, the world’s top bullion-backed exchange traded fund, is showing a slight uptick in demand…its holdings rose 1.5 tonnes last week, the first weekly inflow since early last month…holdings recently hit their lowest level since December 2008…

The Gold/Silver ratio, which measures the number of Silver ounces needed to buy an ounce of Gold, is near a 5-year high at 71.63 and about 10% above the 3-decade average according to Bloomberg data…check out updated Silver charts at the bottom of today’s Morning Musings…

Today’s Equity Markets

Asia

Asian markets were strong overnight, responding to Friday’s rally in U.S. stock prices…China’s Shanghai Composite added 15 points to close at 2357 while Japan’s Nikkei average surged over 500 points (3.98%) – its biggest daily jump in more than a year – to finish at 15111…a weaker yen underpinned gains with the currency retreating from a 5-week high hit last week…reports that the country’s $1.2 trillion public pension fund – the world’s largest – will raise its allocation of domestic stocks to 25% also gave sentiment a boost…

China Stimulus

The Financial Times reports that China’s central bank is planning to inject 200 billion yuan ($32.6 billion) into the banking system, according to financial executives briefed on the matter, as recent credit-easing measures have failed to push the world’s second-largest economy back to stronger growth rates amid deepening worries about a global slowdown…the latest effort by the People’s Bank of China, which will offer funds to about 20 large national and regional banks, follows last month’s move to pump 500 billion yuan into the country’s 5 major state-owned banks…it comes as concerns mount in Beijing that the nation will miss its growth target – set at 7.5% this year – for the first time since the 1998 Asian financial crisis…meanwhile, China Securities Journal has reported that the government may ease a property transaction tax…

China’s Communist Party began its plenary session today…the meeting may produce some legal, land, tax and market reforms…this session comes amid fresh concerns regarding China’s long-term growth…according to a report today from the Conference Board, China’s growth will slow sharply during the coming decade to 3.9% as its productivity nose dives and the country’s leaders fail to push through tough measures to remake the economy…

Important data tomorrow from China – the National Bureau of Statistics is due to announce Q3 economic growth and September industrial production, retail sales and fixed-asset investment…

Europe

European markets are down moderately in late trading overseas…on the data front, German producer prices for September were flat compared to the month before, but showed a yearly drop of 1%…

North America

The Dow is off its lows of the day but down 47 points as of 8:00 am Pacific…IBM posted earnings pre-market this morning that fell short of analysts’ expectations, after seeing a “marked slowdown” in September…

The S&P 500 is up 4 points at 1891 as of 8:00 am Pacific…earnings are expected from about 20% of the S&P 500 this week including Apple (later today) and Microsoft (Thursday)…the index has endured its first 4-week losing streak since August 2011…

The drop in Oil prices is saving U.S. consumers money going into the Christmas shopping season…gas prices have plunged by more than 50 cents per gallon on average since the end of June, and pump prices are falling at the fastest rate in 2 years…according to AAA, one-third of all U.S. gas stations are selling gas for less than $3 per gallon…most drivers are already spending about $5 to $15 less to fill up their gas tank than they were in early July…savings per family could range from $20 to more than $100 per month…

The TSX is up 18 points through the first 90 minutes of trading while the Venture is flat at 810…

Klondex Mines (KDX, TSX) is higher this morning after reporting a nearly 75% increase in Q3 AuEq recovered ounces over Q2 levels (AuEq ounces sold were 28,337, a 12% jump over Q2)…mill throughout remained consistent in Q3 but recovered ounces increased due to the processing of multiple zones of very high grades at Fire Creek…the company has boosted guidance for total recovered AuEq ounces in 2014 to 95,000…

Blackbird Energy (BBI, TSX-V) has recovered another 3.5 cents to 35 cents…the company has spudded its first Middle Montney well at Elmworth…the well will be drilled to a vertical depth of approximately 2,330 m and a lateral length of approximately 2,000 m…drilling operations are expected to take approximately 30 days to complete…Blackbird also reported this morning that it has closed the non-brokered tranche ($7 million) of a private placement announced September 22…the brokered tranche of the PP is expected to close as early as tomorrow…

Barisan Gold (BG, TSX-V) is up a penny at 15 cents after reporting fresh drill results this morning from its Upper Tengkering Cu-Au porphyry discovery in Indonesia…the high-grade zone has been extended to both the north and the south…hole UTD-012 returned a 412-m interval (from 212 m to 624 m) grading 1% CuEq…

