BullMarketRun.com

Is this Gold’s “revenge” following a multi-year low, highlighted by the July 20 bear raid, a merciless pummeling in the mainstream media and a commentator’s remark that the yellow metal is just a “pet rock“?

Benefiting from currency and equity market instability (a key trigger for bullion was China’s recent devaluation of the yuan), Gold blasted through its 50-day moving average (SMA) today to close at a 5-week high of $1,153.  There was obviously some short-covering this morning, but the potential exists for a lot more.  Keep in mind that non-commercial COMEX Gold short positions reached record levels at the end of July and remained there through the middle of this month.  This unprecedented level of bearishness, evident elsewhere in the Gold market including ETFs, has been a compelling reason to run in the opposite direction of the herd as we did when bullion touched important support around $1,070 while the doomsayers were calling for an imminent meltdown to $1,000.

While it’s difficult to say at this point if Gold has actually found a final bottom – ultimately, it could still test $1,000 – what is clear in our view is that this current move has room to grow in the weeks ahead, so the long opportunity continues (no reason Gold should stop at $1,150, though that is resistance that must be overcome as per the chart below).  Seasonal factors are also in bullion’s favor.  In addition, the U.S. Dollar Index could come under more intense pressure, given its weakening technical posture, especially if the Fed backs away from a rate hike in September (the Dollar is still a crowded trade).  We highly doubt the central bank has the courage to raise rates in the current global environment.

The “Golden” Chart

John’s 2.5-year weekly chart for Gold has been like the “bible” on bullion trading since late 2013.  It allowed for correct bullish calls on Gold in December 2013, November 2014 and again just recently.

Simply put, Gold has been consolidating within a downsloping flag for more than 2 years as you can see below.  Consistently, it has tested the top of that flag (resistance) and the bottom of it (support).  Recently, during Gold’s drop that continued for 7 straight weeks (the longest weekly losing skid since 1999), the metal again touched the bottom of that flag while RSI(14) landed at previous support going back to 2014.  The slide had exhausted itself, at least for the time being.  First significant resistance on the way back up was $1,100 and just slightly above that.  The vigorous push through $1,110 this week was a clear signal that Gold was ready to quickly test the $1,150 resistance.

Where to from here?

Note the strong up momentum in the RSI(14), the bullish low “W” in the SS indicator (similar to late last year), and the potential for a bullish +DI/-DI crossover.  A fresh band of support should exist between about $1,130 and $1,140 – the 40 and 50-day SMA’s, respectively.  As long as the bulls can hold that ground on any pullback, they’ve got momentum in their favor.  What could unfold is a 2-steps-forward, 1-step-back sort of scenario, or potentially something more explosive given current global volatility across a myriad of economic and political landscapes.

The possibility of Gold making its way back to the top of the downsloping flag (currently intersects at approx. $1,250) within the next couple of months has to be considered very real, and a growing number of Gold stocks (producers and some of the best quality juniors) are looking exceptionally bullish.  They will outperform the metal and should serve as an island of relative safety, as they did today, in any troubled waters in the equity markets.

Gold has traded between $1,136 and $1,155 so far today…as of 9:45 am Pacific, bullion is up $19 an ounce at $1,153, its highest level in more than a month…Silver has jumped 24 cents to $15.55…Copper has rebounded a nickel to $2.31…Crude Oil touched nearly $40 a barrel but is now up slightly at $41.01 while the U.S. Dollar Index has tumbled half a point to 96.00…

After the release of yesterday’s rather dovish Fed minutes from July’s meeting, and considering developments in China the last few weeks, there appears to be little doubt that a September rate hike is now absolutely off the table as we’ve been speculating for many weeks…that’s why Gold has pushed higher this morning as it challenges resistance at $1,150…interestingly, a growing consensus of so-called market experts – particularly economists and “strategists” – believe the Fed will increase rates next month for the 1st time since 2006…traders in Fed futures (and Gold), however, tell a different story, and we’ll side with the traders…

The combination of China’s slowing economy and falling commodity prices is really bringing the deflation scenario back to the forefront, and that must have the Fed, and central banks and governments across the globe, very concerned…

2.5-Year Weekly Gold Chart In Canadian Dollars

Below is an updated look at Gold in Canadian dollars…the uptrend is impressive…this chart, plus the fact that Oil prices are at a 6.5-year low, demonstrates the tremendous opportunities in high quality Canadian-based Gold producers in particular – Richmont Mines (RIC, TSX) and Claude Resources (CRJ, TSX) are just 2 good examples – who are benefiting from a weak loonie that will likely remain weak for an extended period…

If the band of Fib. resistance between $1,471 and $1,514 is successfully cleared, then a challenge of this year’s high of $1,655 could be in the works at some point during the final 4 months of the year…

TSX Gold Index Update

There’s a confirmed breakout today in the TSX Gold Index above 135 resistance as shown in this 5-year weekly chart…what got us excited recently was when the Gold Index hit the bottom of a downsloping wedge just below 120…it appears the Index could take a run in the near future at its declining 200-day moving average (SMA) in the mid-150’s…a breakout through that level would likely take the Index to the top of the downtrend line (dotted blue)…

The Gold Index has surged 7 points to 145 as of 9:45 am Pacific…

“Climate Change” Hypocrites On The Left

Let’s see, where to start?…is left-wing hedge fund billionaire George Soros, pictured below, now suddenly King Coal?…Soros of course is a hardball investor and philanthropist to myriad left-wing causes, including the activist and “clean energy” rent-seeking movements that have helped take down the coal industry…less than a year ago the Soros’ Climate Policy Initiative issued a major report concluding that the world could save $1.8 trillion over the next 2 decades by transitioning away from coal…the report referred to coal reserves as “stranded assets” that were losing value as they were no longer needed…

Soros has demonized coal and fossil fuels for years, aided by his buddy in the White House, to the point where there are now too many good investment opportunities to pass up…U.S. Securities and Exchange Act filings indicate that Soros has purchased an initial 1 million shares of Peabody Energy and 553,200 shares of Arch Coal, the 2 largest publicly traded U.S. coal companies!…he has obviously warmed up to Big Coal now that stocks are dirt cheap…

Obama’s Arctic Drilling Approval

Meanwhile, President Obama’s case against the Keystone XL Oil pipeline – his 7 years of lies and distortions regarding that project – now seem even more outrageous given the fact he has just given the go-ahead to a far more worrying project (in the eyes of many), which will allow Shell Oil to drill for Oil 8,000 feet below the ocean floor in the Arctic off Alaska…of course the same environmental groups that were singing Obama’s praises over Keystone and his recent announcement of a comprehensive anti-emissions drive are now confused and outraged, to say the least…

“It sends a terrible signal to the rest of the world for the United States to be using public resources to promote that development,” said Niel Lawrence of the Natural Resources Defence Council…

Obama’s comments regarding Shell’s arctic drilling are nothing short of bizarre, but we’ve come to expect the bizarre from this President who is so admired by the left in Canada, especially Justin Trudeau and Tom Mulcair…

Obama backed the Shell project on the basis that it “benefits our economy and enhances global energy security”…

“Treasonous”?  Obama Speaks Of “Global Energy Security”, Not “North American Energy Security”

Interesting that Obama considers “global energy security” more important than “North American energy security” (some would consider that “treasonous”, Republicans should pick up on that)…Obama never talks about North American energy security…no wonder Canadian Prime Minister Stephen Harper shakes his head in bewilderment regarding this guy…

But here’s the really strange part:  “I would rather us, with all the safeguards and standards that we have, be producing our Oil and gas, rather than importing it, which is bad for our people, but is also potentially purchased from places that have much lower environmental standards than we do,” Obama told a press conference…

Wow…those words actually bolster the case for Keystone XL and energy security from a reliable ally with high environmental and democratic standards (vs. other regimes around the world the U.S. still imports from)…and when he says “us”, is he referring to Americans, or is Obama simply not aware that Shell is a European multi-national, not a U.S. firm?…

Even Hillary Clinton, while deeply mired in a major email scandal and a floundering Presidential campaign, found time to tweet her opposition to Obama’s decision to allow Shell to drill in the Arctic, stating, “The Arctic is a unique treasure. Given what we know, it’s not worth the risk of drilling. -H.”

