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Gold has traded between $1,235 and $1,243 so far today…as of 6:50 am Pacific, bullion is down $1 an ounce at $1,238…it’s on track for back-to-back weekly gains (it jumped $32 last week to close at $1,223) and struck a 5-week high Wednesday…Silver is off a nickel to $17.32…Copper, which hit a 7-month low this week on global growth concerns, is up 4 cents to $3.03…Crude Oil has rebounded 31 cents a barrel to $83.04 (it briefly fell below $80 yesterday for the first time since 2012) while the U.S. Dollar Index is up more than one-tenth of a point at 85.09, headed for its second straight weekly decline after 12 straight weekly advances…

Martin Murenbeeld, Chief Economist at Dundee Capital Markets, believes +$1,300 Gold may not be far-fetched.  “One of the things that tend to be overlooked…is that the real interest rate in the U.S., particularly at the short end, is going to remain negative right through 2015,” he stated in an interview with Kitco.  “Furthermore…you will have significant additions to global liquidity and that is one of the key factors in our models and forecast.” 

In a sign of higher investor interest, SPDR Gold Trust, the world’s largest Gold-backed exchange-traded fund, said its holdings rose 0.24% to 760.94 tons yesterday…that’s a slight bump from a 6-year low of 759.44 tons reported at the end of last week…

Today’s Equity Markets

Asia

China’s Shanghai Composite fell 15 points overnight to close the week at 2341…meanwhile, Japan’s benchmark Nikkei surrendered early gains to close down 206 points or 1.4% at 14532 – a new 4.5-month low…it was the Nikkei’s worst worst week in 6 months…

Europe

European markets are up sharply in late trading overseas…

North America

The Dow has jumped 162 points as of 6:50 am Pacific after 6 straight losing sessions…U.S. consumer sentiment rose in October to the highest in more than 7 years, boosted by views on personal finances and the national economy, a survey released this morning showed…the Thomson Reuters/University of Michigan preliminary October reading on the overall index on consumer sentiment came in at 86.4, the highest since July 2007…the gains were unexpected, as a Reuters survey showed a forecast for a slip to 84.1 from last month’s 84.6 reading…

Longer-term charts paint a troubling picture, but this 9-month daily provides hope that a Dow rally could gain some traction after a 1,500-point (8.6%) decline in just 19 trading sessions from September 19 to Wednesday of this week…

What Will The Fed Do? 

Is it possible that after consistently winding down QE 3 since the beginning of the year that the Federal Reserve might take its foot off the brake in the near future, given deteriorating global financial conditions?…stocks got a much-needed lift yesterday when St. Louis Federal Reserve President James Bullard (a non-voting member of the FOMC) suggested to Bloomberg TV that the Fed should consider pausing its QE taper.  “We have to make sure that inflation expectations remain near our target. And for that reason, I think a reasonable response by the Fed in this situation would be to…pause on the taper at this juncture, and wait until we see how the data shakes out in December,” he said.

Those comments came two days after those of San Francisco Fed President John Williams, also a non-voting member of the FOMC, told Reuters: “If we get a sustained, disinflationary forecast…then I think moving back to additional asset purchases in a situation like that should be something we seriously consider.”

Others are much more skeptical of a potential QE comeback…however, various global events – from deteriorating economic conditions in the euro zone to Ebola to Iraq to a major sell-off in Crude Oil – have taken most people, likely even voting members of the Fed, by surprise in recent weeks…the bond market made it clear Wednesday that it has dialed back its expectations for a Fed interest rate increase until late 2015 or early 2016…

The TSX has gained 142 points in the first 20 minutes of trading while the Venture, trying to post back-to-back daily gains for the first time since the end of August, is up 8 points at 800 as of 6:50 am Pacific…energy plays are rallying…

TSX Updated Chart

The correction in the TSX has been an unwinding of very overbought technical conditions that persisted since late last year through the end of August as you can see in this 6-year monthly chart…typically, a pattern such as this will ultimately cleanse itself by going to the opposite extreme, so at some point in the coming months it’s a strong possibility that highly oversold conditions could materialize…that’s why this correction likely has further to go but it will include relief rallies along the way, as we’re seeing now…for the time being, the TSX has been held up by chart support around 14000…interestingly, the nearly 5000-point gain in the index since late 2011 came on gradually declining volume…

U.S. Dollar Index Updated Chart

The recent parabolic move in the U.S. Dollar Index still needs some unwinding…the near-vertical climb in the 50-day moving average (SMA) doesn’t seem sustainable, so Gold certainly stands to benefit as the Dollar generally pauses for a period of time…the nearest band of support is between 84.5 and 85.0, followed by more support at 83.5…the rising 200-day SMA is currently 81.36…the Dollar is still the strongest currency out of a bad bunch and may attract safe-haven buying support in the event of more global turmoil and market gyrations…

