Gold has traded between $1,079 and $1,103 so far today as it finishes the month on its longest losing streak in 16 years…however, a moderate reversal this morning is encouraging…as of 8:45 am Pacific, bullion is up $6 an ounce at $1,094…Silver has added a dime to $14.82…Copper is unchanged at $2.37…Crude Oil has slipped 76 cents to $47.76 while the U.S. Dollar Index has tumbled two-thirds of a point to 96.81…Gold reversed and the dollar went into immediate retreat following the release of some key data this morning, the U.S. employment cost index…

Gold is in danger of posting its 6th straight weekly loss (if it closes below $1,098) and its biggest monthly decline in 2 years…technically, key support has held at the bottom of a downsloping channel on John’s regular 2.5-year weekly chart…major rallies have developed over the last 2 years from the bottom of that channel…any breach of that support, or the next important level in the mid-$1,060’s, would likely produce a very quick test of the $1,000 mark…we’ll have an updated Gold chart tomorrow as part of our regular Week In Review…

Oil prices are under pressure again today as concern over global oversupply intensified after comments from OPEC’s secretary general yesterday, suggesting there would be no OPEC cuts in production…the fall mirrored a general sell-off in commodities on persistent worries about demand in China, the world’s biggest user of energy and many key materials such as Copper…China’s state planner said today that a slowing economy must not be allowed to morph into social risks as the volatile Chinese stock market fell again…

“You Will Hear The Roar of The Printing Presses From Mars”

Central banks in the Western world have set the scene for an “even bigger version” of the 2007-2008 global financial crisis, according to Societe Generale’s bearish strategist Albert Edwards…in a research note yesterday, Edwards said that China’s intervention to stabilize its volatile stock market was part of a larger global story, in which “rock bottom” interest rates and large fiscal deficits in the western world were pushing the global economy towards a fall.  “QE will be stepped up to such a pace that you will hear the roar of the printing presses from Mars,” Edwards declared..

Gold Stock Rally In The Works? 

Below is an updated and interesting “inverse” look at Gold stocks using the chart for DUST, the highly leveraged (3x) Gold miners’ bear ETF that trades on the NYSE…it nearly quadrupled in value since mid-May but is now up against strong resistance (RSI-14 and the top of a downsloping channel)…a breakout (false?) could occur, BUT…the already overbought conditions in this reverse ETF suggests that a reversal in Gold stocks is likely not far off, if indeed it’s not already underway…

The TSX Gold Index has strong chart support at 115, so that has been a key level to watch…the Gold Index dipped as low as 117 July 24, a whopping 20% decline over just 8 trading sessions…while more downside can’t be ruled out, an ultimate bottom somewhere between 115 and 100 is where this bloodletting will probably end…

Below is the DUST 5-year weekly chart…it does have a tendency to spike (spring 2013, fall 2014, and again now)…

Gold In Canadian Dollars

Gold continues to perform well in currencies other than the U.S. dollar, and the loonie is but 1 good example…in Canadian dollar terms, Gold has been following an uptrend since mid-2013…a move above or below the current symmetrical triangle would be a key technical event…certain Canadian-only producers are actually seeing their balance sheets strengthen…

Today’s Markets

Asia

China’s Shanghai Composite widened losses late in the trading session, ending down 42 points or 1.1% for the day…that brought the monthly decline to a whopping 13.4%…Chinese securities regulator continues to spook investors…Reuters reported that Chinese authorities, investigating the impact of “automated trading” on the market, had restricted 24 stock trading accounts for suspected irregularities…China’s various attempts to clamp down on selling is only making the market problem worse, as well as exposing broader structural ills in the country’s financial system…in the eyes of foreigners, the China brand is taking a serious hit…

Europe

European markets were up modestly today…

North America

The Dow is up 18 points as of 8:45 am Pacific…U.S. wages and benefits grew in the spring at the slowest pace in 27 years, stark evidence that stronger hiring hasn’t boosted pay…the slowdown also reflects a sharp drop-off in bonus and incentive pay…the Labor Department reported this morning that the employment cost index rose just 0.2% in the April-June quarter after a 0.7% in Q1…the index tracks wages, salaries and benefits…wages and salaries alone also rose 0.2%…both measures recorded the smallest quarterly gains since the 2nd quarter of 1982…

In Toronto, the TSX has climbed 107 points while the Venture has gained 2 points to 590…for the month, the Venture is currently off 12%…will there be an August turnaround?…we’ll explore that possibility over the weekend…

Sheslay District Controversy:  Fiction & Facts, Continued…

This morning, we once again examine fiction and facts surrounding the Sheslay controversy – this time, another quote from Tahltan Central Council President Chad Day in his July 8 open letter to Energy & Mines Minister Bill Bennett and Doubleview Capital (DBV, TSX-V) President Farshad Shirvani…

“RESPECT”

STATEMENT:  “Doubleview has chosen to ignore our request and to carry on with exploration work.  This is an infringement of Tahltan title and rights and we will not accept the lack of respect for Tahltan authority or territory.” (Chad Day, July 8)

FACT:  Day’s initial letter May 21, posted on the TCC website and sent to Doubleview, Garibaldi Resources (GGI, TSX-V) and Prosper Gold (PGX, TSX-V), “respectfully requested” that the companies halt exploration and drilling…that “request” would later change into a demand, as demonstrated by Day’s arrival by helicopter at the Hat discovery with a group of protesters on the afternoon of Tuesday, July 7, a day before his letter to the Minister and Shirvani…

Day didn’t show up at the Hat for a “neighborly visit”…he came with the explicit intent to shut down a legally permitted drill program, and even CFNR (First Nations Radio) referred to the event as a “blockade” in its story several days later (see screen shot/picture below)…

On the issue of “respect”, Day loses all credibility (apart from showing up as an uninvited guest, along with several other Tahltan, putting strains on the camp)…

It’s not respectful to ignore a genuine “reaching out”…Tahltan sources, clearly somewhat baffled by their own leader’s antics, have informed BMR, on the condition of anonymity, that Shirvani actually sent a “very respectful” letter to Day June 15, 2015, which was ignored by the Tahltan President…ignoring a “respectful” letter is in itself disrespectful, and further underscores our contention that Day has not dealt wisely with this entire matter…

Respect for people of all cultures, including First Nations and the Iranian-born Farshad who may have a valid case for feeling discriminated against in this situation, is a 2-way street…it’s not respectful to pretend that legal agreements (between the Tahltan Nation and the provincial government) and legal permits simply don’t exist, and then publicly and recklessly attack and damage the market value of a company that is merely fulfilling the mandate of its permit and its duty to shareholders…especially in this unique (bizarre) case when the Tahltan Nation, through its business arm (owned by the Tahltan people), had actually carried out an activity (drilling) at the Hat Property for nearly 2 years that the TCC President suddenly 2 months ago decided to strategically oppose for apparent reasons of “leverage”…this is chaotic behavior that’s actually hurtful to the brand and the long-term interests of the Tahltan Nation, not to mention B.C. as a whole…

In addition, Day has shown disrespect to all First Nations by challenging the Taku River Tlingits’ claim to the Sheslay district…we say that with particular emphasis because the 2011 Land Use Agreement signed between the Taku and the provincial government was an historic achievement for First Nations in British Columbia – it was the 1st major land use agreement in the province that had significant First Nations’ involvement…

By making such an aggressive public claim to the Sheslay district, Day is directly challenging the authority and rights of the Taku while ignoring an historic legal agreement, successfully implemented, that allows for exploration and resource development in the area…this puts Day on the wrong side of history…