Greece Puts The Screws To Eldorado Gold (ELD, TSX)

No wonder Greece is such an economic basket case…the socialists and environmental wing-nuts in the bureaucracy there have suspended the mining operations of Eldorado Gold (ELD, TSX) in northern Greece (the Skouries-Olympias Gold Project), saying the company “violated contract terms”…we saw this coming, as we reported earlier this year, and we’re more inclined to take the company’s point of view…Greece’s economy, more than any other in the world, desperately needs the $300 million or so that Eldorado had been planning to spend in the country this year…permitting delays and regulatory “crap” have pushed most of that spending into 2016 or beyond…

Eldorado CEO Paul Wright commented, Paul Wright, “We are most disappointed and perplexed by this entirely inappropriate decision of the Ministry of Energy, which puts 5,000 direct and indirect jobs in Greece at risk, including the jobs of 2,000 Greek employees and contractors of Hellas Gold. We have received numerous favourable decisions of the Council of State – Greece’s supreme court on administrative and environmental matters – over the course of the last three years, which confirm the legality of our activities in Halkidiki. We will once more take legal action against a decision of the ministry in order to safeguard the rights of Eldorado, Hellas Gold, our Greek employees, and the communities and stakeholders that support our projects in Halkidiki. At this time, work at all our Halkidiki operations and projects continues as normal; however, Hellas Gold may be forced to suspend all its mining and development activities in Halkidiki due to this rash decision by the Ministry of Energy.”

Today’s Equity Markets

Asia

China’s Shanghai Composite tumbled 129 points or 3.4% overnight to close at 3666…key support, as John’s charts have shown, is 3400…how long China’s “rescue team” can keep the market above that level remains to be seen…

Europe

European markets were down sharply today…

North America

The Dow is off 241 points as of 9:45 am Pacific…in Toronto, the TSX has fallen 186 points while the Venture is off 5 points to 553…the Venture, entering today, has had 20 “down” days out of the last 25, albeit on low volume…

In economic data released today, the headline index for the survey of manufacturing from the Philadelphia area strengthened in August after plunging in July, beating expectations, according to the Philadelphia Federal Reserve…the index for current general activity in Philadelphia Fed’s manufacturing business outlook survey rose to 8.3 in August, from July’s reading of 5.7…meanwhile, U.S. home resales rose more than expected in July to their highest level since 2007, a sign the U.S. housing market was heating up and could provide more support for the overall economy…

Interesting:  Influential U.S. law firm Wachtell, Lipton, Rosen & Katz has an idea that may be music to the ears of its big corporate clients and a nightmare for some investors and analysts – end quarterly earnings reports…will this idea catch on?…we’ll see…

Wachtell this week called on the Securities and Exchange Commission to consider allowing U.S. companies to do away with the obligatory quarterly reports, 1 of the most important rituals on Wall Street and in corporate North America, suggesting that they distract executives from long-term goals…it’s the latest idea put forward by Wachtell to combat what it and some others see as an excessive focus on short-term performance that they say has been encouraged by activist shareholders…the investors have widened their influence in recent years, drawing criticism from influential figures who say they encourage companies to focus on gimmicks that provide short-term stock gains at the expense of long-term health…Clinton, for one, has pledged reforms including tax changes to “help CEO’s and shareholders alike to focus on the next decade rather than just the next day.”

HXD S&P/TSX Bear Plus ETF

Like it did during the early summer of last year, the HXD (double short TSX ETF) is threatening to break out from a 3-year downsloping channel…confirmation of this would be quite negative for the TSX…we’ll keep monitoring this chart closely…

Pure Energy Minerals (PE, TSX-V) Update

A very informative company conference call 2 days ago got us even more excited about Pure Energy (PE, TSX-V), as we reported Tuesday morning…pre-market today the company released an “order of magnitude cost estimate study” from Tenova Bateman Technologies for PE’s Clayton Valley Lithium Brine Project in Nevada…it’s important to stress that only an inferred (albeit significant) resource currently exists for Clayton Valley (recently released), and the company has yet to provide a Preliminary Economic Assessment for the project which is likely why the language used in this morning’s news may require “clarification” in the eyes of the regulatory authorities – hence the halt 17 minutes into trading with PE up 4 cents at 46.5 cents on volume of more than half a million shares…nonetheless, the news is highly encouraging and underlines how this project, when combined with Tenova’s LiSX selective lithium extraction technology, has the potential to be a low-cost producer of battery-grade lithium materials…

Technically, PE is once again challenging Fib. resistance at 47 cents…the stock essentially “filled the gap”, as expected, from the big move August 4…

Skeena Resources Ltd. (SKE, TSX-V)

Skeena Resources (SKE, TSX-V) reported very positive results this morning from the 1st 6 holes of a 60-hole drill program at its Spectrum Project in northwest B.C., approximately 75 km southeast of Garibaldi Resources’ (GGI, TSX-V) Grizzly Project…each Skeena hole featured multiple high-grade intercepts including S15–012 which returned 10.59 g/t Au over 6.6 m, beginning at 102 m, including a 1.4 m sample that assayed 37.8 g/t Au…further down that hole, 2 other high-grade sections yielded assays of 25.27 g/t Au over 3.9 m at 197.6 m and 4 m grading 7.08 g/t Au at 234 m…

The Spectrum deposit comes to surface and is being tested with relatively short drill holes averaging 230 m in length…

SKE is off a penny at 8.5 cents as of 9:45 am Pacific…strong support between 7.5 and 8 cents, the rising 50 and 200-day SMA’s, respectively…mining legend Ron Netolitzky and his group are off to a good start proving up a potential substantial high-grade Gold resource at Spectrum…the property is also prospective for Cu-Au porphyry deposits…

Integra Gold Corp. (ICG, TSX-V) Update

Leapfrog and WSP I Parsons Brinckerhoff (WSP) have partnered with Integra Gold (ICG, TSX-V) for its Integra Gold Rush Challenge – the $1-million crowd-sourced prize for finding Val d’Or’s “next big Gold discovery”, as the company announced this morning…

More significantly, ICG is ramping up drilling at the Lamaque Project at the end of this month, thanks to a major financing announced earlier this week with Eldorado Gold…this puts ICG in an excellent position for a sustained breakout above Fib. resistance at 30 cents…

ICG is unchanged at 30 cents as of 9:45 am Pacific…

Lion One Metals Ltd. (LIO, TSX-V)

Weakness in the overall junior resource market has wiped 50% off the value of Lion One Metals (LIO, TSX-V) since the beginning of June…this is a high-quality situation that exploded suddenly in early May after breaking out above a long-term downtrend line shown in this 10-year monthly chart…over the last 2-and-a-half months, LIO has retraced back to strong support at the downtrend line which also roughly coincides with the rising 200-day SMA…

LIO’s high-grade Gold Project in Fiji has very robust economics as reported by the company June 1 when it released a Preliminary Economic Assessment (after-tax IRR of 52% and a 1.5-year payback, all-in-sustaining costs of $779 an ounce, and pre-production capital costs of only $49 million including a 14.5% contingency)…

LIO has only 60 million shares outstanding and reported $5 million in cash with no debt at the end of March…it’s off a penny at 32 cents as of 9:45 am Pacific…

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

Gold prices have hit a 4-week high today on some short-covering and safe-haven demand…as of 9:30 am Pacific, ahead of today’s Fed minutes, bullion is up $12 an ounce at $1,130…it has traded as low as $1,116 and as high as $1,131, the 40-day moving average (SMA) which has served as stiff resistance since late June…Silver has added 46 cents to $15.32…Copper is down 2 cents at $2.27…Crude Oil has fallen $1.75 a barrel to $40.87 while the U.S. Dollar Index is off more than one-tenth of a point to 96.85…

Gold is showing signs of having put in a bottom although much will be determined by today’s release of minutes from the July meeting of the FOMC, according to analysts at Commerzbank.  “The rapid price recovery shows that lower prices generate buying interest and cause the selling pressure among speculators to abate. Gold currently appears to be in a bottoming-out phase, which could well continue for some weeks yet before any more sustained price recovery can be expected.”