Richmont Mines’ (RIC, TSX-V) High-Grade Bonanza

Certain Gold producers are looking increasingly attractive, considering the potential for higher bullion prices and the balance sheet benefits of lower Oil prices and a weak Canadian dollar…

Rouyn-Noranda-based Richmont Mines (RIC, TSX) is in the midst of a major turnaround in its financial performance and has a new cornerstone asset to ensure a bright future – a 1.1 million ounce high-grade inferred resource below its Island Gold Mine near Wawa, Ontario…at a time when truly high-grade deposits are becoming quite scarce, this is something to pay attention to…

Richmont, which experienced a more than 10-fold increase in its share price between late 2008 and the fall of 2011, slumped all the way back down to a bargain basement price of $1 per share late last year…it started to reverse course with a vengeance after two important events this year – 1) The release April 1 of an updated resource calculation for its producing Island Gold Mine, including the Island Deep extension; and 2) The company’s return to profitability in Q2 of this year as it reported record revenues and net earnings of $4.7 million (10 cents per share) for the April-May-June period…

Recently, Richmont raised production guidance for 2014 to 85,000 to 90,000 ounces…the company’s cash and short-term deposits increased to $38 million at the end of September…they’re well-positioned to “seize the moment” with development of the Island Gold deep discovery which has NI-43-101 indicated resources of 456,000 ounces grading 11.52 g/t Au and inferred resources of 3.2 million tonnes grading 9.29 g/t Au…the discovery remains open in all directions after 100,000 meters of underground drilling in 2013…development of the first mining horizon on the 635-metre level will be completed in early 2015, in accordance with previously established plans…

RIC Updated Chart

Technically, RIC is looking very strong after a healthy retracement from a nearly 2-year high of $3.07 September 2 to a double reversal bottom pattern that formed late last month and early this month…RSI(14) and buy pressure are showing increasing momentum…this is a “keeper” in our view for the long-term, especially considering the high-grade million-plus ounce Island Deep resource…

Richmont will be releasing full financial results for the third quarter and first 9 months of 2014 before markets open on Thursday, Nov. 6, with a conference call later that day…

RIC is up 3 cents at $2.71 as of 6:50 am Pacific…

Agnico Eagle Mines Ltd. (AEM, TSX) Update

Speaking of producers, Agnico-Eagle (AEM, TSX) is also backed by strong fundamentals and may have started a powerful “Wave 5” move after retracing to a Fib. support level just beneath the 300-day moving average (SMA)…buy pressure has remained steady in AEM despite the fall from a July high of $45.83 to a recent low of $31.20…

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

A lot of babies have been thrown out with the bathwater, so to speak, on the Venture in recent weeks…that kind of carnage always opens opportunities, and one situation to consider is Discovery Ventures (DVN, TSX-V)…DVN’s share price has been sliced in half since the beginning of last month…importantly, it has strong Fib. and uptrend line support at 19 cents as you can see in the 2.5-year weekly chart below…

Discovery has made substantial progress in recent months in accelerating its Willa-Max high-grade Gold-Copper Project toward potential production in southeast British Columbia…

DVN is up half a penny at 19.5 cents as of 6:50 am Pacific…

Mission Ready Services (MRS, TSX-V) Update

Mission Ready Services (MRS, TSX-V), which we’ve recently been pointing out to our readers for their due diligence, has had a great week…this company certainly appears to be in the right space at the right time…it provides solutions to the global defense, security and first-responder markets in the areas of cleaning, logistics, maintenance, program management and client representation…a week ago, the company, which is gaining momentum with some of its clients, announced the closing of a $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…yesterday, it broke out above resistance in the mid-30’s on high volume…as always, perform your own due diligence…

MRS is unchanged at 39 cents as of 6:50 am Pacific…

 Note:  Jon holds a share position in RIC.

Gold has traded between $1,235 and $1,245 so far today…as of 8:00 am Pacific, bullion is down $2 an ounce at $1,239 (see updated Gold chart below as there are some important technical developments)…Silver is off 9 cents at $17.36…Copper is down 3 pennies to $2.99…Crude Oil has slipped another 48 cents a barrel to $81.22 while the U.S. Dollar Index has gained more than one-tenth of a point to 85.06…

The Gold:Oil ratio, the number of barrels of Crude Oil it takes to buy an ounce of Gold, has broken out of its 8-year mean…at the moment, the ratio is 15.25 barrels per ounce of Gold, just above the 8-year mean of 14.4…the ratio dropped as low as 6.7 following Bear Sterns’ collapse in March 2008 and peaked at 22.5 when Gold made its all-time high in September 2011…until recently, the ratio was range bound between 11.8 and 14 barrels per ounce since July 2013…

