BullMarketRun.com

The U.S. Dollar Index could be in for a rough or choppy 2nd quarter after some of the assumptions underlying its rapid ascent over the last 9 months are increasingly being cast into doubt, especially after this morning’s sharply weaker than expected March jobs report from the Labor Department – plus downward revisions for numbers reported in February and January.  While the overall bull market in the greenback remains intact, after some critical breakouts, an extended correction is now likely to unfold after the Dollar Index spiked to a 12-year high of 100.71 in mid-March.

Dollar weakness is clearly positive for the Venture Exchange – there is such an obvious and proven inverse relationship between the two, going back many years, and we’ve seen this dynamic played out in dramatic fashion since last summer with the Venture tumbling by as much as nearly 40% while the greenback soared on expectations of an improving U.S. economy and a Fed rate hike during the first half of 2015.  In our view, the Fed will be lucky if it can start the process of rate “normalization” by late this year.

Gold should get a boost next week and will have its first chance to react to this morning’s jobs report on Monday (keep in mind, North American equity markets reopen Monday but European markets will be closed until Tuesday).

March Jobs Report: Major Expectations Miss

March’s report of just 126,000 non-farm payrolls was about half the total economists were expecting and the worst reading since December 2013, though the unemployment rate remained unchanged at 5.5%.

This morning’s report aligns with evidence in other data that points to a slowing in GDP growth in the 1st quarter (perhaps a pace of 1% or less).  It also affirms market views that the Fed will move more cautiously than previously expected to raise interest rates, and September realistically remains the earliest time frame for the Fed to act in the minds of many traders.  Today’s information also places a greater premium on the next few employment reports as the Fed looks for evidence that the current slowdown in economic growth and labor market momentum is just temporary.

In addition to the much weaker than expected March jobs number, the February and January numbers were both revised downward (February from 295,000 to 264,000, and January from 239,000 to 201,000).  Over the past 3 months, job gains have averaged 197,000 per month.  The trend has been weakening since late last year.

The service sector, as has been typical during the jobs recovery, led the way with 40,000 new positions. Retail added 26,000 and health care grew by 22,000.

Weaknesses came in mining, which lost 11,000 jobs, and nursing care, which shed 6,000 positions. The normally reliable bar and restaurant industry, which added 66,000 in February and had been averaging 33,000 a month, contributed just 9,000 in March. Manufacturing lost 1,000 jobs.

Gold has hovered between $1,194 and $1,208 so far today…as of 9:15 am Pacific, bullion is down $4 an ounce at $1,199…Silver is off 26 cents at $16.68…Copper is down 2 pennies at $2.73…Crude Oil remains volatile with nuclear negotiations with Iran having gone into overtime…WTIC is off 82 cents a barrel at $49.27, while the U.S. Dollar Index has lost two-thirds of a point to 97.53 ahead of tomorrow’s all-important U.S. jobs report…

Along with weaker U.S. economic data, analysts at Commerzbank say that physical demand from India should help support Gold prices over the near-term…they note that according to data from the All India Gems & Jewellery Trade Federation, the country imported 70 tonnes of Gold in March, “putting total imports in the fiscal year that has just ended at 638 tonnes.”

Looking forward, Commerzbank says the federation expects Gold imports in the new fiscal year to reach between 800-825 tonnes…analysts add that demand should pick up quickly as in 3 weeks’ time, India will be celebrating Akshaya Tritiya – an important religious festival at which a lot of Gold is given as gifts…

The OECD reported today that the annual rate of inflation in its 34 members rose to 0.6% in February from 0.5% in February last year, having fallen since July 2014…but inflation rates remain well below the 2% level targeted by most central banks as consistent with healthy economic growth…

An Unstable World

Another Islamist terrorist attack this morning, specifically designed to murder innocent Christians…five heavily-armed gunmen stormed a university campus in northern Kenya…reports state that at least 15 people are dead, dozens more are injured, and hundreds of students are still unaccounted for…the attack was the latest in a series carried out in the region by the al-Qaeda linked al-Shabaab group…a spokesman for the terror group told the BBC that it attacked the school because “it’s on Muslim land colonized by non-Muslims.”