Fed minutes will be released at 11:00 am Pacific…it’s important to keep in mind, however, that since the minutes are released with a 3-week lag, they don’t capture how the landscape has changed since the Fed’s July meeting…there have been significant economic developments in recent weeks that will factor into the Fed’s decision next month – most importantly, China’s currency devaluation and a continued slide in Oil prices that seem to weigh against raising rates…

White Paper Critiques Fed Actions

Stephen Williamson, Vice-President of the St. Louis Fed, finds fault with 3 key policy tenets of Fed actions in a recently released white paper (Current Federal Reserve Policy Under The Lens of Economic History: A Review Essay) dissecting the U.S. central bank’s actions to stem the financial crisis in 2008 and 2009…

Specifically, he believes the zero interest rates in place since 2008 that were designed to spark good inflation actually have resulted in just the opposite…and he believes the “forward guidance” the Fed has used to communicate its intentions has instead been a muddle of broken vows that has served only to confuse investors…finally, he asserts that quantitative easing, or the monthly debt purchases that swelled the central bank’s balance sheet past the $4.5 trillion mark, have at best a tenuous link to actual economic improvements…

Williamson is quick to acknowledge, however, that then-Chairman Ben Bernanke’s Fed, through liquidity programs like the Term Auction Facility that injected cash into banks, “helped to assure that the Fed’s Great Depression errors were not repeated”…

Canadian Feds In Court Against 5 First Nations  

The Globe and Mail reported this morning that lawyers for the federal government are in court today to persuade a judge to force 5 First Nations to open their books to the public…the reserves are protesting the government’s transparency law, which since last year requires all First Nations to post their salaries and audited financial statements online…Aboriginal Affairs Minister Bernard Valcourt has said the legislation makes financial information more accessible to band members and leads to “more effective, transparent and accountable governance, as well as stronger, more self-sufficient and prosperous communities”…

Some band leaders argue the law is about controlling aboriginal communities and breaches their indigenous rights…

“It’s bad legislation”, said Perry Bellegarde, national chief of the Assembly of First Nations, who plans to attend some of the 2-day hearing in federal court in Saskatoon…

Sorry, Mr. Bellegarde, it’s the right legislation and should have been introduced a long time ago…

Last year, after the government’s November deadline had passed, it withheld “non-essential” funding from almost 50 reserves that had yet to disclose their numbers…it proceeded with court action against 5: the Sawridge and Athabasca Chipewyan First Nations in Alberta and the Thunderchild, Ochapowace and Onion Lake bands in Saskatchewan…

Gold-WTIC Comparative

As we noted yesterday, Gold and Oil don’t always move in tandam…bullion’s relative performance vs. Crude is similar to the situation in late 2008, which preceded a strong move higher in Gold prices…this kind of environment is very bullish for Gold producers in particular…

Crude prices hit their lowest in almost 6-and-a-half years this morning after U.S. data showed an unexpected rise in stockpiles…U.S. Crude stocks were up 2.6 million barrels at 456.21 million barrels last week, the U.S. Energy Information Association (EIA) reported…stocks at Cushing, Oklahoma, the delivery point for U.S. Crude futures, rose 326,000 barrels to 57.44 million…

Today’s Equity Markets

Asia

China’s Shanghai Composite plunged as much as 5% in early trading overnight before the communist government’s “rescue team” jumped in and reversed the market to the upside…the Shanghai closed up 46 points (1.2%) at 3795, so it was a volatile session…

Vietnam allowed its currency to weaken by at least 1% today following the devaluation of the Chinese yuan and the expectation of a possible U.S interest rate hike.  “Following the strong devaluation of the Chinese yuan, domestic market sentiment is very much concerned with the negative impact of a United States Federal Reserve interest rate increase,” the central bank said in a statement…

Europe

European markets were down sharply today…

North America

The Dow is off 192 points as of 9:30 am Pacific…the Labor Department reported this morning that its Consumer Price Index edged up 0.1% last month (vs. expectations of 0.2%) after advancing 0.3% in June, marking the 6th straight month of increases…in the 12 months through July, the CPI has climbed 0.2%, well below the Fed’s target rate…

In Toronto, the TSX is down 134 points as the slide in Oil prices is offsetting gains in the Gold Index, while the Venture is off 5 points at 558…Pure Energy Minerals (PE, TSX-V) gapped up this morning – not surprising, given yesterday’s conference call – and is currently up a nickel at 43 cents on strong volume…more on PE later in the week…

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

Last Friday’s all-time record volume day for Garibaldi Resources (GGI, TSX-V) was no coincidence in our view as the company appears to have regained its rhythm in both Mexico and British Columbia…interestingly, GGI came to life when it was trading around a nickel in a weak overall market (similar bearish sentiment as now) in late June 2013, and then proceeded to soar 600% over the next 12 months…just 1 of the advantages GGI has going for it now is the fact there is no longer any fund “overhang” given the fact that Sprott Securities‘ nearly 20% position in the stock has been completely taken out, mostly by a strong retail crowd given the nature of the trading activity during the 1st half of the year…

Technically, GGI is ideally positioned for an imminent breakout with classic signals as you can see in this 2.5-year weekly chart:

1.  RSI(14) conditions became extremely oversold during June and July, with this indicator now showing increased up momentum and threatening to push above a downtrend line in place since late last year;

2.  GGI this morning is pushing above a price downtrend line in place since March;

3.  The ADX indicator clearly shows that the bearish trend has peaked;

4.  Sell pressure (CMF) has reversed into weak buy pressure.

GGI’s technical and fundamentals are now properly aligned for the 1st time in months…besides pending assay results from Mexico, Garibaldi’s exploration crews are on the ground at the Grizzly in the prolific Sheslay district, focusing on 2 key areas to prioritize drill targets – Grizzly Central and the recently acquired Golden Bear claims where a high-grade Gold showing is being investigated…

The possibility of a stand-alone high-grade Gold deposit in the Sheslay district is a very real possibility given how “cooked up” this entire district is…keep in mind that the Golden Bear mine access road – with the “Bridge Over the River Sheslay” – was built (with plenty of Tahltan help) for the past producing high-grade Golden Bear mine immediately to the east of the Grizzly, while the Spectrum Project on trend to the southeast of the Sheslay district features a high-grade Gold deposit in addition to a Cu-Au porphyry system…

With the possibility of both Garibaldi and Doubleview Capital Corp. (DBV, TSX-V) drilling simultaneously in the near future, the Sheslay district – described as B.C.’s “#1 greenfield project” by AME BC – could provide the spark the junior resource market needs…

GGI is up half a penny at 7 cents as of 9:30 am Pacific, while DBV has edged up 1.5 cents to 11.5 cents…

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

Equitas Resources (EQT, TSX-V) is raising up to $1.8 million as it proceeds toward drilling at its Garland Nickel Project in Labrador…the company announced its non-brokered private placement plans yesterday which we interpret as an indication of strong interest in this exploration play from some serious players, especially considering the current overall market climate…

