Gold prices hit a 5-year low this morning after a sharp sell-off at the beginning of the Asian session…as of 7:45 am Pacific, bullion has recovered modestly but is still down $27 an ounce at $1,106…Silver is off a nickel at $14.79…Copper is down a penny at $2.47…Crude Oil has retreated 49 cents to $50.40 while the U.S. Dollar Index is more than one-tenth of a point lower at 97.84…
Gold’s fall in Asia came amid suggestions of a big fund selling its holdings as well as data from China’s central bank that showed its Gold reserves, updated Friday for the 1st time since 2009, were significantly lower than expected…adding to negative sentiment surrounding Gold are growing expectations among many traders/investors of an increase in U.S. interest rates later this year…
A commodity strategist in an ANZ report this morning stated, “In our view, today’s price action doesn’t seem to be driven by fundamentals. The nature, size and timing of the heavy selling suggests a market participant was taking advantage of low liquidity or some sort of forced selling had taken place,” said Victor Thianpiriya, quoted in a Wall Street Journal article…
Close to 5 metric tons of Gold was sold on the Shanghai Gold Exchange in a 2-minute window just before 9.30 a.m. local time, in a market where the normal daily volume traded is 25 tons, the ANZ report said…ANZ added that there was an unusual spike in trading volumes in a Gold futures contract even in U.S.-based Comex, just before Shanghai opened…
Technically, as John’s chart showed yesterday, the next major chart support for Gold is $1,066 after a confirmed breakdown below $1,150 which is now going to be fresh resistance on any rally…
Could Asian Retail Buying Help Gold?
A major drop in Gold would normally trigger strong retail buying in China and India…however, there’s likely not as much cash to put into play for Gold in China at the moment given the recent 30% plunge in the stock market there, while Indian demand has been relatively subdued…however, the situation in India could change in the event of a better than expected monsoon season which started this month and ends in September…
A report in the Economic Times of India over the weekend stated that crop planting has increased a whopping 62% over the previous year despite the meteorological department’s forecast of below average monsoon rain…the season’s rain deficit increased to 7% on Friday from 6% a day earlier after below normal rain…northwestern India, which has a cumulative rain surplus, saw a pickup in rice planting while showers in hilly and eastern states helped fill up water reservoirs…
Platinum 10-Year Monthly Chart
Platinum had a serious breakdown last week as it fell below key support around $1,060…oversold conditions have emerged but will likely grow more intense over the near-term…base support is $800, so Platinum is at risk of going into a free-fall at some point soon…
Volatility Index (VIX) Update
The debt crisis in Greece and the stock market meltdown in China have just been “warm-up acts” to the main event for U.S. investors – the Fed…that’s according to closely followed market watcher Jim Paulsen…the chief investment strategist at Wells Capital Management said this morning on CNBC’s “Squawk Box” that the notion stocks will just “skate right through” the Fed’s initial tightening seems unrealistic (he expects the Fed to hike interest rates in September for the 1st time since 2006…the CME’s FedWatch tool, however, which tracks market reaction on potential changes to the fed funds target rate, puts the chances of a September move at 21% and December at 58%)…
Acknowledging the upswing in stocks, Paulsen said the market could go higher in the short term. “But we may get a full blown correction yet,” he warned, pointing out we’re in the “third-longest period in post-war history without a correction.”
The VIX (Volatility Index) tells us the near-to-short term continues to look positive for the broader equity markets, though the Venture of course is a different story…the major indices are generally “safe” when the VIX is below 20 as it has been for most of this year…it briefly spiked to 20.05 last week before retreating to close at support at 11.95 Friday…
Today’s Equity Markets
Asia
China’s Shanghai Composite started the week on a positive note, adding 36 points to close at 3993…important resistance at 4055 on this rally…
Europe
European markets are up modestly in late trading overseas…Greek bank branches reopened their doors today after being closed for 3 weeks to prevent a banking system collapse, but almost all the restrictions on financial transactions remained in place, showing how far Greece remains from economic normality as its turbulent summer continues…
North America
The Dow is flat as of 7:45 am Pacific while the NASDAQ has hit a new all-time high of 5223 in early trading…
In Toronto, the TSX has fallen 110 points on weakness in Gold and Oil while the Venture is 4 points lower at 625…non-resource plays of course continue to put-perform on the Venture…readers may wish to perform due diligence on Sernova Corp. (SVA, TSX-V), a clinical-stage company developing products for the treatment of chronic diseases using therapeutic cells transplanted into an implanted medical device to replace missing proteins or hormones…earlier this month the company announced that it has started research collaboration with Massachusetts General Hospital to develop a novel treatment for diabetes….SVA is up 1.5 cents at 30.5 cents as of 7:45 am Pacific…
The “Canadian Energy Strategy”?