Gold producers may see a powerful double benefit of higher bullion prices in the immediate future as well as continued weak or even lower Oil prices significantly below companies’ budgeted forecasts…tomorrow, we’re going to examine the explosive potential of Richmont Mines (RIC, TSX) and its 1 million ounce high-grade Deep extension at its producing Island Gold Mine in Ontario…

Commerzbank analysts say the recent downgrade in global Oil demand growth for 2014 and 2015 by the International Energy Agency is clearly bearish for Crude.   “The call on OPEC will thus decline to an average figure of 29.3 million barrels per day next year. According to the IEA, OPEC produced 30.7 million barrels per day in September. Unless production is cut, 1.4 million barrels more Crude Oil per day than is actually needed would thus flood the market next year. For as long as OPEC makes no move to tackle this threat of a massive oversupply by reducing production, prices are likely to continue to fall,” Commerzbank stated.

Gold Fever Picking Up In India

India’s trade deficit widened to $14.25 billion in September, up from $10.84 billion in August and $6.12 billion in September 2013…the increase in the monthly deficit was largely attributed to higher Gold imports, which soared a whopping 450% in terms of value (year-over-year) despite the Indian government’s continued curbs on the metal…the value of Gold imports in September was $3.75 billion vs. $2.04 billion in August…

Today’s Equity Markets

Asia

No panic in China overnight…the Shanghai Composite fell 17 points, less than 1%, to close to at 2357…the steel and real estate sectors dragged the index lower…meanwhile, Japan’s Nikkei average closed at a fresh 4+ month low of 14738 as a stronger yen ignited risk-off sentiment…

Europe

European markets are mixed in late trading overseas…yields on 10-year Greek bonds rose to as much as 8.9%…the European Commission moved to ease concerns over Greece this morning, saying it would continue to assist the country in whatever way is necessary and would ensure a smooth evolution of support for the country after its bailout program finishes…

North America

The Dow is down 85 points as of 8:00 am Pacific…the TSX has reversed sharply and is now up 100 points while the Venture, after slipping as low as 768 in early trading, is now down just 1 point at 777…the Index has fallen in 26 out of the last 30 trading sessions, including today, so conditions are ripe for at least a relief rally…

U.S. 10-Year Treasuries

Stunning action on extremely high volume in the bond markets yesterday as yields on 10-year U.S. Treasury Notes, a key barometer of the strength of the U.S. economy, plummeted as low as 1.87% before ending at 2.09%…this reflected a sudden and dramatic shift in monetary policy expectations…what traders are saying is that they now expect the Fed to hold off raising short-term interest rates until perhaps 2016, not early or mid-2015 as previously anticipated…

The record low for the 10-year Treasury yield is 1.38%, reached in July 2012 at the height of jitters over Europe’s sovereign-debt burden…

This 2-year daily chart for the TNX (10-year Treasury Note) shows that RSI(14) oversold conditions have certainly emerged (a complete reversal from just a month ago) along with a new (lower) trading range vs. what we’ve seen since the summer of last year…strong support exists at a yield level between 1.8% and 1.9%…

What The “Fear Index” is Saying

This 10-year VIX daily chart suggests that the ultimate bottom of this equity market correction may not come until we see the VIX soar even higher…it closed yesterday at 26.25 after hitting an intra-day peak of 31.06…stocks are generally in trouble when the VIX is above 25%, and important market bottoms in 2009, 2010 and 2011 did not occur until the VIX was in the high 40’s…

Interestingly, on a historical basis, November is the worst month of the year for the VIX – over the last 2 decades, 3 out of 4 Novembers have been negative for the VIX…so watch for a potential peak in the “Fear Index” during the second half of this month…

Updated Dow Chart

Below is John’s latest Dow 2+ year weekly chart…as we pointed out previously, the negative divergence between RSI(14) and price – RSI(14) in a general downsloping trend while the market continued to march higher – was a warning of potential trouble on the horizon…

The 16300 area is new Dow resistance on any rally out of temporarily oversold conditions…a retracement to the Fib. 61.8% level, which would be a normal, healthy 10% correction, would take the index down another 600 points or so to 15450…other Fib. retracement levels are 14900 and 14400…

Updated Gold Chart

Gold is showing some interesting patterns with sell pressure in rapid decline and RSI(14) breaking out above previous resistance on this 6-month daily chart…combined with a bullish +DI crossover, Gold appears poised to do something BIG and this is what could stop the bleeding on the Venture…the surge in volume in Gold yesterday was notable…

The fact Gold was able to hold above its 2013 double bottom low in the midst of a parabolic move in the U.S. Dollar Index was impressive…during bullion’s fall from an August high of $1,324 to a low of $1,183 October 6, the “smart money” commercial traders dramatically scaled back their net-short positions while the large speculators – the momentum followers who are often on the wrong side of the trade – became increasingly bearish and fearful…

Gold is now trying to work through a band of resistance between $1,240 and the low $1,250’s…today, tomorrow and next week should prove very interesting in the Gold market – an imminent breakout would not be surprising based on bullion’s current technical posture…