How long can the provincial government stay silent on this matter, especially when Premier Christy Clark championed the Land Use Agreement as bringing “certainty” to investors?…Day’s behavior has potential major implications for investor confidence in B.C.’s exploration and mining sector, and we believe Minister Bennett and the Premier are experienced and wise enough to appreciate that…

  

Below is a link to last weekend’s report including a fascinating government video from 2011 featuring Premier Christy Clark championing the historic Atlin Taku Land Use Plan agreement signed between B.C. and the Taku River Tlingit First Nation…

Premier Clark Video – B.C. Exploration-Mining-Sheslay

Richmont Mines (RIC, TSX-V) Update

The average person on the street probably believes Gold stocks are a silly investment right now, especially when they keep hearing in the mainstream media that the metal is “tumbling” (in the context of the U.S. dollar, of course)…Joe Canuck would likely be shocked to hear that Gold is up almost 14% in Canadian dollar terms since the middle of 2013…

That’s why profitable Canadian-only producers are particularly attractive right now – they’re being overlooked by the general population, even including experienced investors…a classic example is Richmont Mines (RIC, TSX) which has a superb balance sheet and set quarterly production and revenue records in Q2…next Thursday (Aug. 6), the company is expected to report its full financial results for Q2…they should be stellar…

Richmont was trading within a downsloping flag for most of this year until just recently when it briefly broke out of that formation to the upside, though that did come on decreasing buy pressure…the recent wipe-out in the Gold sector immediately took Richmont in the other direction, and it traded as low as $3.22 July 22 – a similar situation to the sudden, overdone drop that occurred last fall…

The long-term outlook for Richmont is particularly favorable considering the company’s impressive high-grade resource that’s being prepared to be mined beneath existing workings at its Island Gold mine in northern Ontario…

RIC is up 8 cents at $3.44 as of 8:45 am Pacific…exceptional support around the $3 level which was previous resistance…

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

Gold has traded between $1,081 and $1,096 so far today…as of 9:45 am Pacific, bullion is down $7 an ounce at $1,089…Silver is off 6 cents at $14.75…Copper is down 3 pennies at $2.37…Crude Oil is flat at $48.81 while the U.S. Dollar Index has surged half a point to 97.71…

A pickup in monsoon rains, along with the recent drop in Gold prices, is expected to drive buying of the yellow metal in India over the next few months…demand for Gold jewellery, coins and bars is expected to increase to 900–1,000 tonnes in 2015 from last year’s 842.7 tonnes, according to the World Gold Council…

The monsoon brings two-thirds of India’s annual rains and influences production in the country’s mostly rain-fed farms…in years when the rains are good, agriculture output and therefore farmers’ surplus income increase…this year, the monsoon season started weak but has picked up considerable strength…

Rains across the country are a positive sign for Gold retailers who are now expecting robust demand from the farming sector…at least 60% of the Gold demand in India originates from the rural market…

GFMS Gold Survey

Demand for Gold fell to its weakest level since 2009 in the 2nd quarter, as Chinese buyers shunned purchases, according to a report this week from London-based metals consultant GFMS…

“Almost all major physical Gold markets suffered in the 2nd quarter,” said GFMS in commentary published with its latest Gold Survey…

Physical Gold demand fell 14% from a year ago, with demand for bars and coins falling 12%, and demand for jewelry declining 9%…the surge in value in China’s stock market during the 1st half of the year led to “substantially lower Gold purchases,” according to the survey…

Another Merger

OceanaGold Corp. (OGC, TSX) and Romarco Minerals Inc. (R, TSX) say they have reached an agreement to merge in an all-stock transaction that will result in the lowest-cost Gold producer in the world, estimated to churn out approximately 540,000 ounces of Gold annually by 2017 at an all-in sustaining cost of less than $600 U.S. per ounce…OceanaGold will acquire all shares of Romarco, whose principal asset is the Haile Gold Mine in South Carolina…the high-grade open pit project is currently under construction…

Shell:  Oil Price Downturn Could Last For “Several Years”

Shell (RDS.A, NYSE) announced in a news release this morning that it’s planning for an “Oil price downturn that could last for several years”…the company announced plans to slash 6,500 jobs amid a slump in Oil prices that has sent a wave of job cuts rippling through the industry…Shell’s Q2 earnings fell 33% from the same period a year ago…

Greenspan Reappears With New Warning

While markets hone in on the Federal Reserve’s monetary policy hints, former Fed Chairman Alan Greenspan sees a bigger economic irritant – government spending…yesterday, Greenspan decried a rise in entitlement costs, which he contended have pressured the U.S. economy…

“To me the discussion today shouldn’t even be on monetary policy it should be on how do we constrain this extraordinary rise in entitlements,” he said in a CNBC “Closing Bell” interview, calling the trend “extremely dangerous.”

Today’s Equity Markets

Asia

China’s Shanghai Composite slipped in the final hour of trading overnight and closed down 83 points or 2.2% to 3706…citing state media China Securities Journal, Reuters reported that banks were investigating their exposure to the stock market through wealth management products and loans collateralized with stocks…

A major investment firm has knocked down the theory that the collapse in China’s equity markets won’t affect the country’s economy…the plunge in mainland Chinese stocks hurts the country’s strong financial sector and consequently does weigh on economic growth, Credit Suisse said in a note yesterday…

Meanwhile, the slump that hit China’s property market this year could hit the country’s banks according to ratings agency Standard & Poor’s, in the latest warning to the world’s second largest economy…

Europe

European markets finished modestly higher today after an explosion of earnings reports…

North America

After 2 strong sessions, the Dow is off 9 points as of 9:45 am Pacific…in Toronto, the TSX is up 69 points while the Venture has added 3 points to 588…

As expected, the Fed kept interest rates unchanged yesterday in a unanimous decision and gave no hint of liftoff coming at the next meeting September 16-17 (no meeting in August)…policymakers said the economy is expanding moderately and made no mention of recent volatility around Greece or China…

U.S. economic growth accelerated in the 2nd quarter as a pick-up in consumer spending offset the drag from soft business spending on equipment…GDP expanded at a 2.3% annual rate, the Commerce Department reported this morning…Q1 GDP, previously reported to have shrunk at a 0.2% pace, was revised up to show it rising at a 0.6%…

To what extent we can actually fully trust the numbers is another question…the Bureau of Economic Analysis, the federal agency responsible for GDP, confirmed this morning that how the government calculates GDP has been amiss the last 3 years…overall, the government has revised down GDP over the 3 years ending in 2014 by 0.3%…

This means that from 2012 through 2014, growth actually averaged 2.1%, compared with the originally reported 2.4%…the bulk of the downward revision came in 2013, where GDP is now reported to have increased a meager 1.5%, down 0.7% from the prior level…the years 2012 and 2014 barely budged…

Significantly, this morning’s GDP report included a 1.8% quarter-to-quarter gain in the core PCE deflator, the Fed’s preferred inflation gauge…whether that’s just a blip or the start of a promising trend, the Fed will be watching closely as it remains concerned about potential deflationary pressures…

NASDAQ Updated Chart

The NASDAQ continues to grapple with the Fib. 5131 resistance…this has been carrying on now for 4 months, so sooner or later something has to “give” – either an explosion to the upside, or a breakdown…a strong band of support exists between 4600 (Fib) and 4800 (the rising 250-day SMA on this 1-year weekly chart)…

TSX Updated Chart

Tuesday, we posted a long-term monthly TSX chart that does give legitimate reasons for concern about the overall health of this market given several indicators that have turned bearish…this morning, a 6-month daily chart shows how a bounce has developed – whether this bounce will ultimately lead to a change in the bigger picture, however, remains to be seen…