As we stated in Tuesday’s Morning Musings, people make the difference, and hard-working President Kyler Hardy has helped assemble a highly qualified team with expertise in all facets of the business…

Click on the arrow below to listen to more of our recent interview with Hardy as he comments on Everett Makela, EQT’s VP-Exploration who brings over 30 years of experience to Equitas which includes important roles with Inco and Vale (he retired from Vale as Principal Geologist, North America, in 2012)…he’s intimately familiar with the Voisey’s Bay deposit and the area…

Dalradian Resources Inc. (DNA, TSX)

Readers may wish to perform their due diligence on Dalradian Resources (DNA, TSX) which has been 1 of the best performing Gold stocks over the last year or so…in March, the company launched a 20,000 m infill drilling program at its Curraghinalt high-grade Gold project in Northern Ireland in support of its previously announced prefeasibility study (planned production of 162,000 ounces per year, 18-year mine life, 30% after-tax IRR based on U.S. $1,054 Gold, and an initial low capex of $250 million – not based on reserves)…

The Curraghinalt deposit is a lode Gold system consisting of a series of structurally controlled, high-grade Gold bearing quartz-carbonate veins…remains wide-open for expansion…Northern Ireland is a resource-friendly jurisdiction with a highly developed infrastructure that welcomes and supports investment…

Technically, DNA has been trading in a horizontal flag since late last year with strong support at its rising 200-day SMA (89 cents)…looking out over the next several months, Dalradian has a good chance to continue to out-perform the sector…

DNA is up 2 pennies at 92 cents as of 9:30 am Pacific…

Kaminak Gold Corp. (KAM, TSX-V) Update

Kaminak Gold (KAM, TSX-V) has provided a couple of encouraging updates on its Coffee Gold Project in the Yukon over the last 3 weeks, the latest being last Thursday…any upside surprises in Gold in the near future should give KAM a lift…

Infill drilling (70,000 m) is now complete on all Coffee deposits, demonstrating good agreement with the existing block model…this is expected to result in a high conversion rate of in-pit resources from inferred to indicated in the updated 2015 block model underpining the Feasibility Study which is scheduled for completion in the 1st quarter of next year…

KAM has been moving off strong support around the 60-cent area…note how the RSI(14) on this 2.5-year weekly chart found support at the 30% level, while the SS indicator appears ready for a breakout above 20%…

KAM is unchanged at 70 cents as of 9:30 am Pacific…

Note:  John and Jon both hold share positions in GGI.  John also holds a share position in EQT.

Gold has traded between $1,109 and $1,122 so far today…as of 10:35 am Pacific, bullion is flat at $1,117…Silver has tumbled 48 cents to $14.84…Copper has shed 3 pennies to $2.28…Crude Oil hit more than a 6-year low this morning but is now up 45 cents to $42.32 while the U.S. Dollar Index has added more than one-tenth of a point to 97.01…

Surprise (not really)!…China’s economy is growing more slowly than official data suggest, Bloomberg says, helping explain why policy makers in that country have stepped up stimulus and devalued the yuan to boost exports…the economy expanded 6.3% in the 1st half, compared to the officially reported 7%, according to the median estimate of economists Bloomberg surveyed last week…the London Metal Exchange Index of 6 metals fell to a 6-year low yesterday and Aluminum had its lowest close since July 2009…nonetheless, China can be expected to continue to magically report 7% growth which is their official target…

The numbers Chinese authorities report simply can’t be trusted…this is a communist regime which excels at manipulating and deceiving its own people, and we saw a great example of that in how the equity markets have performed there this year…that’s why we had to chuckle at recent mainstream media commentary that stated there’s a “new trend toward more transparency on China’s part” in terms of reporting its Gold reserves as the country pushes for the yuan’s inclusion in the IMF’s currency basket…

Our question is, did China actually lie about the amount of Gold it accumulated between late 2009 and the end of June?…in other words, did they actually gobble up much more than they announced, and will they now make it seem like they’re ramping up their purchases?…will they produce an even higher Gold accumulation figure for August?…who knows what the real numbers are, though it’s quite apparent that China has been accumulating significant amounts of Gold to back up its currency…

It’s more than interesting that China went nearly 6 years without updating its reserves and then suddenly provided 2 updates in less than 30 days…the central bank said it increased its reserves by 1.1% in July to 53.93 million ounces…that pace of purchases works out to 240 tons per year, well ahead of the pace of 100 tons per year since 2009 as reported last month…China is simply being “more transparent”, the mainstream media are claiming…

Gold 35-Year Monthly Chart

Below is a 35-year monthly Gold chart which shows a weakening bearish trend while RSI(14), despite the recent multi-year price low, continues to hold strong support at nearly 40%…important price support, as John identified prior to last month’s drop to $1,072, is $1,068 (Fib. level)…an uptrend line intersects through $1,000, so that can’t be ruled out as an ultimate bottom…the declining 200-day moving average (SMA) has provided strong resistance – momentum in Gold should shift dramatically at the point the 200-day reverses to the upside…

Oil Update

The slide in Oil prices continues which has been no surprise given the bearish fundamentals and technical…the stunning fact is that Saudi Arabia, Iraq and the U.S. together have added 2 million barrels a day to the world Oil supply since last fall’s price collapse…and now there’s the threat of Iran’s return to the market, albeit that’s a difficult supply source to forecast…Iran has said it could increase exports by a million barrels a day, but analysts have been skeptical and see it adding less output…however, Iran also has an estimated 50 million barrels of Crude on tankers that could be sent to global markets quickly…

In the U.S., meanwhile, despite large spending cuts on new drilling, output in the has held steady near multi-decade highs…production in North Dakota, a key producing state, rose in June compared with May…

WTIC 2-Year Weekly Chart

Fresh resistance for Crude is now at $45…the bearish trend is gaining strength and a drop to strong support in the mid-$30’s does seem likely at some point later this quarter or by early Q4…the 50-day SMA is declining rapidly and that will also restrain any rallies…

Gold-Crude Comparative

Gold and Crude often but don’t always move in unison, and the correlation is clearly weakening significantly as you can see in this 34-year weekly chart…

U.S. Dollar Index Updated Chart

What this chart tells us is that the U.S. Dollar Index likely peaked, for this year at least, in March at 100.71…the question now is whether the primary support band will hold between about 93 and 96…the 100-day SMA is beginning to roll over, and the SS indicator shows momentum is weakening…note how the RSI(14) stayed at extreme overbought levels for an extended period – highly unusual, and often that kind of pattern can be followed by a period of very oversold conditions…the bulls who are expecting the Dollar Index to perform strongly through the balance of the year could be in for a nasty surprise…

Failure of the primary support band could cause a tumble down to the 88 level which would certainly be supportive of Gold…

Republican Field Getting Trumped

Donald Trump is surging in the polls – it’ll be interesting to see if he can maintain that momentum through a grueling primary season – because he’s not acting like a politician (Stephen Harper could learn something here as he battles career politicians Justin Trudeau and Thomas Mulcair)…Trump is telling Americans what they need to hear, not what they want to hear…he’s also putting Americans first, not illegal immigrants first…

Trump has won his party’s trust on top issues more than any other Republican presidential candidate, and now stands as the clear leader in the race for the GOP nomination according a new CNN/ORC poll…Canadian-born Senator Ted Cruz, a very worthy candidate, is sitting at just 5%…

The Canada-Mexico Problem

It seems Mexico is not only a problem for the U.S. – it’s also an issue for Canada, though in different ways…

Since 2012 Canada has been losing market share to Mexico with regard to non-Oil exports to the United States as this chart from Bloomberg shows…during that time the relationship between the Canadian dollar and the Mexicana peso has been flat, so currency differences aren’t the explanation…