Eldorado Gold Corp. (ELD, TSX) Update

Gold producers are looking very attractive at the moment and Eldorado Gold (ELD, TSX) is in the bottom quartile of the industry in terms of average cash operating costs…the company expects to produce 790,000 ounces of Gold this year, slightly higher than original estimates…

Eldorado broke above a downtrend line in June and soared nearly 50% before retracing recently to support at the rising 200-day SMA…the fact it held that support is bullish…RSI(14) and the SS are both indicating momentum is to the upside, while a bullish +DI crossover has also occurred…

Note:  John, Terry and Jon do not hold share positions in ELD.  Jon holds a share position in RIC.

Gold has been volatile today, trading between $1,221 and $1,251…as of 8:00 am Pacific, bullion is up $8 an ounce at $1,240…Silver has swung between $17 and $17.80 and is currently up 11 cents at $17.50…Copper has retreated 7 cents to $3.03…Crude Oil briefly fell below $80 a barrel but has since recovered to $81.90, up 6 cents, while the U.S. Dollar Index has dropped three-quarters of a point to 85.20…Russia’s Prime Minister Dmitry Medvedev told CNBC today that the world must move away from its dependence on the U.S. dollar, arguing that the global economy would benefit from a more diversified currency system…on Monday, Medvedev and China’s Premier Li Keqiang signed energy, trade and finance agreements and agreed on a 150 billion yuan ($25 billion) currency swap…

Fading confidence in the global economy has fueled speculation that the Federal Reserve may delay raising interest rates until well into 2015 – this has put the brakes on the U.S. Dollar Index, temporarily at least, giving bullion a lift…

Weakness in equities continues to attract some safe-haven buying into Gold…technically, bullion’s immediate obstacle is the $1,240 area – a confirmed breakout above $1,240 would put the bears on the defensive…$1,250 is also another key area, and that’s where Gold hit a wall this morning…

Keep a close eye on Canadian Gold producers – they will benefit significantly from a combination of lower Oil prices and a weak Canadian dollar…this morning we have an updated chart on the TSX Gold Index – accumulation patterns are showing up during this period of high volatility…

Today’s Equity Markets

Asia

Asian markets were mostly higher overnight…benign Chinese inflation data fueled hopes of additional easing, while a weaker currency provided support for Japanese shares…the Shanghai Composite gained 15 points to close at 2374 while the Nikkei average added 137 points to climb back above 15000…

Chinese consumer prices rose 1.6% from the year-ago period, compared with the 1.7% gain forecast by Reuters and after climbing 2% in August…wholesale prices, meanwhile, dropped 1.8%, versus expectations of a 1.6% decline and after falling 1.2% in the month before…producer prices in China have been declining since February 2012, weighed by falling commodity prices, overcapacity and weakening demand…

Europe

European markets are down sharply but off their lows in late trading overseas…

North America

Weak economic data this morning, along with other concerns, weighed heavily on the major indices at today’s open but losses have been trimmed…U.S. retail sales slipped 0.3% in September, slightly more than expected; the PPI for September fell 0.1% as opposed to expectations of a 0.1% gain; and a gauge of business conditions in New York declined in October, with the Empire State’s business conditions index falling to 6.17 this month from 27.54 in September…

The Dow is off 177 points as of 8:00 am Pacific after tumbling as much as 368 points…the S&P 500 is 22 points lower at 1856…keep in mind that energy companies are among the largest components of the S&P 500 by market capitalization…the TSX has retreated 144 points while the Venture is now trading below another support level (800)…the Index is 18 points lower at 785 through the first 90 minutes of trading…

TSX Gold Index Chart Update 

A “dead-cat” bounce or the beginnings of an important upside move in the producers?…this 6-month TSX Gold Index chart shows the potential for an October reversal after a plunge of 22% between September 2 and October 8…the short-term bearish trend has clearly been weakening…the Gold Index, however, faces considerable overhead resistance which likely can’t be overcome without Gold staging a breakout through $1,250 – which certainly has to be considered a possibility given the unusual market conditions we’re in…the Gold Index is up slightly at 170 as of 8:00 am Pacific…

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

Contact Exploration (CEX, TSX-V) is an excellent illustration of how Oil and gas plays have played a significant role in dragging down the Venture since the beginning of September…Crude Oil prices have tumbled more than 25% since their June highs and this has certainly taken its toll on all the junior producers in that space who did some heavy lifting while the Venture climbed to 1050 earlier this year…

Since hitting John’s Fib. resistance level bang-on at 56 cents in early September, nearly $60 million has been wiped off the market cap of Contact after yesterday’s close at 36 cents…recently, we warned that CEX had broken below an upsloping channel in place since the summer of last year, and it has continued to weaken…13.7 million flow-through shares from a private placement that are now free-trading aren’t helping matters…