Meanwhile, al-Qaeda terrorists in Yemen stormed the coastal city of al Mukalla early today, seized government buildings and freed at least 270 inmates from a prison, including many of its own operatives, according to Yemeni officials…the overnight attack on the eastern city, an important seaport, was a new setback for Saudi-backed government forces already fighting an uprising by Iranian-supported Houthi rebels…al Qaeda and ISIS are both exploiting Yemen’s sectarian strife…

Oil Update

Lifting Oil sanctions on Iran has the potential of impacting global markets long before the nation starts pumping more Crude, though the removal of sanctions is likely to be gradual and subject to explicit and verifiable conditions (we hope) if President Obama gets his way and is able to pull together a 6-nation agreement with Iran regarding its nuclear program (an announcement regarding the talks is expected imminently with a news conference having been called, so perhaps the broad framework of a deal has been hammered out – a final version would still be at least a few months away)…

The Iranian regime has consistently demonstrated that it can’t be trusted, and some observers predict that if an “Obama” deal does materialize with Iran, it may actually lead to increased conflict and a nuclear arms race in the Middle East (The Law of Unintended Consequences, especially when over-zealous politicians are involved, particularly a President with extremely weak foreign policy discernment)…

According to data compiled by Bloomberg, Iran has been stockpiling Oil onshore and in supertankers in the Persian Gulf…while estimates of the hoard vary from as little as 7 million barrels to as much as 35 million, Barclays Plc and Societe Generale SA predict this Crude would be the first to be sold abroad if there’s an agreement on Iran’s nuclear program…again, any final deal won’t come until at least this summer, and the lifting of sanctions surely won’t be immediate…

The world is clearly awash in Oil – this fact, along with the major technical breakdown in the WTIC chart last year, suggests that risks are still skewed to the downside (the “primary” trend) as far as prices are concerned…however, tensions continue to build between Shiite Iran and Sunni Saudi Arabia – Yemen being the latest example – and this increasingly bitter rivalry has the potential of escalating into a broader regional conflict that could bring a significant risk premium back into Crude…in the volatile Middle East, anything is possible…

Technically, what we see at the moment is a growing possibility of a near-term rally in Oil – the fundamental factors that may drive this?…that’s hard to pin down precisely at this point, but one of them could be further weakness in the greenback…a potential deal with Iran throws some unpredictability into the equation, but let’s see what develops over the next few sessions…

WTIC has been trading in a $12 range since late December with resistance near $50 and support around $45…what’s interesting at the moment is that for the first time since Crude’s collapse began last summer, the 50-day moving average (SMA) – currently $49.53 – has flattened out and is now threatening to reverse to the upside…the bearish trend has weakened considerably over the past couple of months, increasing the odds of a substantial rally that savvy short-sellers will likely take advantage of (the primary trend is still negative, remember, unless the Middle East erupts in flames)…at the moment, non-commercial short positions in Oil are at their lowest level in more than 2 years…

TSX Gold Index Update

A big move yesterday in the TSX Gold Index – what’s key to keep an eye on is Fib. resistance in the mid 160’s…this is the level where the Index reacted during a rally last month…

A series of higher lows in the Gold Index since the November apparent bottom at 129 is encouraging…however, it’ll be interesting to see how the Index handles a now-declining 50-day moving average (SMA)…

The producers have pulled back slightly in early trading today with the Gold Index down 1 point at 164 as of 9:15 am Pacific…

U.S. Dollar Index Update

A weaker than expected jobs report tomorrow could lead to a more extended correction in the U.S. Dollar Index which went into a consolidation pattern after touching resistance recently at 100…strong support exists at 96, which is also the rising 50-day moving average (SMA)…it’s quite possible that after the fastest rise in the Dollar Index in 40 years, a more significant pullback may need to occur here…

Today’s Markets

Asia

Asian markets were strong overnight, led by the Nikkei which climbed 278 points or 1.5%…China’s Shanghai Composite gained 16 points to finish at a fresh multi-year high of 3826…sentiment was boosted by news that Beijing is expanding the investment scope of the country’s social security fund…

Europe

European markets were mixed ahead of the Easter long weekend…in Britain, all eyes will be on the country’s political leaders as they take part tonight in a 7-way television debate which could help decide the outcome of next month’s election – the most difficult to call in decades…

North America

The Dow is up 11 points as of 9:15 am Pacific…in Toronto, the TSX has shot up 102 points while the Venture is flat at 681 as it still grapples with resistance…

Pretium Resources Inc. (PVG, TSX) Update

Pretium Resources (PVG, TSX) announced this morning that the company and the Nisga’a Nation have entered into a comprehensive co-operation and benefits agreement covering the Brucejack Project in northwestern British Columbia…the agreement establishes a “long-term, mutually beneficial relationship” between Pretium and the Nisga’a Nation, which has rights and interests as defined by the Nisga’a final agreement in the Nass area where portions of the project are located…

Under the terms of the deal, the Nisga’a Nation will provide continuing support for the development and operation of Brucejack as a safe, environmentally sound mine with participation in its economic benefits, and Pretium will honor commitments to the Nisga’a Nation regarding jobs and contracting opportunities at the project, education and training, and financial payments…