Mexico is simply a cheaper place to produce…it also has enough human capital and engineering skills to manufacture almost everything Canada can and do it a lot cheaper…the socialists in this country who are demanding a $15 minimum wage and higher taxes on a broad array of businesses to pay for social experiments we can’t afford, and don’t work, are simply out of touch with economic reality….resource extraction will also be made more difficult under either an NDP or Liberal regime (or combination thereof) in Ottawa…

Today’s Equity Markets

Asia

China’s Shanghai Composite plunged 6% overnight to close at 3749, its lowest level since August 7 as concerns over the yuan eclipsed data which showed monthly home prices up for a 3rd straight month in July…

Europe

European markets were down slightly today…

North America

The Dow has fallen 36 points as of 10:35 am Pacific…U.S. housing starts rose to a near 8-year high in July as builders ramped up construction of single-family homes…the Commerce Department report this morning added to solid payrolls, retail sales and industrial output data in suggesting the economy got off to a strong start in the 3rd quarter…

The TSX has declined 61 points while the Venture is off 5 points at 566…

Venture Long-Term Chart

This long-term Venture chart shows extreme oversold conditions on an historical basis…when you look at this 16-year monthly chart in combination with the 39-week “cycle” chart we’ve been highlighting recently, it’s very reasonable to expect a significant rally in this market in the not-too-distance future – within the next several weeks…

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

Pure Energy (PE, TSX-V) conducted a conference call this morning that just concluded within the last 45 minutes or so…it was extremely informative – we suggest investors who may have missed the live call check out the recorded version the company said it will be posting on its website…

Pure Energy has a fabulous zip code – Nevada – to evolve into an important, low-cost North American Lithium brine producer in a highly favorable, friendly jurisdiction where the company is getting strong support from the state government…recently, PE released a NI-43-101 inferred Lithium resource for its Clayton Valley Project…an updated resource estimate could come prior to year-end, and initial work has also commenced on a Preliminary Economic Assessment…recent company visits to Asia and Israel have further demonstrated intense interest in the project as stated in the conference call this morning…

The Clayton Valley Project has an exciting technology component to it in terms of the potential extraction process, a technology that has been developed by a major player…

Pure Energy is also aiming attract a strategic partner and secure a supply agreement that it believes is technically and commercially feasible (keep in mind, Western Lithium reached a $100 million market cap without a supply agreement)…

From a market standpoint, this morning’s call noted the company’s recent increased exposure for Pure Energy in the U.S. due to its OTCQC listing…

Technically, PE showed strong support as expected in the mid-to-upper 30’s recently after retreating from Fib. resistance at 47 cents…it’s unchanged at 39 cents as of 10:35 am Pacific…

Integra Gold Corp. (ICG, TSX-V) Update

Major news out of Integra Gold (ICG, TSX-V) as the company announced Eldorado Gold (ELD, TSX) will make a $14.6 million strategic investment in Integra by way of a non-brokered private placement of common shares of ICG at 28 cents per share…that’s an 11% premium to the 20-day volume-weighted average price of Integra on the Venture through yesterday…

ICG is up a penny on strong volume at 27.5 cents as of 10:30 am Pacific…5 rigs will be operational by month-end at the company’s Lamaque Project near Val d’Or, so another period of intense drilling should really capture investors’ attention along with this investment by Eldorado…

ICG 2-Year Weekly Chart

Note:  John and Jon do not hold share positions in PE or ICG.

Gold has traded between $1,115 and $1,124 so far today…as of 9:00 am Pacific, bullion is up $4 an ounce at $1,118…Silver has added 7 cents to $15.32…Copper is down 2 pennies at $2.31…Crude Oil is relatively unchanged at $42.56 while the U.S. Dollar Index is up one-tenth of a point at 96.80…

A key technical level to watch in Gold is $1,131 which is bullion’s 40-day moving average (SMA)…it has been trading below the 40-day for nearly 2 months…a decline this quarter in Gold (it ended June in the $1,160’s) would be the 5th straight loss and the longest quarterly slump since 1999…however, the “smart money” commercial traders have been signaling a rally in bullion since it plunged to the $1,070 level last month, and Gold now has seasonal factors in its favor…traditionally, the late August to early October period has been strong due in part to a pick-up in Asian demand, particularly from India…the monsoon season there has been good which will help drive Gold sales…

Markets will be focused this week on any new developments out of China as well as Wednesday’s Fed minutes from the July 28–29 meeting, after which there was no news conference…just how relevant the Fed minutes will be, however, is a major question, since that Fed meeting preceded China’s 1st currency devaluation in 20 years last week…a lot has changed in the past 2 weeks and a Fed rate hike actually looks unlikely in our view until at least early next year…

Chinese authorities are resorting to increasingly desperate measures as they tackle deflationary pressures, weakening exports, and a slowing economy in general…domestic and international politics undoubtedly played a role as well in last week’s decision to devalue the yuan…in trade-weighted terms, against a whole basket of major trading partners’ currencies, not just the greenback, the renminbi had soared to record highs, making Chinese goods and services uncompetitively priced to world customers…

Oil Update

The U.S. Oil-rig count increased by 2 in the latest week to 672, as reported by Baker Hughes Inc., marking the 4th consecutive week of increases…there’s always a lag between price change and drilling activity, so the jump in rig counts while WTIC prices continue to fall is due to the strength in Crude prices 2 months ago…Oil bulls did receive some good news last week when the U.S. Commerce Department quietly informed members of Congress that it intends to allow Oil companies to sell U.S. Crude to Mexico, in a further weakening of the country’s 4-decade ban on Crude Oil exports…

Commodity Performance Chart

Below is a chart that demonstrates Gold’s strength as a currency…over the past 20 months, since mid-December 2013, and despite a record run by the greenback, the yellow metal is down just 10% in U.S. dollar terms…this compares to a 25% slide in the price of Silver, a whopping 55% decline in WTIC, and a 28% drop in the CRB Index (Thomson Reuters/Jeffries which comprises 19 commodities)…

Gold is the most enduring and valuable currency of all time…it doesn’t default, threaten to default, change governments, debase, or stimulate…Gold conducts no monetary policy…Gold simply “is”…it stands at the center of fiat currency experiments, all of which have failed in the past to dethrone Gold as the world’s most valuable and lasting currency…

Today’s Equity Markets

Asia

China’s Shanghai Composite started the week on a positive note, adding 29 points to close at 3994…Japan’s Nikkei average climbed 100 points to finish at 20620…

Japan’s economy contracted in the 2nd quarter, though slightly less than expected, as overseas demand for Japanese goods slumped and households spent less, raising the possibility the government will act to bolster an anemic recovery…Japan’s GDP shrank 1.6% on an annualized basis in the April-June quarter, according to data released today by the Cabinet Office…that compared with a 1.9% contraction forecast by economists surveyed by The Wall Street Journal…

Europe

European markets were mixed today…

North America

The Dow fell as much as 136 points in early trading this morning before reversing after the release of fresh data that showed the National Association of Home Builders index rising to its highest level since November 2005…as of 9:00 am Pacific, the Dow is now up 28 points…

Earlier this morning it was reported that manufacturing activity in New York state plunged to its weakest level in August since 2009 due to steep drops in new orders and shipments, although optimism on future business improved, according to a New York Federal Reserve survey…the New York Fed’s Empire State general business conditions index tumbled from 3.86 in July to -14.92 in August, its lowest since April 2009…economists polled by Reuters had expected the index to rise to 5.00 this month…a reading above zero indicates expansion…

In Toronto, the TSX is down 60 points as of 9:30 am Pacific with the Gold Index is showing strength…it’s up 4 points to 134…the Venture has fallen 2 points to 571…