CEX is off 1.5 cents at 34.5 cents as of 8:00 am Pacific…

Three Shell gas stations in Calgary rolled back their pricing to 1984 levels (40 cents a liter) for a day last week, celebrating 30 years of refining gas in Fort Saskatchewan.  While we’re not about to see regular prices at those levels, some savings at the pump (the equivalent of a modest tax cut for North American consumers) are one benefit to the slide in Crude prices…

Crude Oil Slide

Oil prices posted their biggest 1-day drop in nearly 2 years yesterday amid a glut of crude, threatening the stability of some countries and providing an economic lifeline to others…the Saudis have clearly accelerated the decline by quietly telling Oil market participants that Riyadh is comfortable with markedly lower prices for an extended period, a sharp shift in policy that appears to be aimed at slowing the expansion of rival producers including those in the U.S. shale patch…earlier this month, state-owned Saudi Aramco stunned the rest of OPEC by slashing its November prices to defend its share of Asia’s growing market…Saudi Arabia also said it increased its output in September…meanwhile, Kuwait, Saudi Arabia’s traditional Gulf ally, is now challenging its bigger neighbor in an increasingly competitive battle for market share as it sells Oil to buyers in Asia at the widest discount to a comparable Saudi grade in 10 years…

The Saudis are putting the screws to Vladimir Putin, which is perfectly acceptable, as Russia – a high-cost producer with an economy that relies very heavily on its Oil sales – is hurting severely with prices at current levels…however, they’re also likely targeting a perceived threat from rapidly growing U.S. Crude production which is at a 25-year high (8.5 million barrels a day compared to 4.5 million in 2008)…it’s believed that marginal U.S. shale producers need about $85 a barrel to break even – bankruptcies could literally be on the horizon in the U.S. (and Canadian) Oil patches if prices were to fall below $80 for an extended period…

This downturn in Oil is also sure to do some serious damage to certain hedge funds and may force additional selling due to margin calls…

WTIC Seasonality Chart

Going back to 1995, October has been the worst month of the year for Crude Oil prices while November is the second-worst in terms of average overall monthly percentage declines…this is normally followed by an upswing over the winter through early spring…

WTIC Short-Term Chart

Technically, a breakdown of channel support in WTIC occurred last Thursday (on high volume) as you can see in this 6-month daily chart…that helps explain this week’s acceleration to the downside…the trend has been bearish since early July after a -DI crossover…RSI(14) could easily plunge further into oversold territory…

WTIC Long-Term Chart

What’s more worrisome about this plunge in Oil prices is the breakdown below a multi-year uptrend…based on this 10-year monthly chart, it’s reasonable to expect WTIC to fall into the mid-$70’s – the Fib. 50% retracement level is $75.31 – before a sustained rebound may kick in…sell pressure has now replaced buy pressure, dominant – remarkably – for a decade, even through the 2008 Crash…

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

This company could be in the right space at the right time – Mission Ready Services (MRS, TSX-V) provides solutions to the global defense, security and first-responder markets in the areas of cleaning, logistics, maintenance, program management and client representation…last Friday, the company, which is gaining momentum with some its clients, announced the closing of a $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)…on that note, MRS President and CEO Rod Reum commented:  “This significant award, coupled with our ongoing contract to clean and repair the U.S. Special Operations Command Spear equipment at our JBLM and Fort Bragg facilities, helps to further broaden our business credentials within the various military communities and validates our technology. To date our advanced cleaning system has enabled us to place equipment back into service at approximately a 91% saving compared to replacement cost. We believe this award will be advantageous in gaining further recognition by the various military services and private organizations seeking to cut costs while maintaining the integrity of their equipment.”

Technically, MRS has been climbing an upsloping channel since the beginning of August with resistance in the mid-30’s and strong Fib. support in the mid-20’s…MRS started trading late last year after completing its qualifying transaction (formerly Priceless Piranha Capital Corp.)…as always, perform your own due diligence…MRS is off a nickel to 31 cents as of 8:00 am Pacific…

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

Gold has traded between $1,231 and $1,238 so far today…as of 8:00 am Pacific, bullion is down $3 an ounce at $1,234…Silver is off 8 cents at $17.42…Copper has surged a nickel to $3.10…Crude Oil is off another $1.24 a barrel to 84.51 – under continued pressure over supply concerns and efforts by Saudi Arabia to go after market share, drive the price down and put the squeeze on American producers (more on the “Petroleum Pearl Harbor” tomorrow)…the U.S. Dollar Index is up more than one-third of a point to 85.71…

Gold has responded favorably, though not robustly, as a “safe haven” during this period of weakness in equities…the fact bullion managed to hold above its 2013 double bottom low despite the recent surge in the U.S. Dollar Index has contributed to some short-covering, while a pick-up in Chinese demand was apparent following that country’s week-long National Day holiday…technically, Gold is currently within a resistance band ranging from $1,229 to $1,240…a confirmed breakout through $1,240 would be bullish…