The TSX started to recover yesterday after RSI(14) on this short-term chart hit previous support while a Fib. level at 14000 was also touched…for a major turnaround to really kick in, the TSX is going to have to overcome resistance at its declining 50-day SMA at 14722 which is also about 70 points below the 200-day…

A band of Fib. resistance stretches from 14329 to 14864…if the TSX can successfully push its way through 15000 again, that would probably be a game-changer…the commodity slide will have to end in order for that to occur…

Pure Energy Minerals Ltd. (PE, TSX-V) Update

Pure Energy (PE, TSX-V) continues to gain momentum after the release Tuesday of a maiden resource for the company’s Clayton Valley Lithium Brine Project in Nevada…the Lithium space is more investor friendly at the moment, and extracting and processing Lithium from brine deposits is relatively simple and low cost…the Clayton Valley Project is contiguous and to the southeast of the only producing Lithium mine in the U.S., Albemarle’s Silver Peak Lithium brine mine… 

Technically, PE‘s uptrend is accelerating following the breakout above the ascending triangle…note the next Fib. resistance…as always, perform your own due diligence…

PE has climbed a nickel to 36.5 cents as of 9:45 am Pacific…

Equitas Resources Corp. (EQT, TSX-V) Update

Equitas Resources’ (EQT, TSX-V) Garland Project in Labrador…this morning, the company announced the start of a ground exploration program that will include mapping and prospecting, a large loop (approx. 30 line km) EM survey, followed by 4000 m of diamond drilling once final targets have been defined…

As we’ve stated previously, while there are never any guarantees with a project like this, it’s nonetheless highly interesting and should generate considerable speculative interest, especially when drilling actually starts…major Nickel camps such as Sudbury, Thompson, Norilsk and Raglan comprise clusters of deposits…to date, Voisey’s Bay stands alone…the question is, where is the rest of the system?…or is there a “rest of the system”?…

In a regional context, magnetic signatures and structural interpretations indicate Garland shares the same style and scale of structural deformation documented at Voisey’s Bay…the east-west strike of the anomalies is notable at Garland…the trend of the anomalies, up to 1 km or greater, lend further encouragement for the discovery of significant mineralized systems…

We look forward to further exploring the geological possibilities at Garland in the weeks ahead…

Technically, an overall uptrend in EQT remains firmly intact (particularly impressive given overall market conditions) and there’s every reason to believe the strong support that’s very evident should continue to hold…near-term resistance is 10 cents…

EQT is off a penny at 9 cents as of 9:45 am Pacific…

NexGen Energy Ltd. (NXE, TSX-V) Update

NexGen Energy (NXE, TSX-V) is vigorously drilling its high-grade Arrow Zone Uranium discovery in Saskatchewan’s Athabasca Basin, and the A2 and A3 cores continue to impress with strong, very dense mineralization encountered over wide intervals as reported by the company July 16…the 25,000-m summer drill program is in full swing…

The Arrow zone now covers an area of 550 by 215 m with the vertical extent of mineralization commencing from 100 to 920 m, and it remains open in all directions and at depth (a cool 90-second 3-D video of Arrow generated from Leapfrog is available for viewing on the NexGen’s website).

Technically, NXE has retraced to an uptrend support line just slightly above its rising 100-day SMA…given the extent of drilling this summer, and the quality of the project, it’s hard to imagine NXE not generating much more exploration excitement leading into the fall…

NXE is up 2 pennies at 67 cents as of 9:45 am Pacific…

Note:  John holds a share position in EQT.

Gold has traded between $1,089 and $1,100 so far today, ahead of the Fed policy decision…as of 9:30 am Pacific, bullion is flat at $1,095…Silver is up 12 cents at $14.81…Copper is off a penny at $2.39…Crude Oil has reversed higher after government data showed U.S. Crude stockpiles declined far more than expected last week…the EIA reported that inventories fell by 4.2 million barrels in the last week, more than 20 times analysts’ expectations for a decrease of 184,000 barrels….Crude stocks at the Cushing, Oklahoma, delivery hub fell by 212,000 barrels…WTIC is up $1.02 a barrel to $49.00…the U.S. Dollar Index has added one-fifth of a point to 96.86…

There are indications of physical demand for Gold starting to develop and support the market, says UBS…

“Volumes are not necessarily exceptional, but the fact that it’s around should offer some reassurance to Gold longs and perhaps encourage shorts to lock in some of their profits,” the bank says. “Among Gold’s physical markets, the usual candidates have stepped up to the plate, with the exception of China, where appetite has remained lackluster for now. Interestingly, demand out of the U.S. – an unlikely contender – has actually been better than expected.”

U.S. Mint Gold coin sales in July are nearly 4 times as much as the historical average, according to UBS…

Fed Day – Fresh Policy Statement At 11:00 Am Pacific 

Just 1 of several things to watch for from the Fed today – officials have said they want to be “reasonably confident” inflation will rise to their 2% annual target before raising rates…look for possible changes from June’s policy statement for insight on their thinking…last month, the statement said “energy prices appear to have stabilized”, but evidence is mounting that a fresh slide has started despite today’s bounce…the recovery in Crude prices from March into June had all the earmarks of a major relief rally with another downturn likely, so it’ll be interesting to see how the Fed addresses that issue today…

Fed funds futures, financial instruments the market uses to handicap rate hikes, are currently pointing to the first rate hike in December…

The latest CNBC Fed Survey still shows a majority expecting a September rate hike, but that majority is rapidly shrinking…

“Downside Global Risks”: Legarde

In a new conference today, as reported by Reuters, International Monetary Fund Managing Director Christine Legarde said global risks are on the horizon….

“If I look at the global economy as it stands at the moment, we have a situation where growth is a little bit tepid,” she stated. “We have recovery, but it’s fragile, it’s unbalanced, and there are some downside risks on the horizon.”

Legarde highlighted some positive growth in low-income countries, but she also noted a slowdown in growth in countries like China…the euro zone, she said, is “beginning to turn the corner” despite Greece worries…

Copper 20-Year Monthly Chart

Copper is at a highly critical point, resting at both the bottom of a downsloping flag and an uptrend line going to the start of the bull market more than 13 years ago…

If it breaks below this key area, watch out…the drop could be severe…

U.S. Dollar Index Updated Chart

We’ve maintained for the last few months that the U.S. Dollar Index has already put it its highs for 2015 with a head-and-shoulders double top in March-April…

Since touching Fib. support at 93 in mid-June, the Dollar Index has rallied back to resistance in the high 90’s before easing off again recently…further technical deterioration will occur if RSI(14) on this 9-month daily chart falls below the uptrend line as shown below…

SS is moving lower from a bearish “M”, and the ADX indicator is at the point of a bearish DI cross…will the dollar weaken and Gold strengthen through the balance of the week following the Fed statement?…

Today’s Equity Markets

Asia

China’s Shanghai Composite snapped a 3-session losing skid with a gain of 127 points or 3.5% overnight as the aptly named “rescue squad” continued its efforts to prop up the market…local governments are increasing purchases of stocks, as confirmed by the China Securities Regulatory Commission, while the central bank injected $8 billion (U.S.) cash into money markets yesterday and hinted at further monetary easing…we can only guess the Chinese study Fib. analysis, too…they’re determined to not let the Shanghai dip below key Fib. support at 3400, and they have a large war chest – nearly $4 trillion in foreign reserves – to dip into…

Nonetheless, foreign investors have become quite nervous..China equity ETFs suffered outflows on 14 of 17 trading days in July, totaling $1.1 billion, or 5.9% of assets, according to research firm TrimTrabs in a statement released yesterday…despite the government support, many high-profile foreign investors have become more pessimistic on China, citing asset value depreciation, psychological damage, capital outflows, and poor July industrial profits growth and manufacturing data…

Chris Berry of discoveryinvesting.com noted this morning, “China’s debt-to-GDP ration stands at roughly 282% according to McKinsey and has grown at a 19% CAGR (compound annual growth rate) since 2007. It is highly unlikely that the Chinese economy has grown as much during the same time period. When debt grows faster than income, sooner or later a problem arises as additional credit loses its ability to generate growth. It would appear Xi Jinping and China’s leaders are faced with the issue of generating growth in a macro deflationary environment.”