Mexico Update

The most exciting precious and base metal discovery we see unfolding in Sonora State, Mexico, at the moment is Garibaldi Resources‘ (GGI, TSX-V) Rodadero Project, and we’ll be updating our readers on that Monday after recent interviews with both Dr. Craig Gibson and GGI President and CEO Steve Regoci…shallow high grades in a step-out hole 150 m north of discovery hole SE-14–01 has opened up new possibilities at the north-south trending Silver Eagle system, while a large east-west trending mineralized structure has been outlined several km to the north…in total, a dozen targets (Ag, Au) have now been outlined at the 45 sq. km Rodadero Project with 3 key priority areas as the Phase 2 program continues…

Kootenay Silver Inc. (KTN, TSX-V) Update

Kootneay Silver (KTN, TSX-V) has a high-quality exploration play unfolding with its La Negra Silver discovery, contained within the Promontorio mineral belt…we all know how prolific Sonora is as a mineral region…the La Negra breccia discovery is situated approximately 6.5 km north of Kootenay’s flagship Promontorio Silver resource, and a 30-hole follow-up drill program commenced about a month ago with more encouraging results released 2 days ago…

Technically, a confirmed breakout has occurred in KTN above an ascending triangle and chart resistance…this bodes well for Q2…

International Montoro Resources Inc. (IMT, TSX-V) Update

As drilling continues at the intriguing Pecors anomaly (Ni-Cu-PGE target) near Elliot Lake in northern Ontario, immediately west of Sudbury, it’s not surprising that International Montoro Resources (IMT, TSX-V) is now threatening to break out technically above a 7-month horizontal channel as shown below in our updated 1.5-year weekly chart…this is an extremely bullish pattern and scenario for the month of April that importantly is concurrent with a minimum 2,000-m drill program…

We’ll have more on the Pecors anomaly Monday, and why the Ontario Geological Survey (not to mention IMT’s technical team) believes it’s such a promising target…

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

Gold has traded between $1,179 and $1,204 so far today…as of 8:50 am Pacific, bullion is up $19 an ounce at $1,202…Silver has climbed 21 cents at $16.84…Copper is flat at $2.75…Crude Oil has jumped $1.59 a barrel to $49.19 while the U.S. Dollar Index, coming off its best quarter since the financial crisis in 2008,has slipped one-third of a point to 98.11…more weakness in the greenback could be on the way…

Friday’s U.S. employment report will be key in determining if the greenback heats up again after its recent pullback, or if the correction from the March high of just under 101 becomes a more extended event…some observers believe that U.S. Q1 economic weakness will start showing up in employment this quarter, which would be dollar negative…indeed, this morning’s ADP employment report for March showed an increase of only 189,000 in monthly private payrolls, below expectations of a modest rise to around 225,000…this could foreshadow a weaker than expected jobs report Friday from the Labor Department…keep in mind, though, that the Labor Department has reported jobs gains above 200,000 for 12 consecutive months, the longest such run since 1994 (funny how the “feel” of the economy doesn’t quite match those numbers)…economists polled by Reuters have been forecasting a 245,000 gain in U.S. jobs in March which would be down significantly from February’s robust figure of 295,000…if the jobs number disappoints, Good Friday won’t be be a good day for the greenback…

UBS is growing more bullish on the prospects for Gold, particularly equities, with the belief that the Fed will be limited in its ability to tighten monetary policy later this year…in a note to clients, analyst Julian Garran highlighted 4 favorite producers – Randgold (“one of the best-managed stocks in the global Gold sector”), Acacia, Goldcorp and Agnico Eagle…

New York-listed SPDR Gold Trust, the world’s largest Gold-backed ETF, recorded its biggest monthly outflow in March since December 2013…that actually can be interpreted as a bullish sign from a contrarian standpoint as the Gold price jumped by more than 15% in the two-and-a-half months following that large December 2013 outflow that pressured bullion down to a low around $1,180…

Senior Western officials warned today that significant hard work lay ahead on the outlines of a final nuclear deal between Iran and six world powers, although they remained hopeful an agreement could be reached…the deadline to complete the framework for a final nuclear deal passed yesterday with U.S. and Iranian diplomats saying enough progress had been made to continue working…it’s the third time in less than a year that the two sides have crashed through a deadline for the diplomacy…a political understanding is supposed to pave the way for a final, fully fleshed-out nuclear deal between Iran and the six powers by June 30…