Venture 8-Month Daily Chart

The Venture will start to reverse higher once it can overcome its declining short-term moving averages (10 and 20-day) that continue to put pressure on the Index…as you can see in this 8-month daily chart, the Venture has not traded above its EMA(20) in almost 3 months – that’s a long stretch…the breakdown from the uptrend line in late June sparked a significant sell-off that could prove to be the Venture’s “capitulation moment” – time will tell…extreme oversold conditions appear to have peaked in late July, and the sellers are running out of energy given some of the technical indicators…buyers just need some reasons for a sense of urgency to jump into this market and take it into recovery mode…

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

Equitas Resources (EQT, TSX-V) has several factors in its favor at the moment including momentum and anticipation…given that so many juniors appear to be taking the summer off, this is 1 company that’s getting rewarded for its efforts as it prepares for a 4,000-m drill program starting soon at its Garland Nickel Project 20 miles southeast of the Voisey’s Bay mine in Labrador…

People make the difference, and hard-working President Kyler Hardy has helped assemble a highly qualified team with expertise in all facets of the business, so we believe this is a group that investors can have trust and confidence in…Everett Makela, VP-Exploration, brings over 30 years of exploration experience to Equitas which includes important roles with Inco and Vale (he retired from Vale as Principal Geologist, North America, in 2012)…Makela understands the Voisey’s Bay deposit and the area exceptionally well…he excels at target generation, design and implementation of exploration programs, and the creation of joint venture and alliance opportunities…interpretation of geophysical data is being handled by a trusted Makela associate, Alan King, who’s a recognized expert in electromagnetic exploration methods who previously served as the chief geophysicist for Vale’s global exploration operations…

In late June, Equitas added mining analyst and industry economist Raymond Goldie to its board of directors…Goldie is the author of Inco Comes to Labrador, a book on Inco’s acquisition, progression and development of the Voisey’s Bay deposit…he frequently appears on national television and as a keynote speaker at mining conferences…

Hardy Interview – Part 2

What makes Equitas different from most other companies on the Venture, many of whom have lost the trust of investors?…that was the question Jon threw at Hardy – click on the arrow to listen…

Importantly, Equitas has designed its camp to position itself to drill throughout the winter in the event of a discovery out of the approximately 14 holes that are planned to be drilled to depths between 250 and 350 meters…

Click on the arrow to listen to Hardy’s comments regarding the flexibility of the camp set-up…

Technically, Equitas continues to show strong up momentum as it challenges Fib. resistance at 15 cents…EQT is off half a penny at 13.5 cents as of 9:00 am Pacific…

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

Everything including the kitchen sink was thrown at Garibaldi Resources (GGI, TSX-V) since the start of the 2nd quarter, including indiscriminate fund selling and flow-through pressure (totaling more than 12 million shares), chaotic behavior from a First Nation leader, and the 2nd-worst July ever for the Venture…

With all of that now out of the way, the possibility of a strong recovery out of extreme oversold conditions clearly exists which is why GGI responded so vigorously on positive news Friday out of both Mexico and the Sheslay district…Garibaldi has the advantage of news flow from 2 separate jurisdictions, a factor that proved pivotal for the company in 2014…

Technically, GGI formed a bullish engulfing pattern Friday on record volume of 3.2 million shares (all Canadian exchanges)…John’s 2-year weekly chart shows a peak in the bearish trend occurred at exceptional support at 4.5 cents…keep in mind, GGI soared 600% in 12 months from the late June 2013 low of 4.5 cents to last year’s early summer multi-year high of 32 cents…past performance doesn’t guarantee future results, but history quite often repeats itself in these volatile speculative markets…

GGI is unchanged at 6 cents as of 9:00 am Pacific…

Pilot Gold Inc. (PLG, TSX) Update

Pilot Gold (PLG, TSX) is active on 2 significant projects – Kinsley Mountain in Nevada and TV Tower in Turkey – and reported working capital of $16 million (CDN) as of June 30…

PLG has plunged from a high of nearly $1.30 in January to a recent low of 33 cents…extreme oversold conditions emerged at the end of July/early August, setting up a good chance for a strong rally before the summer is over…very strong sell pressure is now in decline…

PLG is up half a penny at 40.5 cents as of 9:00 am Pacific…

Silver Short-Term Chart

Silver has recorded 3 straight weekly gains, putting it above a downtrend line for the 1st time since late June…what will be important now is if the metal can hold potential new support at the $15 level which is also defined by the downtrend line…interestingly, through the recent turmoil, Silver was able to hold slightly above its low late last year…

RSI(14) has been showing increasing up momentum and should find support at the 50% level…a major challenge for Silver over the coming weeks will be the band of Fib. resistance it needs to work through between $15.30 and $16.60…

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 so far 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 started modestly in early 2013, could continue for a while yet…this should be viewed in a larger context as a bullish contrarian indicator given historical patterns…it doesn’t necessarily mean, however, that Silver has found a bottom just yet…

Note:  John and Jon both hold share positions in GGI.  John also holds a share position in EQT.

BMR Exclusive Including Interview Excerpt With AME BC

Another dramatic moment Friday morning in British Columbia’s premier “greenfield” project as Garibaldi Resources (GGI, TSX-V) suddenly announced the mobilization of exploration crews to the 270 sq. km Grizzly Property, clearing a 5-week “logjam” in the district.

Tensions in the region escalated after a blockade led by Tahltan Central Government President Chad Day temporarily shut down Doubleview Capital’s (DBV, TSX-V) most recent drill program at the adjoining Hat Project during a critical 1 km step-out from the Lisle Discovery Zone.

While no one denies the Tahltan have legitimate interests in the Sheslay district, the blockade was nonetheless blatantly offside with the 2011 Atlin-Taku Land Use Plan signed between another First Nation, the Taku River Tlingits, and the provincial government, a critically important deal given how recent it is and how it was “co-managed” by a First Nation.  The process involved multiple stakeholders, representing a broad diversity of interests, in very detailed discussions and negotiations that spanned several years.  The Tahltan elected not to participate in the process.

Land Use Plan Implications

The Land Use Plan serves as not only a strong foundation for Garibaldi’s attempts to pull off a “hat trick” for the district with a 3rd discovery along the emerging world class Sheslay mineralized corridor – we’ll have more on GGI‘s potential strategy at the Grizzly in the coming days –  but it’s a “blueprint” (a resource management plan) for the district that gives the advanced Hat Project (24 drill holes completed to date) a huge boost in the eyes of industry leaders we’ve spoken to recently, who have just become aware of the details of the 2011 agreement.  And it puts Doubleview in a strong position to get back to the property imminently to complete HAT-25 which was stopped in a zone of Gold-Copper porphyry mineralization at a depth of 270 m, and carry on with additional drilling.

Realistically, given the importance of the Land Use Plan, not to mention a multi-year exploration and drilling permit for the Hat, the odds of a “major” stepping up to the plate at this discovery have probably increased significantly, which may help explain Doubleview’s silence at the moment as well as comments from Garibaldi’s Steve Regoci in Friday’s news regarding “productive discussions with all stakeholders (our emphasis) concerning this emerging world class district.”  Regoci appeared to be sending a message, and not just on behalf of Garibaldi. 

The entire Hat Project falls within an “Area Specific Resource Management Zone” which speaks to the “certainty” part of Premier Christy Clark’s comments with regard to the Land Use Plan.

“Our agreement,” the Premier stated, “will protect areas that are culturally and ecologically significant.  It will also promote our economy, job creation, economic development, and bring certainty for economic development for the future.” 

AME BC  Interview Excerpt – Part 2

The prolific Sheslay district, spanning hundreds of square kilometers, is very much on the agenda of the Mineral Association for British Columbia (AME BC) as we initially reported in an article August 2.