Tokyo’s Nikkei rose modestly on the back of better than expected retail sales…they rose an annual 0.9% for June, topping expectations for a 0.50% gain, but still slowing sharply from a 3% spike in the previous month…

Europe

European markets were up moderately today following some strong earnings reports…

North America

The Dow is enjoying another triple digit gain today, up 105 points as of 9:30 am Pacific after a 189-point advance yesterday…in Toronto, the TSX has shot up 125 points while the Venture has reversed from an intra-day low of 580 and is now unchanged at 587…Pure Energy Minerals (PE, TSX-V) is showing signs of breaking out above an ascending triangle (see John’s chart yesterday) following a maiden resource estimate for its Clayton Valley Lithium Brine Project in Nevada…PE is up 4.5 cents at 32.5 cents on strong volume as of 9:30 am Pacific…

Venture Updated Chart

Interesting chart…extreme oversold conditions are very evident in this Venture 7-month daily, and this morning the Index touched Fib. 580 support and then quickly started to rebound…this could mark the start of a rally but there must be follow-through the rest of the week…

New Gold Inc. (NGD, TSX) Update 

Many producers have taken a big hit this year, and New Gold (NGD, TSX) is no exception…about half of the NGD short position from late last year has been covered…probably a wise move…will the rest of the shorts scramble to cover if Gold doesn’t do as they expect in the near future?

NGD has fallen slightly below the bottom of its downsloping flag…a false breakdown, perhaps?…we’re about to find out…NGD has strong support at $2.50 and fell as low as $2.65 last week…

NGD is up 8 cents at $2.80 as of 9:30 am Pacific…

Yamana Gold Inc. (YRI, TSX) Update

Yamana Gold (YRI, TSX) is another producer that has suffered…a huge gap has opened between the current share price and YRI’s long-term downtrend line…while technical conditions could still worsen somewhat, dumping at these levels has to be considered as risky as piling in at overbought extremes…

YRI is off 3 cents at $2.55 as of 9:30 am Pacific…

Defiance Silver (DEF, TSX-V) Update 

Defiance Silver (DEF, TSX-V) has held up relatively well this year vs. its junior peers while enjoying some drilling success that should expand its San Acacio Silver deposit in the historic Zacatecas district in Mexico…yesterday, the company announced the start of another drill program (1,500 m) that will attempt to build upon the recent discovery of significant Silver and base metal mineralization below the limits of the current resource…

Strong technical support at the rising 200-day moving average (SMA) at 12 cents…

DEF is unchanged at 13.5 cents as of 9:30 am Pacific…

Note:  Terry, John and Jon do not hold share positions in PE, NGD, YRI or DEF.

Gold has traded in a narrow range between $1,091 and $1,100 as the Fed begins its 2-day policy meeting…as of 10:30 am Pacific, bullion is up $3 an ounce at $1,098…Silver has added 13 cents to $14.67…Copper has jumped a nickel to $2.40…Crude Oil has rebounded 78 cents to $48.17 while the U.S. Dollar Index has gained one-tenth of a point to 96.66…

The latest monthly CNBC Fed Survey still shows a majority on Wall Street forecasting that the first Fed rate hike in 9 years will come in September, but it’s a dwindling majority rife with defections to the later months of October and December…

HSBC strategists yesterday lowered their average annual Gold price forecasts for this year and next, warning that the yellow metal is likely to remain under pressure in the short-term and may “move within striking distance of $1,000“ an ounce before recovering…HSBC lowered its 2015 average annual price forecast to $1,160 from $1,234 and for 2016 to $1,205 from $1,275…among the reasons for Gold’s recent selloff, they stated, is the “drift towards Fed tightening and the associated U.S. dollar strength, low global inflationary pressure, weak Gold demand from India and China and market positioning and momentum.”

Silver “Underpriced” vs. Gold:  Silver Institute 

Despite the recent price weakness, there is still a lot of potential for Silver as the market continues to see broad-based demand, according to a report today from the Silver Institute which views the metal as “underpriced” vs. Gold…Silver also continues to see strong industrial demand…the Silver Institute noted that Silver use in the renewable energy sector is expected to increase 8% this year to 65 million ounces (the metal is a key component in solar panels) thanks to a big jump in U.S. solar installations…

“Additionally,” today’s report stated, “the Silver market is expected to be in a deficit of 57.7 million ounces in 2015, as supply contracts and physical demand grows. This would mark the third consecutive year that the market is in a physical deficit. When the market experiences an annual shortfall from mine supply, users must drawdown on above ground stocks, thereby tightening available supply.

“On the investment side, retail investor demand for the white metal has been sturdy in the first half of 2015, in what has been a challenging precious metals investment market. Through July 24, global Silver ETF holdings increased by over 4.7 million ounces in 2015, indicating that these investors likely have a more positive longer-term view of the Silver price.”

Oil Update

The world remains awash in Oil and that likely means prices need to head lower before there’s a better balance between supply and demand…

Oil giants have shelved about $200 billion (U.S.) worth of new projects since Crude prices began plunging last summer, according to a new report by consulting group Wood Mackenzie…according to the report, 46 major Oil and gas projects, containing 20 billion barrels of Oil equivalent of reserves, have been deferred…the largest affected country is Canada, where the development of about 5.6 billion barrels of reserves – almost entirely in the Oil sands – has been put on hold…Wood Mackenzie figured that the number of major Oil and gas projects globally that will be approved by companies in 2015 can likely be counted “on one hand”…

Technically, what occurred in WTIC between mid-March into May and June was a gigantic relief rally off the $43 low…this rally went all the way up to the declining 200-day moving average (SMA)…WTIC then went back into reverse, and some key support levels have been taken out…a “C” wave move is now in progress and this could easily re-test the March low or even take Crude into the mid-$30’s where it bottomed in early 2009…the worst-case scenario – one that no one is talking about – is $20…that could only occur if the global economy were to really tank…

CRB Index Long-Term Monthly Chart

The commodities rout has been blamed on multiple catalysts, including a stronger U.S. dollar and the prospect of Fed rate increases…the sell-off has also been tied to a weakening of growth in China, and oversupply in some markets such as Oil, Copper and iron ore, certainly due in part to slower Chinese buying…

Grains were hammered once again yesterday, as well, with corn down 4%…so commodity weakness is broad-based…

This 35-year monthly CRB chart shows an RSI(14) pattern quite similar to the one that emerged in 1999-2000…it does not appear that the CRB has hit bottom yet as the index is highly vulnerable to crashing below support at 200 which held in early 2009, and previously in 1986 and 1992-93…this would mean a test of at least the 180 lows which were followed by powerful moves to the upside…

The CRB Index is up 1.5 points to 204 as of 10:30 am Pacific…

Shanghai Composite Sinks Again, Chinese Authorities Investigating “Share Dumping” 