The Canadian Energy Strategy approved by provincial premiers Friday put “climate change” and the environment front and center, and renewable energy on a pedestal…however, it still wasn’t strong enough for many environmental activists including Dale Marshall of Environmental Defence. “The energy strategy was weak and disappointing on commitments on climate change and clean energy,” he stated. “The only way to salvage it is for provinces to take steps to strengthen it by committing to significant climate action, focusing on increasing electricity trade in clean, renewable power, and collaborating on a strong energy-efficiency program.”
No wonder Saskatchewan Premier Brad Wall had to come out with a common sense remark that Oil is not a “four-letter word”.
Wall took shots at Ontario and Quebec’s position and criticized Alberta’s newly-elected NDP premier, Rachel Notley, for her recent statement that Quebec is right to want meaningful action on climate change before endorsing an east-west pipeline…he suggested it means she would give a veto to other provinces if they don’t like her energy policies…fair comment in our view, though Notley gave Wall a sharp rebuke…
TSX Gold Index Update
With today’s weakness, very oversold conditions are now starting to emerge in the TSX Gold Index which has fallen below support at 135 and is now down a whopping 15% for the month of July…
Keep in mind, Gold in Canadian dollars closed at $1,470 Friday – in some instances the baby is being thrown out with the bathwater as some solid Canadian producers, who are still fetching a strong price for Gold, are getting whacked down unnecessarily…
This chart gave a strong warning early in the year that the TSX Gold Index was up against strong resistance and that was a good time to sell after a powerful rally from the November low…we’re now into a period when some tremendous bargains should emerge, just like they did late last year…
The Gold Index is down 11 points at 126 as of 7:45 am Pacific…
Rainy River Royalty Stream
A wholly owned subsidiary of Royal Gold (RGL, TSX) has entered into $175 million purchase and sale agreement with New Gold (NGD, TSX) for a percentage of the Gold and Silver production from the Rainy River Project in Ontario…
Royal Gold President and CEO Troy Jensen commented, “The Rainy River Project fits well into our high quality portfolio and met all our criteria for new investments with nearly 4 million ounces of Gold reserves, continued exploration upside and projected cash costs below $600 per ounce. We are particularly pleased to add another piece of business in Canada and partner with New Gold, a company that is well-known for its development track record and operational expertise.”
Richmont Mines Inc. (RIC, TSX) Update
Given the continuing drop in the value of 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 as we pointed out above – 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 broke out of that formation to the upside, though that did come on decreasing buy pressure…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 off 23 cents to $3.77 as of 7:45 am Pacific…
Canada Carbon (CCB, TSX-V) Update
One Venture play on the resource side that has held up well recently is Canada Carbon (CCB, TSX-V) which has continued to follow a long-term uptrend this year…
Last Wednesday, the company reported that it had received indicative pricing (our emphasis) of $12,000 (U.S.) to $14,000 (U.S.) per metric tonne for 99.9998% graphite that is currently used in high-technology electronics industry applications…the non-binding quotation of value, from a participant in the high-purity graphite market that is currently working with CCB’s graphite, represents current pricing for 1 specific application for ultrahigh-purity graphite, an application which is estimated to require 250 to 350 tonnes per month…
A day later, CCB was forced to clarify its news and remind investors that pricing in the graphite market is not transparent. “The terms indicative pricing and real-time pricing are neither industry standard nor defined terms in legislation. No spot price exists for graphite at any purity level. In addition, no mining study at any confidence level has been completed to establish costs of production, capital costs and other important economic considerations,” CCB stated.
Technically, CCB has excellent support at the uptrend line but has not yet been able to overcome the resistance as indicated below…it’s off half a penny at 27.5 cents as of 7:45 am Pacific…
Silver Short-Term Chart
Silver couldn’t hold the $15 level last week and that’s why we’re seeing continuing pressure today…the next chart support is $13.50 which would certainly imply a near-term test of the $14.15 intra-day low at the beginning of last December…
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, Terry and Jon do not hold share positions in RGL, NGD, RIC, or CCB.