Oil Update

A nuclear deal with Iran, which President Obama seems determined to achieve even though the Iranian regime has consistently proven it cannot be trusted, has the potential of adding to Crude’s global supply problem…even with prices trading well below where they were just six months ago, the world is still awash in Oil and storage tanks are also brimming…however, there are some signs that U.S. production growth will level off and start to decline later this year (that’s certainly OPEC’s aim)…total output in the seven main U.S. shale Oil producing regions is expected to rise in April, according to the Energy Information Administration, but the EIA is forecasting the smallest month-over-month gain since January 2011…

Gold Seasonality Chart: March Showers Bring April Flowers

March is over, thank goodness…going back over the last two decades, it’s one of the worst months of the year for bullion – in fact, 70% of the time it’s a negative month as John’s seasonality chart shows…

The good news is, based on trading since 1996, April has almost been the polar opposite of March…nearly 60% of the time, bullion has posted positive returns this month – only September has been better in that respect…May also tends to be favorable, followed by what’s usually a June pullback and then a summer rally…

Silver Shines In Q1  

Interestingly, Silver enjoyed a solid Q1 with a 5.15% gain – that was even better than the 1st quarter returns posted by the Dow, S&P 500, Nasdaq and the FTSE…

Gold was essentially flat for the quarter while Crude, of course, took a heavy hit, declining nearly 10%…below is a Q1 quarterly performance chart covering Gold, Silver, Copper and WTIC…

Note how Copper started a consistent, albeit gradual, trend higher around the end of January…stimulus measures in China are clearly helping Copper…China accounted for about 40% of global Copper demand in 2014 (up from 22% in 2008), and record investment this year in China’s state power grid is one factor that should help support Copper prices…

Shanghai Composite Soars In Q1

Monetary easing in China, and expectations for more of the same during this 2nd quarter, fueled a major move in the Shanghai Composite during Q1 as it posted a gain of nearly 16%…

Today’s Equity Markets

Asia

China’s Shanghai has started Q2 with a bang, surging 62 points overnight to close at 3810…China’s official March manufacturing PMI unexpectedly edged up to 50.1 in March from February’s 49.9, a tad above the level that separates growth from contraction…

A major technical breakout in this index occurred in July of last year when it broke out above a multi-year symmetrical triangle…the upsloping channel here is amazing and there’s every reason to believe that momentum will carry this market to the next Fib. level around 4100 in the coming weeks…

Europe

European markets were up modestly today…

North America

While off its lows of the morning, the Dow is still down 78 points as of 8:50 am Pacific…

Another sign of a sputtering U.S. economy – the pace of manufacturing growth fell in March to its slowest in almost 2 years, pressured by fewer new orders and stagnant employment, according to an industry report released today…the Institute for Supply Management (ISM) said its index of national factory activity fell to 51.5 from 52.9 the month before…the reading was shy of expectations of 52.5, according to a Reuters poll of economists, and was the lowest reading since May 2013…

In Toronto, the TSX is up 16 points while the Venture continues to try to push through the 680 area – it’s up 1 points at 681 through as of 8:50 am Pacific…

International Montoro Resources (IMT, TSX-V) Update

International Montoro Resources (IMT, TSX-V) continues to show strength as drilling of the 1st hole progresses at the intriguing Pecors anomaly near Elliot Lake in northern Ontario…in fact, IMT is on the cusp of a major technical breakout above a multi-month horizontal channel – a pattern that has played out in several other situations John has tracked just recently…

A broad range of data, including sediment sampling from Pecors Lake, suggests that the potential mineralization causing the massive Pecors anomaly is more similar to that found at Nickel mines in the Sudbury Basin to the east than to that of nearby Uranium and REE discoveries…that’s not just the conclusion of IMT’s technical team – the Ontario Geological Survey has conducted important work in the area and is no doubt following this drill program with great interest…the initial 2,000 m of drilling at Pecors has a chance to produce some fascinating results, and that’s why we believe April could be a breakthrough month for this play…it’s exploration – there are never any guarantees – but this has a good shot at success given the intense study of the target…

Unusual geophysical anomalies cannot be ignored…a great example, of course, is the discovery of the massive Kidd Creek Copper-Zinc-Silver deposit in 1964 near Timmins…there was no exposure of the mineralization to tell mine finders what lay below their feet…that discovery came entirely through the effort to trace and explain a geophysical anomaly –  volcanogenic massive sulfide ores that formed 2.7 billion years ago on an ancient seafloor…

IMT Takes Aim…

Noront Resources (NOT, TSX-V) Updated Chart

Noront Resources (NOT, TSX-V) jumped 22% in March and remains in a bullish pattern with strong support at the 50-cent level, just above the rising 50-day SMA, as demonstrated during this week’s consolidation…

NOT is unchanged at 55 cents as of 8:50 am Pacific…

Note:  Jon holds a share position in IMT.