Singapore launched 25 kg (around 804 ounces) Gold contracts yesterday, the latest Asian country to start exchange-traded contracts with the aim of providing a regional benchmark price…the launch comes as Asia, home to the world’s top two Gold buyers, China and India, has been clamoring to gain pricing power over the metal and challenge the dominance of London and New York in trading…

Holdings in SPDR Gold Trust, the world’s largest Gold-backed exchange-traded fund and a good proxy for market sentiment, fell 2.64 tons on Friday to 759.44 tons, its lowest level since December 2008…contrarians will look at that as a positive sign…

Chinese Copper imports picked up last month and may continue to do so for the rest of the year, according to Citi Research…Chinese imports of the red metal rose to around 390,000 metric tons in September, a rise from 340,000 and 343,000 tons seen in the previous 2 month…however, the year-on-year decline was still 14.8%.  “Given September is typically a stronger month seasonally for imports, this represents only a slight increase (month-on-month) on a seasonally adjusted basis,” Citi stated. “We continue to believe that Chinese copper consumption will improve through Q4, supporting copper imports through the remainder of the year.”

Views on Global Economy

In an interview on CNBC, Bank of England Governor Marc Carney stated that while the U.K. has had a “strong recovery” in the past 18 months, “We have to take into account a more modest global recovery, particularly if that’s the case in Europe.”

Over the weekend, in a speech at the International Monetary Fund, Federal Reserve Vice-Chairman Stanley Fischer stated, “If foreign growth is weaker than anticipated, the consequences for the U.S. economy could lead the Fed to remove accommodation more slowly than otherwise.” 

Only 32% of investors polled by Bank of America Merrill Lynch in October expect the global economy to strengthen over the next 12 months, down more than 20 percentage points from September and the lowest reading in 2 years…monetary policy underlies this shift in sentiment, the bank said in its monthly fund manager survey…only 18% of fund managers now view policy as too stimulative, down 14 percentage points to the lowest level since August 2012…

Today’s Equity Markets

Asia

Japan’s Nikkei average hit to a 2-month low overnight, falling 364 points or 2.4% to close at 14937…China’s Shanghai Composite held mostly steady overnight, losing just 6 points to finish at 2360…

Europe

European markets are mixed in trading overseas…there are growing concerns over the obvious deterioration of the euro zone economy…new data showed today that German investor morale has fallen sharply this month, raising fears that the euro zone engine could contract in Q3…Germany’s ZEW index of economic sentiment fell into negative territory for the first time since November 2012 as pessimism mounted over the outlook for the euro zone’s largest economy…

In addition, data for euro zone industrial production also showed a fall…the figure for August sunk 1.8% from the month before and was worse than expected in a poll of economists by Reuters…capital goods output was the major laggard within the new figures and showed their biggest drop since January 2009…

North America

The Dow is up 73 points as of 8:00 am Pacific…bulls are hoping that a slew of Q3 earnings reports this week – several companies reported positive results before this morning’s open – will reverse the market’s direction and take the focus away from a slowing global economy, Ebola and geopolitical concerns…

U.S. small business optimism fell in September as more owners said they expected a slowdown in profits and sales, tightening credit conditions and a harder time filling job openings, according to a survey released this morning…the National Federation of Independent Business said its Small Business Optimism Index fell 0.8 point to 95.3…the index is now 5 points below where it was before the start of the 2007-2009 financial crisis and recession…

Yesterday, the S&P 500 breached its still-rising 200-day moving average (SMA) for the first time since 2012…interestingly, according to Morningstar data, the index is positive 69% of the time 1 month after breaking through that average…3 months out, it’s up 86% of that time…however, in this case as we showed in a chart yesterday, a bigger concern is that 1900 was an area of significant chart support, beyond just the 200-day, and an uptrend channel in place since the late 2012 low of 1343 has also been broken…

Dow Chart Update

This 2-year weekly Dow chart shows a trend of negative divergence between RSI(14) and price that began over the summer…RSI(14) has also broken below support at 50%…

Investors should keep in mind these Fib. support levels on the Dow – 15591, 15047 and 14503…that implies the potential for a deeper correction…what we may also be witnessing – though it’s too early to tell at this point – is the possible emergence of a head-and-shoulders pattern…if such a pattern develops, and penetrates the below the neckline, then a test of support around 15600 would certainly be expected…

TSX Chart Update

The TSX broke below an upsloping channel (in place for over a year) and key support at 15000 at the end of September, so the plunge since then is not hugely surprising…the sell-off in Oil has not helped matters…

Major support levels for the TSX are 14200, 13500, 12800 and 11500…a relief rally out of temporarily oversold conditions is certainly possible…