Click on the arrow below to listen to the 2nd part of an excerpt from our interview with Glen Wonders, AME BC’s  Vice-President, Technical & Government Affairs.  AME BC, funded entirely by a strong membership, has roots in the province that go back for more than a century, and it was represented at the table in the discussions that led to the historic 2011 Land Use Plan.

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

TSX Venture Exchange and Gold

It was an eventful week in the markets with China again taking center stage as it devalued its currency (debate rages about whether or not this was a “sneak attack” in the currency wars) and also mysteriously announced the 2nd update to its Gold reserves in a month after staying silent on that matter for nearly 6 years (read our comments with regard to China in the Gold section below).  The greenback showed continued weakness, and Gold pushed above resistance at $1,100 as the yellow metal posted its best week in 2 months.

Combine the above with a Sheslay surprise – Garibaldi Resources (GGI, TSX-V) sending in the “Grizzly Gang” which was a powerful message (greeted with an all-time daily volume record for the stock Friday) – and indeed it was a particularly interesting week given that we’re still in the dog days of summer.

On low volume, the Venture bounced between a high of 583 and a low of 570, closing down 4 points for the week at 573.  Declining short-term moving averages continue to restrain the Index as minor relief pulses since June have been unable to push above the 10 or 20-day SMA’s.  The 1st sign of a turnaround in this market will come when the Venture does climb above those resistance levels, and on increased volume.

While the Index was finding support around 580 which gave way at the end of the week (on decreased volume, however), there are reasons for encouragement looking at the broader picture based on 2 important charts.

Three specific points regarding this 1st chart (Venture 4-month daily):

1.  RSI(14) has emerged out of extreme oversold conditions and is now trending higher – a move through the 30% level would be significant

2.  Sell pressure has been declining consistently since late last month – important

3.  The -DI indicator has likely peaked

Overall, the Index is obviously still mired in unchartered territory.  RSI levels became very extreme at the end of July – similar to the situation last December – and they have slowly started to recover while the Venture has continued to edge slightly lower.  This divergence between RSI and price is actually a good sign as it’s often seen while an important low is being formed.  John’s estimated Fib. support levels range from 547 to 580, and within that band is likely where a bottom – at least a temporary one – will be produced.

The smart money in our view is on the buy side with the highest quality juniors, while there are also excellent opportunities among select Gold producers on the senior exchanges.

Venture 4-Month Daily Chart

Hope In The Form Of The Venture’s 39-Week “Cycle”

We do see a good possibility of a significant turnaround commencing on the Venture within the next several weeks, simply based on its 39-week “cycle”.  Interestingly, this also fits within the timeline of the Fed’s next meeting in mid-September – a crucial one, indeed (we doubt the central bank has the courage to pull the trigger on its 1st rate hike in 9 years given the global growth problem and deflationary concerns which are even greater now given the Chinese currency devaluation).

Strangely enough, over the last 15 years, there has been a consistent pattern of trend reversals (in price and RSI) around the end of each 39-week period on the Venture – you can see it quite clearly on the fresh version below, through Friday, which is important to look at and understand.

What this chart suggests is that some sort of turnaround will likely occur around the end of August into the beginning of September – that’s when the current 39-week period expires.

The vertical blue lines separate each 39-week period.

Commodity Pressure On The Venture

While a Gold rally has ensued, as expected, Crude and Copper (and a host of other commodities) remain vulnerable with the CRB Index now at a post-Crash low and critical support.

Global deflationary pressures, driven in part by the collapse in Oil prices as well as the China growth “engine” slowing down significantly, could put even more pressure on the commodity sector before the summer is over.  If Crude ultimately declines into the mid-$30‘s, which seems very possible given fundamental and technical considerations, the CRB would likely test support at 180, almost 10% below where it closed Friday.  Such a development would obviously impact the Venture, though keep in mind that the Venture reversed a few months prior to the CRB following the 2008 Crash.

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 recent weakness with the drop below $1,100, 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

Our contention for the last several months is that the Dollar Index put in its high for the year during March-April based on what has proven to be, so far at least, a very reliable 9-month daily chart.  Fundamentally, a runaway dollar would not be healthy for the U.S. or global economies, so one can be certain the Fed is keeping a close eye on movements in the greenback (the Chinese appear to be, as well).

What occurred this past week was what we were expecting – a breakdown in the RSI(14) uptrend line from the rebound that started in mid-May.  The 100-day SMA (not shown on the chart below) has also reversed to the downside, a bearish sign.

We now expect the RSI(14) to continue to trend lower, following the downtrend line to the 30% support level (it’s now at 45%, a week ago it was 55%), and this would give a further boost to Gold.  Nearest Fib. support ranges from approximately 92.5 to 95.5.  Note that the price uptrend line since mid-May now intersects with the Fib. 61.8% level (95.43), so that’s an important area that the bulls won’t want to see fail.

Ultimately, what we perceive as a growing possibility (though not a certainty) over the remainder of the year for the U.S. Dollar Index is a test of base support at 88.  That’s definitely not a mainstream view but the chart supports that kind of consolidation potential following the record advance that started during the summer of last year.

Gold

As we stated a week ago, it’s never wise to go against the commercial traders who recently dramatically reduced their net short positions to extreme levels.  Such action was a valuable clue that bullion was ready for a rally, not a near-term collapse down to $1,000 as many pundits were predicting.

What’s China Up To?

China’s move to devalue its currency was Gold-bullish, but what also helped the metal this past week was the fact that China made a disclosure for the 2nd time in a month regarding its Gold reserves.  The central bank said it increased its reserves by 1.1% in July to 53.93 million ounces.  That pace of purchases works out to 240 tons per year, well ahead of the pace of 100 tons per year since 2009 as reported last month.

One view is that this could be a new trend toward more “transparency” on China’s part as it pushes for the yuan’s inclusion in the IMF’s currency basket.  Or, alternatively, did China actually lie about the amount of Gold it accumulated between late 2009 and the end of June?  In other words, did they actually gobble up much more than they announced, and will they now make it seem like they’re ramping up their purchases?  This is a communist regime that we simply have little trust in.  Don’t forget, they recently manipulated the Shanghai Composite to 5000, and now they’re manipulating it again to prevent a further breakdown.  The fact of the matter is, they are master manipulators.  Will they produce an even higher Gold accumulation figure for August?

What do you think?  Send us your comments.  What’s clear is that the Chinese have been buying bullion, and lots of it, to back up their currency.

Gold has been consolidating within a downsloping flag for more than 2 years.  Consistently, it has tested the top of that flag (resistance) and the bottom of it (support).  Recently, Gold again touched the bottom of that flag while RSI(14) also landed at previous support going back to the end of 2014.  Just a couple of reasons why commercial traders decided to change their bets while the bearish camp became hugely overcrowded.

For the week, Gold jumped $20 an ounce to finish at $1,014.

Gold 2.5-Year Weekly Chart

Silver soared 43 cents or 3% for its 3rd straight weekly advance, closing at $15.24.  Crude Oil, under continued pressure, fell $1.57 a barrel to $42.18.  Copper shed a penny to $2.33 while the U.S. Dollar Index plunged a full point to 96.57.