Venture 3-Year Weekly Chart

It’s an important week for the Venture…what to watch for, technically, is follow-through from the bullish action at the end of last week including confirmation of the hammer candle shown in this 3-year weekly chart…

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

Energy stocks took a pounding on both the TSX and the Venture last week with the sell-off in Crude Oil…Pine Cliff Energy (PNE, TSX-V), which fortunately closed a $60 million bought deal at $2.05 September 23, fell as low as $1.31 last Thursday morning before recovering to finish Friday at $1.54…interestingly, the fall to $1.31 took PNE to the very bottom of an upsloping channel that has remained in place since late 2012…

PNE is up a penny at $1.57 as of 8:00 am Pacific…

Updates On Three Companies With Revenue Streams

Three interesting companies we’ve been watching closely recently have managed to “buck the trend” this month and two of them are up significantly in October…what they have in common are healthy balance sheets and revenue streams…

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

Mission Ready Services (MRS, TSX-V) hit a new high of 45 cents last week…the company provides solutions to the global defense, security and first-responder markets in the areas of cleaning, logistics, maintenance, program management and client representation…on company has been gaining momentum with some of its clients, and 10 days ago announced the closing of  $4 million private placement at 25 cents per unit…

Recently, MRS was awarded a $1.5 million contract for research and development of the U.S. Marine Corps’ next-generation body armor architecture…this followed the awarding of a larger contract MRS is participating in for warehousing and operations support services to clean and launder, stock, and store up to 7,800 pallets of individual protective personnel equipment (IPPE) for the Marine Corps’ Logistics Systems Command (MCLC)…

MRS started trading late last year after completing its qualifying transaction (formerly Priceless Piranha Capital Corp.)…

Technically, MRS has been climbing an upsloping channel since the beginning of August and confirmed a breakout last week above resistance in the mid-30’s…

MRS is off 3 cents at 42 cents as of 8:00 am Pacific…

Highbank Resources Ltd. (HBK, TSX-V)

Overlooked during last week’s market mayhem was a forward guidance statement for fiscal 2015 from Highbank Resources (HBK, TSX-V)…the company is projecting pretax profit of $11 million on gross revenues of $27 million for its first year of production at its Swamp Point North aggregate project near Stewart (during that period, the company would be required to make application to expand its existing mine permit)…SPM is expected to have a total capex of less than $8 million to access a $2 billion NI-43-101 resource…

HBK is up half a penny at 27.5 cents as of 8:00 am Pacific…

Cematrix Corp. (CVX, TSX-V) Update

Cematrix Corp. (CVX, TSX-V) announced last week that it has secured another $1 million in contracts for Oil sands, and refinery and infrastructure projects…this brings the company’s 2014 contracted work to a record $15.7-million…currently, $9.5-million of this contracted work is scheduled for completion in 2014, $5.2-million in 2015 and $1-million in 2016…record revenues are great but hopefully this can also translate into some earnings momentum…CVX reported earnings of less than $100,000 in Q2 after a Q1 loss of over $700,000…Cematrix provides cellular concrete product for many applications in Oil sands, Oil and gas facilities, and infrastructure projects throughout Canada…

“This is a truly historic day for our company,” stated Jeff Kendrick, CVX President & CEO in a September 25 news release when the company announced that it had secured a record $6.8 million contract.    “The results we are achieving today from a revived oil sands and refinery construction market, together with the growth of the infrastructure market throughout Canada and the United States, are a testament to the dedication of the Cematrix team and our unwavering belief in our product and solutions. Some of these projects are years in the making as we work with our customers from the design phase of each project including thermal modelling, through to the final pouring of our product,” he added.  

CVX recently overcame resistance at 20 cents early this month and closed Friday at 25 cents for a total market cap of $8.4 million…

Silver Short-Term Chart

Silver’s immediate technical challenge is to overcome resistance around $17.40 and push above RSI(14) resistance at 40%…sell pressure has weakened considerably since peaking in late August/early September…in addition, the metal has emerged out of an extreme RSI(14) oversold condition that mirrored the overbought levels that dominated from mid-June to mid-July…

Silver Long-Term Chart

This long-term chart suggests that Silver is in the process of bottoming out but may not have found a final low just yet…next major support is at $16, and that may have to be tested…the 2008 and 2010 lows came on spikes to the downside – that’s something to watch for…

Note:  John, Terry and Jon do not hold share positions in any of the above-mentioned companies…

TSX Venture Exchange and Gold

It was a roller coaster week for the Venture and the broader indices with no end in sight to the renewed volatility in equity markets that began in September.  However, what’s comforting is that the Venture seems to have found at least a short-term bottom within a projected support band between 760 and 800.  In fact, importantly, 800 support is deemed to have held after a temporary breach of that level was not technically confirmed.