This is almost laughable…China’s securities regulator said today that it has launched an investigation into yesterday’s sell-off on the country’s stock markets (the worst single-day loss since 2007) as the rout in Chinese equities continued…in a transcript of a Q&A posted on its website, China Securities Regulatory Commission (CSRC) said it was “looking into incidents of share-dumping” on July 27…

That was indeed “share-dumping” – welcome to the real world, China – and perfectly legitimate dumping, at that…there’s also likely more to come as this is one of the most margin financed markets of all time…Chinese authorities are also contributing to a loss of investor confidence in the broader financial system in that country by their panic-driven actions that simply aren’t working, making matters worse…they’ve gotten caught up in a negative feedback loop…

What the CSRC should be investigating is the government’s direct manipulation of Chinese equity markets to the upside since last year…government cheerleading of the markets, aided by the Communist Party-controlled China Daily newspaper which was strongly advocating stock ownership, kept intensifying as the Shanghai Composite and the smaller Shenzhen Index continued to rise (the Shanghai jumped 51% from the beginning of 2015 through June, and 134% in the past year, while the Shenzhen soared 109% this year and 173% over the past 12 months)…since the beginning of 2015, the China Securities Depository & Clearing Co. estimated new investors were opening up an average of 170,000 brokerage accounts a week…the bulge in revenue for securities firms was so big that it helped to offset weakness in other industries, keeping economic growth at an unexpectedly strong 7% for the 2nd quarter…

Now, of course, the “wealth effect” strategy has gone into reverse and Chinese authorities are scrambling to fix the problem – this includes even threatening to prosecute short-sellers, cancelling public offerings of stock and prohibiting major shareholders from selling their stakes for 6 months…the government also mandated its main pension fund for civil servants to invest up to 30% of its assets in stocks, or up to 900 billion yuan ($145 billion)…what the WSJ’s Lingling Weithe pointed out in an article this morning is that the rescue effort is missing 1 feature found in markets elsewhere: a senior figure stepping forward to stop the panic…

It’s true that the vast majority of Chinese wealth rests outside of the stock market…the share of households that participate in the market is believed to be just under 9%, well below the one-third or more of households in the U.S. and other Western markets that own stocks…however, the chaos in China’s equity markets, and how government authorities have responded to it, has done some damage to the China brand…in addition, the market sell-off – especially if it gets worse – is another brake on economic growth in that country plus there are spillover affects globally…

Keep in mind as well that, as USA Today reported this morning, the 144 China-based stocks with primary listings on major U.S. exchanges have erased nearly $40 billion in U.S. paper wealth since the Shanghai Composite peaked on June 12…

Technically, the Shanghai remains in serious trouble…a “C” wave to the downside appears to have commenced following the predicted “B” corrective wave to resistance around 4055…3400 is key support…if that level is breached, and odds are that it will be, then the Shanghai will quickly test the 3000 level…

Today’s Equity Markets

Asia

The Shanghai Composite traded down as much as 5% overnight but recovered to finish 1.7% lower (off 63 points) at 3663…Japan’s Nikkei closed essentially unchanged…

Europe

European markets were up moderately today…the U.K.’s GDP grew by 0.7% in the 2nd quarter, according to preliminary official data, meeting expectations…

North America

After 5 straight losing sessions totaling 659 points or 3.6%, the Dow is up 173 points as of 10:30 am Pacific…U.S. consumer confidence for July came in at 90.9, missing expectations and posting a decline from June’s read…the U.S. homeownership rate continued to decline in Q2, hitting a 48-year low (63.5%), according to estimates published by the Commerce Department this morning…

In Toronto, the TSX is up 64 points as of 10:30 am Pacific while the Venture, which has declined for 9 straight sessions, is flat at 582…

TSX 6-Year Monthly Chart

Commodity weakness has taken its toll on the TSX…the concern with this 6-year monthly chart is the breakdown of support at 14150, the increasing down momentum (SS) and the decidedly bearish trend as indicated by the ADX…the Fib. support band between 12830 and 13144 could ultimately be challenged…

Tribute Pharmaceuticals Canada Inc. (TRX, TSX-V) Update

Speculators continue to have an appetite for certain non-resource plays on the Venture, and this includes Tribute Pharmaceuticals (TRX, TSX-V) which appears to have conquered Fib. resistance at $2.09…overbought RSI(14) conditions that emerged in June were cleansed during the healthy pullback to $1.70…

TRX is unchanged at $2.19 as of 10:30 am Pacific…John called this one on the breakout from the pennant formation in June…

Pure Energy Minerals (PE, TSX-V) Update

Pure Energy Minerals (PE, TSX-V) resumed trading at 9:30 am Pacific after announcing a maiden resource estimate for its Clayton Valley South Lithium Brine Project…Clayton Valley is strategically located halfway between Reno and Las Vegas in one of the oldest mining areas in Nevada…

The just-released inferred resource estimate for the project outlines 816,000 metric tonnes of Lithium Carbonate Equivalent (LCE), present as “easily-extractible brine in 2 aquifers (Main Ash Aquifer and Lower Aquifer System),” the company stated, its 8,000 0acres of claims..the claims comprised 3 contiguous blocks and overlie a deep basin structure…significantly, the zones that host the brines appear to extend much deeper into the basin and extend laterally throughout the entire claim area…

The next stages of drilling will test the depth and potential extension of the deposit as well as new zones recently discovered from Pure Energy’s seismic reflection survey…

Technically, PE has been trading within a strong overall uptrend since last year as shown in John’s updated 2.5-year weekly chart…note the bullish ascending triangle…the 50 and 200-day SMA’s have converged at 25 cents…

PE is off 2 pennies at 26 cents as of 10:30 am Pacific…

Note:  John, Terry and Jon do not hold share positions in TRX or PE.

Gold has traded between $1,088 and $1,106 so far today…as of 10:30 am Pacific, bullion is down $2 an ounce at $1,098…Silver is off 9 cents at $14.69…Copper has slid a nickel to $2.34…Crude Oil is 59 cents lower at $47.55 (significantly, it has broken below important Fib. support at $49) while the U.S. Dollar Index has fallen nearly a full point to 96.41…

Exactly 1 week ago, Gold experienced a suspicious “mini flash crash” in a matter of seconds as large sell orders were dumped into markets in Shanghai and New York, taking the metal down nearly $50 an ounce to $1,080 – its lowest price in 5.5 years – before it began to recover…the selling came during thin market conditions and on a day when Japanese markets were closed for a holiday…we encourage readers to check out Frank Holmes’ latest “Investor Weekly” at www.usfunds.com, a feature that we would consider a “must-read” for every resource investor each week, for his interesting thoughts on what occurred…

“The last time the metal descended this quickly was 18 months ago, on January 6, 2014, when someone brought a massive Gold sell order on the market before retracting it in a high-frequency trading tactic called “quote stuffing.” Last month I shared with you that we now know who might have been responsible for the action – and many others that preceded it – and pointed out that the accused party’s penalty of $200,000 was grossly inadequate,” Holmes declared.  “On Monday I told Daniela Cambone during this week’s Gold Game Film that such downward price manipulation seems to result in little more than a slap on the wrist. But if manipulation is done on the upside, traders could get into serious trouble.”