Gold has traded between $1,112 and $1,222 so far today…as of 10:00 am Pacific, bullion is off $2 an ounce at $1,113…Silver has also reversed lower, falling 17 cents to $15.25…Copper is flat at $2.33…Crude Oil is 24 cents higher at $42.47 while the U.S. Dollar Index is up slightly at 96.41…

Yet another surprise from China this morning after what has already been a tumultuous week in that country with a currency devaluation, amid other developments…the world’s largest producer and consumer of bullion said that it now owns about 1,677.4 metric tons of the metal…what’s surprising is that this is the 2nd update in a month after China had been silent on the size of its hoard for nearly 6 years…most analysts expected the next report would not come until about 2020…instead, it happened in just 29 days…will they start reporting now on a monthly basis?…

China increased its Gold reserves by 1.1% in July, or about 19 tons, according to data from the central bank today…on July 17, the central bank said it owned 1,658 tons, roughly 600 tons more than what was reported in 2009…so the central bank accumulated 600 tons in 6 years (an average of 8 tons per month) and then 19 tons just last month?…is it doubling its rate of Gold buying?…

34-Year Gold Monthly Chart

Gold declined 44% from its summer 2011 all-time high to the recent low around $1,070…in historical terms, that’s an entirely normal correction – as recently as 2008, bullion tumbled 33% over a very short period…from 1996 to 1999, the drop was approximately 40%…

While no one can say for certain that Gold has officially hit bottom just yet – a test of the $1,000 level can’t be ruled out – decreasing global mine supply (it was down 5% in Q2 according to the World Gold Council), currency instability and a host of other factors could yet produce a powerful “Wave 5” move over the next 2–3 years as John has outlined in the chart below…

TSX Gold Index Updated Chart

A significant rally is clearly underway in the TSX Gold Index, despite some weakness for a 2nd straight day, as shown in this 5-year weekly chart…we can state that based on the increasing up momentum in the RSI(14), out of very oversold conditions similar to last fall and the spring of 2013, plus the position of the Slow Stochastics after it landed at previous support…the +DI indicator is also increasing rapidly which could lead to a bullish +DI/-DI cross in the near term…

Nearest key resistance is 135…the Gold Index is now down 2 points at 130, after climbing as high as 134, as of 10:00 am Pacific…

Copper Update 

Copper is so far holding critical support, but a fresh concern is that Chinese importers using bonded Copper stocks as collateral for short-term dollar loans face rising costs after the unexpected depreciation of the yuan earlier this week, potentially forcing smaller firms to give up the metal to banks for resale in the coming quarter…that is bad news for firms using Copper-backed financing to raise funds in China, still a common practice due to restrictions on bank credit and despite greater scrutiny by authorities after a major metals financing scam last year…

Some industry observers say the risk of Copper being dumped could hit future imports, piling more pressure on international markets already grappling with oversupply and slowing economic growth in China, the world’s top metals consumer…

Copper 20-Year Monthly Chart

Copper has touched the bottom of a downsloping flag as well as a long-term uptrend support line…the metal is resting at strong support and could either rally significantly from current levels or potentially break down…sell pressure remains strong…where Copper goes from here will depend on developments in China…

Today’s Equity Markets

Asia

Asian markets were relatively quiet overnight…China’s Shanghai Composite edged 11 points higher to close the week at 3965…

Europe

European markets were down slightly today…the euro zone’s modest economic recovery suffered a setback last quarter as France stagnated and Germany posted a tepid expansion, underscoring deep-rooted fragility in the region that could threaten the global recovery…

The figures, released this morning, came amid heightened concerns in financial markets about China’s economy, which has been an engine of growth for global activity over the past decade…they put greater pressure on the U.S. to generate output for both itself and its trading partners, and suggest that the ECB will keep its aggressive stimulus measures in place through at least next autumn as planned…

GDP growth in the euro zone slowed to 0.3% from 0.4% in the 1st quarter, the European Union’s statistical agency reported today, falling short of economists’ forecasts of a 0.4% gain…GDP grew 1.3% on an annualized basis, Eurostat said…

North America

The Dow is up 29 points as of 10:00 am Pacific…in Toronto, the TSX is 13 points higher while the Venture is off a point at 575…a late-day rally in the works, perhaps, to finish the week?…

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

Garibaldi Resources (GGI, TSX-V) is one of the Venture’s volume leaders and top gainers today after reporting encouraging news out of both Mexico and British Columbia…

The logjam appears to have cleared in the prolific Sheslay district where Doubleview Resources (DBV, TSX-V) and Garibaldi are the most active…GGI is sending in crews to the Grizzly over the next few days to commence an immediate surface exploration program to define final drill targets at the 270 sq. km project…they’ll be focusing their efforts on Grizzly Central and the newly-acquired Golden Bear claims adjoining the Grizzly southern boundary where a high-grade Gold showing (150+ g/t Au) was discovered during construction of the Golden Bear mine access road in the 1980‘s…that area was never systematically followed up…

Meanwhile, in Mexico, assays are pending from 7 drill holes at GGI‘s La Patilla Property where metallurgical testing has also returned an impressive Gold recovery rate of 95% from a flotation test from a sample of high-grade material…this suggests that the quartz vein mineralization in the La Patilla system is very “clean” and amenable to a flotation system used at a nearby processing center…

More on the Sheslay district by Monday…this morning’s news is clearly highly encouraging for both Garibaldi, Doubleview and other players in the area…keep in mind, Doubleview drill hole HAT-25 was in a zone of Gold-Copper porphyry mineralization at a depth of 275 m on a dramatic 1-km step-out when the controversial Tahltan blockade temporarily shut down the drilling last month…

GGI is up a penny at 6 cents on total volume (all exchanges) of 3 million shares as of 10:00 am Pacific, while DBV has gained a penny to 10.5 cents…

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

It has been an active week for Equitas Resources Corp. (EQT, TSX-V) in both the market and on the ground…the company is carrying out final ground exploration prior to commencing a 4,000-m drill program at its Garland Nickel Project near the Voisey Bay’s mine in Labrador, and by Monday we’ll have more from our recent interview with President Kyler Hardy…

Technically, EQT staged a confirmed breakout this week above previous stiff resistance at 10 cents…this 2-year weekly chart shows several promising patterns, and there’s little doubt in our view that this company will continue to draw a lot of attention over the immediate to near-term – leading up to and during the drilling process…

EQT is up half a penny at 11.5 cents as of 10:00 am Pacific…

Integra Gold Corp. (ICG, TSX-V) Update 

Integra Gold Corp. (ICG, TSX-V), which has been a strong market out-performer this year, has made significant progress with its high-grade Lamaque South Gold Project in Val-d’Or…the pace of activity is impressive…since the beginning of the year through mid-July, Integra had completed 50,000 m of diamond drilling in 113 holes with up to 8 drill rigs operating on several key targets…the company has expanded its 2015 drilling plans from 50,000 m to 75,000 m, and activity is expected to ramp up again next month…

ICG was able to hold critical base support (15 to 17 cents) late last year when markets were getting pulverized…it broke out into the mid-30‘s earlier this summer before the recent plunge in both Gold and the Venture took it down very close to the 21-cent Fib. support level…

A sustained recovery from the August 7 intra-day low of 22.5 cents appears to be underway…a band of resistance exists between 27 and 30 cents, so expect that to be tested given the bullish “W” that has formed in the RSI(14)…ICG also has a rising 200-day moving average (SMA) at 27 cents…

ICG is unchanged at 26.5 cents as of 10:00 am Pacific…

 

RoxGold Inc (ROG, TSX-V) Update

Roxgold (ROG, TSX-V) has been firming up recently given Gold’s rebound above $1,100 an ounce…the company is aiming to put its high-grade (>10 g/t) Yaramoko Gold Project in Burkina Faso, West Africa, into production by the middle of next year…check out the company’s latest update 10 days ago…

Roxgold’s 55 Zone was fully permitted for construction in January of this year…a positive Feasibility Study was released a year ago and envisions an underground mining operation with an initial life of mine of over 7 years, and production of 100,000 ounces per year…

Technically, Roxgold is challenging resistance in the mid-70’s…note that the 50-day SMA crossed above the 200-day in late May, while RSI(14) is now showing strong up momentum after briefly falling below its uptrend line last month when most Gold stocks took a beating…

ROG is up a penny at 73 cents as of 10:00 am Pacific…

Note:  John and Jon both hold share positions in GGI and DBV.  John also holds a share position in EQT.