For the week, the Venture was off 17 points to 810 after dipping as low as 769 in early trading Thursday before a sharp reversal kicked in.  On the long-term daily chart, the Venture’s RSI(14) plunged to an historical low last week.  Sentiment couldn’t be worse – an ideal breeding ground for either a bottom or at least a powerful rally.

The Technical Side

Technically, the Venture’s sudden collapse can be explained by the 9-month daily chart below.  As soon as the Index broke below a symmetrical triangle in early September, followed shortly thereafter by a breakdown below very strong and critical support around 970, the risk of a steep plunge increased substantially.  On September 30, the Index confirmed a close below an uptrend line around 920 going back to last year’s low of 859.  This also led to a reversal of the 200-day moving average (SMA) to the downside, setting the stage for a robust sell-off.

The Index is now working its way out of deeply oversold conditions and relief should come in the week ahead after a 7-week slide totaling 214 points.

The Fundamental Side

Fundamentally, the interesting fact is that the Venture’s 25% drop in 32 trading sessions (September 2 to October 15) occurred when Gold fell just 3.7% during that time while Copper slipped only 4.4% – historically, such a divergence between the Venture and those two metals could be unprecedented.  It’s not certain yet what that may mean.  However, the Venture’s tumble was much more in line with Crude Oil’s 17% drop over the same 32-session period which demonstrates how important the Index’s energy component has become.  In 4 months, WTIC fell 26% to Wednesday’s intra-day low of just under $80 a barrel – exactly matching the Venture’s decline over the same period.

In effect, junior resource investors became the victims of Saudi Oil market manipulation because there’s ample evidence suggesting the Saudis have engaged in a deliberate attempt to drive down the price of Oil.  We can understand why they would want to put the screws to Vladimir Putin’s regime, but they also see North America as a rapidly growing threat to their long-term Oil market share.

Oil appears capped at $90 for an extended period and could even fall into the $70’s unless OPEC members agree to cut production (seems unlikely), Putin does something crazy (always possible) or Baghdad falls and ISIS stampedes through all of Iraq and captures the country’s rich southern oilfields (within the realm of possibility given President Obama’s naive belief that air strikes alone can stop that evil from spreading – he has already foolishly told the enemy what he won’t do which is put U.S. combat troops on the ground).

Very weak Western political leadership, a deteriorating global economy and wobbly stock markets aren’t helpful to the Venture which needs something to grasp onto right now – how about a breakout in Gold?  That could be on the way as we explain below.

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 and therefore great opportunities for in Gold and quality Gold stocks – 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 is looking interesting, and the coming week has the potential to feature a second major technical development this month.  The first one came early during the week of October 6 when the metal reversed after holding just above its 2013 double bottom low at $1,180.  The fact that bullion was able to maintain this critical support during an all-time record run by the U.S. Dollar Index – 12 straight weekly advances – was highly encouraging.  In addition, “smart money” commercial traders dramatically scaled back their net-short positions as the large speculators became increasingly bearish and fearful, especially after the October 3 close below $1,200 an ounce.  It’s important to point out that $200 rallies in Gold occurred following the two previous brief dips below $1,200.

Gold has posted back-to-back weekly gains, climbing another $15 last week to finish at $1,238.  Our 6-month daily chart is giving some bullish readings:  1) RSI(14) has pushed above previous resistance at 54%; 2) sell pressure is rapidly declining; and 3) a bullish +DI crossover has taken place.

If Gold is able to overcome a resistance band between $1,240 and the low $1,250’s, watch out – such an event would constitute a second major technical development this month, and frantic short-covering could immediately drive the metal considerably higher.  Some traders were disappointed that Gold didn’t react more favorably to last week’s sell-off in the equity markets.  On the other hand, buyers stepped in on a slight intra-day dip Friday and bullion finished the day relatively unchanged despite a 263-point Dow rally.

This chart sure looks like an important bottom formed October 6.

Silver fell 13 cents last week to close at $17.27 (updated Silver charts Monday morning).  Copper lost a penny to $3.03.  Crude Oil sank more than $3 a barrel to $82.75 while the U.S. Dollar Index declined for the second straight week, losing more than half a point to finish at 85.20.

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 (air strikes won’t stop them) 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.