If you think your favorite junior got hit hard last week, the “big boys” got slammed even worse in some cases as the TSX Gold Index tumbled 8.8% for the week vs. a 5.9% decline in the Venture Exchange…for the month to date through Friday, the Gold Index has slid 17.2% while the Venture is off 11.8%…they have each lost about three-quarters of their value since the highs of 2011…

The world’s largest Gold producer, Barrick Gold Corp. (ABX, TSX), lost $2.2 billion, or 17%, of its market value last week…$3.7 billion or 23% was shaved off the value of U.S. Copper-mining company Freeport-McMorRan Inc. (FCX, NYSE)…

Fed Meeting Starts Tomorrow

This week’s key event is the FOMC decision on Wednesday…while almost no one expects the Fed to raise interest rates at this meeting which begins tomorrow, traders and investors will be closely examining the Fed statement and what the central bank has to say about the outlook for the economy and inflation…economic reports Thursday (first look at Q2 GDP) and Friday (the employment cost index) following the Fed meeting will be critical…

The Fed can’t ignore events in China and the fact that growth across the developed world has lagged behind expectations this year…countries continue to struggle to rebound from the 2008 financial crisis…global growth has averaged 3.3% in the years since the financial crisis, compared with 4.7% in the 6 years prior to 2008, according to International Monetary Fund data…the IMF expects growth of 3.3% for this year but watch for another downward revision…

Gold 2.5-Year Weekly Chart

John’s 2.5-year weekly Gold chart has proven to be an exceptionally reliable guide for the direction of bullion prices…it was this chart that suggested a major rally was in store for Gold after it touched a low of $1,130 last November…indeed, the yellow metal rallied nearly $200 an ounce in less than 3 months…

Since early 2013, Gold has been meandering within a downsloping flag, occasionally but consistently testing the bottom and top of the flag…

What does this chart tell us about the current situation?…

Last week, you can see that Gold once again touched the bottom of the flag…simultaneously, Gold’s RSI(14) on this 2.5-year weekly chart also hit previous support…

What this suggests is that if history once again repeats itself, a rally in Gold at the moment (closest resistance is $1,150) is more likely before any test of the psychologically and technically important $1,000 level…

Any move above or below the boundaries of the downsloping flag is going to be critical…in other words, there’s little doubt Gold will test $1,000 IF last week’s low doesn’t hold…

Hedge funds and money managers currently have record net short positions in Gold – that’s probably a good sign as extreme positions by those groups in the past have been reliable contrarian indicators…

Today’s Equity Markets

Asia

Not surprisingly, China’s Shanghai Composite turned south again overnight, demonstrating that the recent rally was merely a dead-cat bounce that met resistance around 4050 as John’s charts predicted…what’s worse, it was a government-manipulated rally…so the question is, what do Chinese authorities do now?…how big of a fire hose can they come up with?…when a government takes actions that don’t work, panic can often set in…

The Shanghai plunged 345 points or a whopping 8.5% overnight, closing at 3726…key support is 3400…a drop below 3400 could create absolute panic in this market…fresh official data showed the country’s industrial profits declined 0.3% year on year in June, compared with a 0.6% rise in May and a 2.6% gain in April…

Losses were much more muted in Japan where the Nikkei fell just 1%…

However, according to a top forecaster as reported by Bloomberg, the Japanese economy likely contracted last quarter, dragged down by weak consumer spending and a slump in exports…the world’s 3rd-biggest economy may have shrank as much as an annualized 2.5%, according to Yoshiki Shinke (Dai-ichi Life Research Institute)…the median estimate of 25 economists surveyed July 9-22 by Bloomberg is for 0.8% growth after the 3.9% expansion in the 1st quarter, so a Q2 reversal would shock a lot of investors…

“There is no doubt Japan’s economy is in a soft patch,” said Shinke, the only economist to make the Japan Center for Economic Research’s top-5 list of forecasters for the past 6 years. “The question isn’t whether the economy contracted but how deep the contraction was.”

Europe

European markets were down significantly today (roughly 1% to 2.5%), thanks to the sell-off in China and weakness in North America…

North America

The Dow is off 140 points as of 10:30 am Pacific…

Just a few companies are driving the gains in major U.S. stock indexes this year, raising fresh concerns about the health of the market’s advance…6 companies – Amazon.com Inc., Google Inc., Apple Inc., Facebook Inc., Netflix Inc. and Gilead Sciences Inc. – now account for more than half of the $664 billion in value added this year to the NASDAQ, according to data compiled by brokerage firm JonesTrading…

Amazon, Google, Apple, Facebook, Gilead and Walt Disney Co. account for more than all of the $199 billion in market capitalization gains in the S&P 500…

On the bright side, Q2 earnings season has gotten off to a reasonably good start…about 74% of the 1st 186 S&P 500 companies to report so far have beaten earnings expectations, according to Thomson Reuters – slightly above historical norms…the revenue picture is a bit murkier, with only 52% of companies beating sales estimates, well below the historical average of 61%…keep in mind that share buybacks have allowed many companies to “artificially” inflate their earnings per share…

Canadian Markets

In Toronto, the TSX is down 167 points through the first 4 hours of trading while the Venture has slid 8 points to 585…closest estimated support levels are 576 and 547…

Venture 16-Year Monthly Chart

By historical standards, the Venture is in the midst of extreme oversold conditions that could possibly become even more extreme in the coming weeks, but a final capitulation or “flushing out” is probably what this market needs…incredible opportunities emerged in late 2008, and one can argue we’re in a similar situation now…the key is to focus on high-quality juniors who can survive anything that is thrown at them…

Check out the extreme “DI” levels (ADX indicator) on this 16-year monthly chart…if conditions were reversed, if this chart were turned upside down, this would be a dangerous time to be chasing stocks higher…

Sheslay District Controversy:  Fiction & Facts, Continued…

Below is a link to our exclusive weekend report with detailed information on northwest British Columbia’s Sheslay district controversy, including a fascinating government video from 2011 featuring Premier Christy Clark championing the historic Atlin Taku Land Use Plan agreement signed between B.C. and the Taku River Tlingit First Nation…the Land Use Plan was a major achievement and allows for exploration and potential resource development in the Sheslay district…

Premier Clark Video – B.C. Exploration-Mining-Sheslay

This morning, we once again examine fiction and facts – this time, a statement that gave uninformed readers a wrong impression of the realities on the ground at Doubleview Capital Corp.’s (DBV, TSX-V) Hat Project…

“CREEKS” AND “TIMBER”

STATEMENT: 

“They have completely damaged the creeks and filled them up with timber so they can cross the creeks.” (Chad Day, Terrace Standard, July 15, 2015)

FACTS:

As part of its extensive Sheslay district research and due diligence, BMR completed a Hat site visit in the 2nd quarter of 2014 – the only media to do so…Chad Day’s 1st-ever visit to the Hat was July 7, 2015, and he came with a declaration to halt all exploration and drilling before even checking out the property on the ground – in fact, based on witnesses we’ve spoken to, we’re not even sure he actually toured the property on foot other than a 1 km journey from the camp to the drill site and back…

We’ve seen the Hat Property for ourselves, in detail, on the ground and from the air…we have extensive video footage…there are no major creeks running through it, just one significant stream that’s long and very narrow – only about a meter wide, even less in places…Hat terrain is mostly gently sloping…in that sense, very similar to North Vancouver…we saw a few “swampy” areas, normal in a setting like this, some with minor ATV disturbance…

For those who are intimately familiar with the mining industry and exploration, drill rigs require water…it’s in no company’s interest to “completely damage the creeks” and “fill them up with timber” so workers can “cross the creeks”…Doubleview has used this stream as its critical water source at all times of the year, even during the coldest of winter days…any company with any common sense will protect its water source like a mother and father protect their new-born baby…

To actually protect that stream, Tahltan workers in 2 locations at the Hat placed logs over a width of about 3 meters, about half a meter above the stream, to allow for crossing by ATV’s to deliver supplies…the stream runs all year long, thanks to the natural heat and energy in the water (and some sulphides)…but “Hatwater” is clean and delicious…it’s what prospectors and geologists have drank going back to the mid-19th century…