The TSX is down 200 points at 14028 through the first 90 minutes of trading today…

Venture Chart Update

Below is a long-term (10-year monthly) Venture chart…next major support is 800…note the peak levels (circled in blue) for +DI and -DI at the bottom of this chart…those levels have defined important reversal points going back to the Crash of 2008…in this case, -DI would have to move higher to match previous peak levels…

The Venture is off 16 points at 811 as of 8:00 am Pacific…

Richmont Mines (RIC, TSX) Update

Canadian Gold producers stand to benefit from lower Oil prices and a weak Canadian dollar…combine that with stronger than expected production levels, exploration success at its Island Gold Mine in Ontario (substantial high-grade resource defined below existing workings), and fresh earnings momentum, and that’s a formula for better things to come from Richmont Mines (RIC, TSX) which is bouncing back from a very difficult 2012 and 2013 as we’ve pointed out on a few occasions recently…

After losing $1.9 million in Q1 this year, RIC achieved net earnings of $4.6 million in Q2, and last week raised 2014 production guidance to between 85,000 and 90,000 ounces (up 10,000 ounces)…the company will be releasing Q3 earnings November 6…RIC had $38 million in cash as of September 30 and has a current market cap of approximately $135 million…

Technically, RIC recently held important support around $2 and had a “gap-up” this morning on the TSX to $2.65 (it also trades on the NYSE where it had a strong day yesterday)…as of 8:00 am Pacific, RIC is up 25 cents to $2.70…

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

Ascot Resources (AOT, TSX-V) continues to aggressively drill its Premier Property in northwestern British Columbia with assays from more holes reported this morning…while overall results were promising, they weren’t spectacular – with the exception of hole P14-707 in the West Zone area which intersected 0.75 m (from 167 to 167.75 m) of 14,394.5 g/t Au…the Premier is a high-grade past producer and, encouragingly, Ascot is finding extensions to mineralized structures there which appear very similar to the multi-million ounce Big Missouri-Martha Ellen-Dilworth system to the north…

Ascot will spend the remainder of the 2014 season drill testing, with up to 4 rigs, the southern two-thirds of the Premier system in a series of widely spaced drill patterns, to demonstrate strike and dip continuity…in addition, drilling will also focus on specific very high grade Gold targets recently intersected…

AOT opened slightly higher this morning but is now down 10 cents at $2.00 as of 8:00 am Pacific…a strong band of support exists between $1.73 and $1.90 with the rising 50-day SMA resting in between…that support must hold or AOT is vulnerable to a significant sell-off, especially in the current market environment…

Note:  John, Terry and Jon do not hold share positions in RIC or AOT.

U.S. markets are under pressure again after trying to regain their footing in early trading today following last week’s sell-off.  As of 7:30 am Pacific, the Dow is off 68 points while the S&P 500 is 12 points lower at 1894.  Q3 corporate earnings season begins in earnest tomorrow with results from Citigroup, Johnson and Johnson, JPMorgan Chase and Wells Fargo.  Will earnings reports bring a market reversal?

Gold is up $7 an ounce at $1,230 while Silver is unchanged at $17.40 as of 7:30 am Pacific.  Copper is off 3 pennies to $3.04.  Crude Oil is weak again today, down by more than $1 to just under $85 a barrel, while the U.S. Dollar Index has declined by one-fifth of a point to 85.49.

Canadian markets are closed due to Thanksgiving.  BMR Morning Market Musings returns tomorrow.

S&P 500 Updated Chart

The 1900 area, which includes the rising 200-day moving average (SMA), is key support for the S&P 500 – it really needs to hold 1900 on a closing basis – as you can see in the chart below (a close beneath that level today would require confirmation tomorrow).  At 35%, RSI(14) is also at previous support.

Since reaching an all-time high of 2019 on September 19, the index has fallen 6% but has not experienced a correction of at least 10% in more than 700 trading sessions.  That streak is in danger of coming to an end.  Note the downsloping RSI(14) going back to June and the negative divergence between RSI and price when the index hit 2019 last month.  A technical breakdown appears to be building.

Nasdaq Updated Chart

It’s interesting that both the Venture (first), the TSX (second) and now the Nasdaq have each broken below long-term uptrend support lines, so the Nasdaq is highly vulnerable to additional weakness especially with a bearish -DI crossover.  A retracement to the Fib. 50% or 61.8% support levels certainly can’t be ruled out.  The bottom of the upsloping channel (about 4400) can be expected to provide resistance on any rally from current levels.

Silver Short-Term Chart Update

If there’s anything positive to gleam from this short-term (6-month) Silver chart, it’s that 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 condition from mid-June to mid-July.   However, this doesn’t mean that Silver is ready to take off to the upside in a major way – at least not yet.  It has a lot of resistance to contend with (immediately in the mid $17.50’s), and a slowing global economy is a fundamental factor working against the metal at the moment.

Silver Long-Term Chart Update

The fact that Silver has been pushed to a 4-year low, breaching the $18.50 support level, isn’t a very encouraging sign.  This long-term chart suggests that the metal is in the process of bottoming out but hasn’t found a final low just yet.  Next major support is at $16.  The 2008 and 2010 lows came on spikes to the downside – that’s something to watch for.

It’s Thanksgiving in Canada, a very special day to “serve” and to share with friends and family.  In particular, no matter what challenging circumstances we may each face at the moment, it’s a day to reflect on all the blessings we do enjoy in our personal lives and to be grateful for each and every one of them.  Having an “attitude of gratitude” every day of the year, not just at special times such as this, is critical. Many of us may not feel as “rich” as we were even just a couple of months ago, given the turmoil in the markets, but we challenge everyone to think of richness not just in financial terms.

As Canadians, we can also of course be thankful for living in such a magnificent country with the freedoms and blessings that so many people around the world simply do not have.

God has called us to live generous lives and to be a blessing to others.  From all of us at BMR, Happy Thanksgiving!

To our American friends, who celebrate Thanksgiving next month, happy Columbus Day!  This day remembers Christopher Columbus’ arrival to the Americas on October 12, 1492.

Canadian stock markets are closed today.  U.S. stock markets are open (the bond market is closed) though trading volumes will be lighter with the Columbus Day holiday.  Our regular BMR Morning Musings resumes tomorrow but we’ll have a separate post later this morning, covering various market developments with our usual Monday Silver chart updates as well.

TSX Venture Exchange and Gold

The bleeding has intensified on the Venture as the Index suffered its worst week out of 6 consecutive bad ones, plummeting 56 points or 6.3% despite Gold’s best weekly performance (up 2.7%) in 4 months.  The broader equity markets also suffered with the TSX falling 3.8%, the Dow off 2.7% while the Nasdaq tumbled 4.5%.  Volatility is clearly on the upswing with the VIX breaking above its August high.

Obvious signs of a slowdown in global economic growth, which also triggered a substantial drop in Crude Oil prices below key technical support, was a major contributor to last week’s market woes.  Canadian markets are closed Monday for Thanksgiving but the U.S. returns to action Monday with bulls hoping for a shift in focus next week from the global economy, Ebola and geopolitical concerns to corporate earnings.  Major U.S. banks and technology companies are slated to report Q3 results.  This could help stabilize the markets and reverse the negative momentum.

The Venture, which has fallen in 25 out of the last 29 sessions, is caught in the grips of a severe technical breakdown with 3 key levels breached in just the last 18 trading sessions – 970, 920 and 860.  As we’ve mentioned previously, the ease with which the Venture sliced through those important and strong support levels is a worrisome sign and suggests there is a heightened risk of 1) a major correction in the broad equity markets, and/or 2) a plunge in Gold and/or commodities in general.

History shows that a sudden downtrend like this in the Venture often leads to a dramatic capitulation moment when fear spikes and frightened investors dump their holdings based purely on emotion, not common sense.  So it’s really critical for investors to stay level-headed at times like this, and also identify high quality opportunities that might be recklessly sold during the capitulation peak.

On an encouraging note, we remind readers that in times like this, fortunes are born.  It was in the depths – and in the aftermath – of the 2008 Crash when fortunes were made by many investors, and the same will hold true during this slide.  So this is no time to be discouraged.  Rather, it’s a time to really get to work and find special situations that have been knocked down – and may get knocked down even further – before their turn comes to soar. 

Below is a 9-month Venture chart that shows the 19.2% drop in 29 trading sessions.  Next major support levels are 800, 760 and 680.  Intense oversold conditions have emerged but that doesn’t mean a bottom in the Index has yet occurred.

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 held critical support last week, and it’s interesting that the yellow metal was able to stay above its 2013 double bottom low during a record run of 12 straight weekly advances by the U.S. Dollar Index – a streak that finally came to end yesterday.

Chinese traders were back in the market mid-week following their Golden Week holiday, with strengthening demand for kilobars prevalent in the last couple of days, according to MKS (Switzerland). “Apparently onshore jewelry sales were brisk during this period so manufacturers have had more appetite to load back up on the metal. This has helped to stabilize Gold from the free-fall seen early this week and raise a hair of concern for short specs (speculators).”

Gold jumped $32 last week to close at $1,223.  Bullion has some work to do, however, as RSI(14) on this 6-month daily chart is now up against resistance while a band of chart resistance exists between $1,229 and $1,240.

Silver regained its footing last week and rose 55 cents to close at $17.40 (updated Silver charts Monday morning).  Copper finished unchanged at $3.04.  Crude Oil sank $3.80 a barrel to $85.82 while the U.S. Dollar Index full three-quarters of a point to 85.81.

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.