Equitas Resources Corp. (EQT, TSX-V) Update    

We have a lot of respect for freelance writer Mike Kachanovsky, and he just put together an excellent piece on Equitas Resources (EQT, TSX-V) for Investor’s Digest that we suggest readers check out…

There are “diamonds in the rough” in the speculative resource-related space during this turbulent market period, and Equitas has to be considered another example of that in our view as we’ve been pointing out in recent months…the company has benefited significantly from a major restructuring late last year…

Since the discovery of the Voisey’s Bay deposit in the early 1990’s, small parcels of EQT’s Garland Project have been owned by 9 separate companies…this is the 1st time that this large property has been consolidated under 1 owner…

On June 24, EQT announced the appointment of Raymond Goldie to its board of directors…Goldie is currently a vice-president and senior mining analyst with Salman Partners…2 days later, the company announced it had arranged a non-brokered private placement of 6 million units at 8.5 cents per unit for total gross proceeds of $510,000, and the closing of that financing ($521,000) was announced July 16…

EQT has been in a gradual uptrend since its restructuring late last year as you can see on this 2+ year weekly chart…the uptrend line and the rising 200-day SMA at 8 cents have been providing strong support…

EQT is up half a penny at 9 cents as of 10:30 am Pacific…

Deveron Resources Ltd. (DVR, TSX-V) Update

We believe we’ve uncovered something quite intriguing here, and we have mentioned it before at lower prices…now it’s looking even more interesting…Deveron (DVR, TSX-V) is one of the few companies on the Venture that hasn’t obliterated its share structure over the last 2+ years, and it has been a top-performing stock over the last few months despite no news…the chart tells us there are expectations for some developments here – Deveron only has 11.8 million shares outstanding, and out of that the public float is only around 3 million shares…so this is a “tight” deal trading above its late 2012 IPO price (25 cents) with strong financial backing – an attractive vehicle, we’re speculating, for a smart entrepreneur to make something happen either within or outside of the resource sector…

Ask yourself this – how many Venture stocks are actually trading above where they were in late 2012, and also haven’t diluted their share structure since then?…  

This 2.5-year weekly chart shows a confirmed breakout above 25 cents with 2 measured Fib. resistance levels…this obviously isn’t a big volume play given the small float, but the share structure gives it very explosive upside potential in the event there is the right news to drive it…

DVR closed last week at 30 cents, just 2 pennies below its more than 2-year high set May 21…

Klondex Mines Ltd. (KDX, TSX) Update

Klondex Mines (KDX, TSX) last week reported record AuEq ounces sold in Q2 (primarily due to higher mill throughput and considerably higher Gold grades) and management also raised its production guidance for 2015 for its high-grade project in Nevada…Canaccord Genuity views Klondex as one of the highest quality intermediate Gold producers in the sector…

Technically, KDX was due for a pullback as John’s most recent chart indicated…the overall uptrend from 2013 is very well established, however, with the nearest strong support (Fib.) at $2.73…

KDX is off 6 cents at $2.98 as of 10:30 am Pacific…

Richmont Mines Inc. (RIC, TSX) Update

Given the weakness in the loonie, Gold is looking a lot better in Canadian dollars than it is in U.S. dollars, and that’s an important point for investors to remember – especially when looking at Canadian-only producers…one of those, of course, is Richmont Mines (RIC, TSX) which has a superb balance sheet and set quarterly production and revenue records in Q2 (the company’s full financial results for Q2 will be released on August 6)…

Richmont was trading within a downsloping flag for most of this year until just recently when it briefly broke out of that formation to the upside, though that did come on decreasing buy pressure…last week’s wipe-out in the Gold sector immediately took Richmont in the other direction, and it traded as low as $3.22 – a similar situation to the sudden, overdone drop that occurred last fall…

The long-term outlook for Richmont is particularly favorable considering the company’s impressive high-grade resource that’s being prepared to be mined beneath existing workings at its Island Gold mine…given volatile markets, watch for any unusual opportunities in RIC that could emerge over the next couple of weeks ahead of the company’s August 6 earnings report which should be strong…

RIC is up 2 cents to $3.37 as of 10:30 am Pacific…exceptional support around the $3 level which was previous resistance…

Silver 9-Month Daily Chart

Silver’s immediate challenge is to get back above the $15 level which was previous support…interestingly, through last week’s turmoil, Silver was able to hold slightly above its $14.15 low late last year…the bullish “W” in the RSI(14) on this 9-month daily chart suggests a rally could be in the works from current levels…

Silver Long-Term Chart

An explosive push higher (eventually) – is this actually a scenario that could unfold in Silver over the next couple of years?…quite possibly, given the look of this 34-year monthly chart, though at the moment it’s hard to understand all the factors that could come into play to generate the kind of “Wave 5” move that could develop…

It seems possible that the bottom of “Wave 4” came late last year when Silver briefly plunged to just above $14 an ounce, though that could be challenged again shortly with the possibility of a new low…RSI(14) has managed to hold support which goes back to 2001…

Sell pressure continues to remain very strong, however, as shown by the CMF – amazingly, at levels not seen in nearly 25 years since the low of $3.51…this intense sell pressure at the moment, which could continue for a while yet, should therefore be viewed in a larger context as a bullish contrarian indicator…this doesn’t necessarily mean that Silver has hit rock bottom yet, however…

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

The British Columbia government not only invested great time (years) and taxpayers’ money concluding an historic Land Resource Management and Shared Decision Making Agreement with the Taku River Tlingit First Nation on July 19, 2011, as BMR reported the other day, but it even put together a slick video featuring Premier Christy Clark championing the deal.

Signed government agreements are very valuable documents.  A government video explaining and promoting an agreement can be priceless, as you’ll see.

Every British Columbian should view this short but informative 2-minute video (click on link below) publicly released by the government in the summer of 2011.  The facts speak for themselves.

The Atlin Taku Land Use Plan, of course, includes the Sheslay district, a potential world class mineral area effectively taken “hostage” just over two months ago by Tahltan Central Council President Chad Day who at the time revealed, in an open letter since removed from the Tahltan website, that the “Tahltan Central Council is currently engaged in government-to-government negotiations with the Province of British Columbia to reach a long-term approach to land planning, management, and decision-making throughout Tahltan territory where the Tahltan Nation plays a central role.”

Day, who seems to be going against a multitude of groups including of course investors and even some of his own people with his aggressive Sheslay strategy, helped lead a Tahltan blockade of Doubleview Capital Corp.’s (DBV, TSX-V) Hat Project earlier this month just as the company was drilling a critical step-out hole 1 km northwest of hole #23 and the Lisle Discovery Zone (using Tahltan workers, ironically).

Premier Clark Heralding The Land Use Deal

Contrasting Approaches

There is zero public evidence of the the Taku River Tlingit First Nation taking a confrontational approach with Doubleview, Garibaldi Resources (GGI, TSX-V) or Prosper Gold (PGX, TSX-V) regarding exploration in the Sheslay district which started ramping up in the middle of 2013, accelerating after Doubleview’s discovery reported in early 2014 that sparked an area staking rush – one of the few seen in Canada in recent years.

The Atlin Taku Land Use Plan was the first of its kind in B.C. and allows for both exploration and potential resource development in the Sheslay district, while a Shared Decision Making Agreement between the Taku Tlingits and the government has guided the referrals (consultation) process.  Doubleview, Garibaldi and Prosper all hold multi-year exploration and drilling permits for their respective properties, granted by the B.C. Ministry of Energy & Mines.

It remains curious that Day’s opposition did not begin until his letter of May 21 which, it clearly appears from the wording of it, was a time of “sensitive negotiations” between the Tahltan and the government (the two parties signed a Shared Decision Making Agreement in 2013 that is still in effect, also guiding the referrals process, but it seems Day has been pressing hard for an expanded new agreement).  The May 21 letter was also issued exactly one month after Doubleview reported that “the company believes that the Hat Property may be host to a major, world-class deposit.”

Again, ironically, while under majority ownership of the Tahltan Nation Development Corporation (owned by the Tahltan people), Tahltan Drilling Services completed the first 23 drill holes at the Hat Property through May 21 going back to 2013.

This entire controversy has been unfortunate for the junior exploration sector in B.C. which is in dire need of drilling activity and new discoveries.  If the problem isn’t solved soon, there could be damaging and long-term consequences for the province’s reputation as an “investor friendly” jurisdiction for exploration and mining – investors and companies are watching this situation closely.  Since Tahltan territory covers about 10% of the province, this Nation of great people has potentially much to lose, as well.

For more information regarding the Taku Tinglit-Tahltan “overlap” claim, and other details on the Sheslay district controversy, click on the link below:

BMR Exclusive July 22: Sheslay District Fiction & Facts – The Land Use Agreement

Sheslay District Area Map & Land Use Plan Boundary

Atlin Taku Land Use Plan – View The Document

https://www.for.gov.bc.ca/tasb/slrp/pdf/srmp/ATLIN-TAKU-LUP.pdf

“This is another significant milestone in land use planning in British Columbia, fully protecting an additional 800,000 hectares and providing certainty for investors over three million hectares in an area of the province rich in natural beauty and natural resources.” (Steve Thomson, Minister of Forests, Lands and Natural Resource Operations, July 19, 2011, B.C. government news release).

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

TSX Venture Exchange and Gold 

It was another rough week for the Venture which is now in unchartered territory, 45 points below its December low with roughly estimated Fib. support levels at 595, 576 and 547.  For the week, the Venture slipped 39 points or 5.9% vs. a 3% decline in Gold, a 3.1% drop in the TSX and a 2.9% slide in the Dow.

While the Venture is certainly vulnerable to further declines – the Index is on an 8-session losing skid – keep in mind that RSI conditions are more extreme now than they were at the December low (RSI-2 is almost at “0“, for example on today’s 7-month daily chart).  Investors are always skittish about trying to catch a falling knife, however, and would prefer to see that knife hit the floor first.

Actually, history shows that the best thing that could happen to this market right now – and Gold for that matter – would be a headline-producing, panic-driven, dramatic capitulation sell-off of 10% or more in a single day.  In other words, enough of this fooling around – let’s just get this over with as quickly and possible and move on.  That’s why the 2008 Crash was a blessing in disguise – a potential long-term bear market was compressed into just several months, and then it was “game on” again.

The key breakdown for the Venture came in late June when support at the uptrend line from the December low was breached.  Important Fib. support at 646 and 628 also gave way.  The Venture has now lost 76% of its value following its early 2011 post-Crash high of 2465, but there is hope on the horizon as you’ll read below.

There Is Hope – The Venture’s 39-Week Cycle Chart

Recently, we posted John’s updated 39-week Venture cycle chart.  Strangely enough, over the last 15 years, there has been a consistent pattern of trend reversals at the end of each 39-week period on the Venture – you can see it quite clearly on this fresh version, through Friday, which is important to look at and understand.

What this chart suggests is that a cycle low will occur around the end of August into the beginning of September – that’s when the current 39-week period expires.  More extreme RSI(14) levels probably need to occur here before we see a bottom in the market, so that lends credence to the argument that we’ll see additional weakness before a reversal.

The vertical blue lines separate each 39-week period.

What event could happen in September or early fall that could turn this market around and enable it to perform very differently than it did last year from September through mid-December?  We’ll find out soon enough, but if the Fed were to finally get a rate hike out of the way, this would at least remove the anticipation of one which has been pressuring the U.S. Dollar to the upside since the summer of last year and hurting commodities as well.  Or perhaps the situation in China will grow worse, impacting global financial markets in general and causing central banks, even the Fed, to really open the floodgates of stimulus.  In any event, something big appears to be on the horizon – be prepared.

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, and current weakness, is that it has forced producers to become much more lean in terms of their cost structures. Producers, big and small, continue to make hard decisions in terms of costs, projects, and rationalizing 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 eventually create a supply problem and therefore great opportunities 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.

U.S. Dollar Index Update

Does the U.S. Dollar Index have to put in a triple top for 2015?  Perhaps.  A runaway dollar would be dangerous, so we can’t believe for a second that the Fed would want to see a breakout in the Dollar Index through the 100.71 high it hit in March.  This would actually be counter-productive to the Fed’s desire to jump-start inflation, and would generally impair the U.S. economy.

One of the reasons for the economy’s disappointing performance during the 1st half of 2015 was the delayed affect of the impact of the record surge in the dollar during the 2nd half of 2014. It’s reasonable to expect the Dollar Index to run into fierce resistance in the high 90‘s as we’ve been stating, after it retraced to Fib. support around 93 in May and then retested that level a month later.  The correlation between the greenback and the Venture is very high, so an extended period of Dollar weakness – even for just 6 months or so – would give the junior resource market some much-needed relief.  Perhaps that’s what we’ll see beginning in September.

Gold

Some are calling it “manipulation” – a huge sell order dumped into the Gold market at a very strategic time last Monday, just as the Shanghai Gold Exchange opened while it was a holiday in Japan.  Bullion crashed through critical support and fell nearly $50 an ounce to $1,080 in just 2 minutes before stabilizing.

For the week, Gold was off $34 an ounce as it recovered some lost ground Friday with an intra-day reversal – a significant day, or just a short-covering bounce?

As Gold prices slumped to a 5.5-year low, holdings of the world’s biggest Gold-backed exchange-traded fund, the SPDR Gold Trust, have fallen to their lowest level since 2008.  Yes, those holdings could drop even more, but one should view that information from a contrarian point of view.  Remember, holdings peaked in December 2012 – those who interpreted that bullishly got clobbered severely.

Technically, Gold has been consolidating within a downsloping flag since the middle of 2013, consistently testing resistance at the top of that flag and support at the bottom of it.  That trend continues, and what we also saw this past week was Gold touching the bottom of the flag while RSI(14) is now at a support level.  

Gold has hit the bottom of the flag on 3 occasions now since the end of 2013 – the previous 2 rallies following those events resulted in gains of 18% and 13.6%, respectively.  Will history repeat itself?

A close below the flag would virtually ensure a test of the $1,000 level.

Fundamentally, it didn’t actually help that China finally updated its Gold reserves a week ago Friday which showed a 57% increase to 1,658 tonnes since the country’s last update in 2009.  This took some speculation out of the market and the actual number, while it showed steady accumulation of Gold by China since 2009, was disappointing to many observers who were expecting a current reserve figure north of 2,000 tonnes.  Interestingly, despite the tonnage increase, Gold now accounts for 1.65% of China’s total forex reserves, against 1.8% in June 2009 according to a report from Reuters.  The United States, the biggest official sector Gold holder, holds nearly 73% of its reserves in Gold.

Silver fell a dime last week to $14.74.  Copper tumbled 9 cents to $2.39.  Crude Oil fell below an important support level ($49 to $50), closing down $3 a barrel last week to $47.97, while the U.S. Dollar Index lost half a point to 97.20.

The “Big Picture” For 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 3 decades in 2013, and fresh weakness now, the fundamental long-term case for the metal remains solidly intact based on the following factors: