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December 21, 2015

BMR Morning Market Musings…

Gold has traded between $1,066 and $1,081 so far today…as of 8:00 am Pacific, bullion is up $12 an ounce at $1,078 (resistance at $1,080)…Silver has jumped another 20 cents to $14.28…Copper has added 2 cents to $2.14…Crude Oil has dipped 34 cents a barrel to $34.39 while the U.S. Dollar Index has fallen one-quarter of a point to 98.46…

Base metals Nickel, Copper and Zinc have declined steeply in 2015, but last week Morgan Stanley chose them as their top picks for 2016…this comes as Chinese producers ramp down their output, while miners outside China have also started taking measures to reduce global supply…

A judge in Brazil’s state of Minas Gerais has frozen the Brazilian assets of mining giants BHP Billiton and Vale SA after determining their joint venture Samarco was unable to pay for damage caused by the bursting of a dam at its mine last month…in a decision issued late on Friday, the judge ruled that Vale and BHP could be held responsible for the disaster at the iron ore mine in the state of Minas Gerais, for which the government is demanding 20 billion reais ($5 billion U.S)…the companies are able to appeal…the dam burst, which turned into Brazil’s worst-ever environmental disaster, killed 16 people, left hundreds homeless and polluted a river 800 km long that flows across two states…

Crude Oil Update

The Oil markets continued their bear run today with Brent Oil, the global benchmark, hitting lows ($36) not seen since July 2004 as an expanding global surplus due to high-paced production sparked fears prices will fall further…its U.S. counterpart, West Texas Intermediate, is also under pressure today…in yet another seismic shift for the Oil industry, President Obama on Friday signed a spending law (that in itself is a story for another day) that also removed the 40-year ban on U.S. Oil exports…with domestic production up and gas prices down, political opponents of the ban seized an opportunity in Congress to push through the measure…the end of the ban, however, has sparked fresh concerns about a rising global surplus…

The price of Crude is set for its largest monthly percentage decline in 7 years…

In today’s Morning Musings…

1.  The long dollar/short Gold trade remains very crowded (good news for Gold bulls)…

2.  Venture long-term chart should give comfort, not despair, to investors…

3.  Fission Uranium (FCU, TSX-V) cuts a deal with a Chinese company for the PLS Property…

Plus more…to view the rest of today’s Morning Musings, login with your username and password, or click here to gain full access to this and other exclusive BMR content and features…

December 20, 2015

Sunday Sizzler Report (Pro Subscribers)

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December 19, 2015

The Week In Review And A Look Ahead

TSX Venture Exchange and Gold

The Venture responded pretty much on cue last week, likely landing at its December low on Tuesday at 494 – a day ahead of last year’s bottom.  On Wednesday, of course, the Federal Reserve hiked its Fed-funds rate for the first time in nearly a decade.  This removes a major “overhang” from commodities as speculation regarding the start of Fed tightening put added pressure on this battered sector over the last year-and-a-half, with the U.S. Dollar simultaneously enjoying a powerful advance.  What remains to be seen is whether the Fed becomes the first central bank since the 2008 financial crisis to be able to maintain higher interest rates – no less than 7 other central banks have had to backpedal on monetary policy due to economic weakness.  Meanwhile, the Fed has consistently misjudged the inflation picture as well as the extent and seriousness of the Oil price decline.  So we’re in for a fascinating 2016, a year in which Gold could easily surprise to the upside even if that means testing $1,000 support first.

Venture 4-Month Daily Chart

The Venture finished the week above the psychologically important 500 level with a “Morning Doji Star” reversal pattern, so there’s little doubt in our view that the Index is in the early stages of a rally – timing of which is consistent with 14 years of trading history that shows average gains in December, January and February of 4.5%, 4.3% and 4.4%, respectively.  We’re now into traditionally what has been the best 3-month period on the calendar.  Sector leaders during this time will likely include Gold and Lithium plays (Crude Oil remains under pressure, and the non-resource companies who have done well in recent months should continue to outperform).  Selectivity as usual will be key – we’re not anticipating a broad-based surge.  The “heavy lifting” will be carried out by the top 10%, the 200 or so companies who are well-positioned at the moment to “make things happen”.

For the week, the Venture lost 1 point to close at 501.  It held up well at the end of the week despite a 3.5% drop in the Dow Thursday-Friday and Gold’s biggest single-day decline in 5 months on Thursday.  What has been very different about this quarter for the Venture, compared to Q4 last year, is how the Index has retreated so little (4.6%) vs. commodities in general, suggesting U.S. dollar strength may have peaked for the time being.

Technically, the Venture’s immediate challenge is to get back above resistance at its EMA(8) and EMA(20) – currently 501 and 509, respectively – and remain above those moving averages long enough in order to allow them to reverse to the upside (this is what started the October rally which, notably, collapsed October 29 when the Fed signaled the likelihood of a rate hike at its next meeting).

Previous support at 515 is now resistance, so that’s certainly a level the Venture must climb above by month-end in order to build momentum and take a run toward 560.

Venture 4-Month Dec 19

The Venture “December-January” Effect

80% of the time over the last 15 years, the Venture’s December low has occurred by the 18th of the month.  And in every case, this was followed by a significant reversal to the upside.  The Venture would be aided significantly by a strong Gold performance in January and if commodities in general can stabilize after a difficult couple of months and a challenging 2015 overall.

Gold & Stocks During Rate Hike Cycles

Historically, it’s a myth that Gold performs poorly during Fed rate hike cycles, if indeed that’s what we’re in (barring a sudden Fed retreat in 2016).  During the last Fed rate hike cycle, for example, between June 2004 and June 2006, the Fed-funds rate more than quintupled to 5.25% through 17 consecutive hikes totaling 425 basis points.  Gold powered 49.6% higher over that exact span.  There are numerous other example of Gold moving higher concurrently with interest rates, though it seems the ill-informed mainstream media, particularly in the U.S., have convinced much of the general public that Gold is simply a bad investment in an environment of rising interest rates.

As far as the broader equity markets are concerned, stocks have performed very well in the first 2 years following the start of rate hikes as you can see in this chart below: 

UBS - Equities & Fed Hike Cycles

U.S. Dollar Index Updated Chart

It may take another failed breakout attempt above 100 to take the wind out of the sails of the U.S. Dollar Index which showed signs of weakness prior to the Fed meeting but pushed higher to close the week at 98.72.  Speculation has helped keep the greenback buoyant over the last year-and-a-half.  But with an interest rate hike now out of the way, the Dollar Index is susceptible to a strong correction if some weaker-than-expected economic data start rolling in.  A breakdown below 97 or a breakout above the March high of 100.71 are two possibilities to watch for.  It’s hard to imagine how the U.S. economy would benefit from the latter scenario – resistance will be powerful between 100 and 101.

Dollar Index Dec 19

Gold

Gold bounced around like a ship in wild seas last week, retesting its December 3 low before finishing strong on Friday to close at $1,066.  This 6-month chart shows a favorable RSI(14) pattern since last month (it’s possible that a bullish “W” is forming) while sell pressure has declined sharply since mid-November.  For now, bullion is in a range between $1,045 and $1,080.  It will take the path of least resistance which, we believe, will be to the upside based on a host of factors including a bullish COT structure (the smart-money commercial traders are signaling that a rally is in the works).

Gold 6-Month Dec 19

Gold 2.5-Year Weekly Chart

All signs (technical, sentiment, short positions, etc.) have been pointing toward a turnaround in Gold and Gold stocks, which is why we encouraged subscribers last month to go long on the double-leveraged HGU around the $3 level ($15 post-consolidation).

The most reliable Gold chart over the last couple of years has been the 2.5-year weekly.  Facts are facts, and each time Gold has hit the bottom of its downsloping channel since late 2013, a major rally has taken the metal back up to (or near) the top of the channel within about 3 months.  Those moves have averaged about 15%.

We believe two short-term scenarios are possible – Gold challenges chart resistance at $1,150, but the rally stops there.  Or, bullion surges to the top of the flag (just above $1,200).  It will then either break out massively from that point, for some reason unknown at this time (a “Black Sawn” event), or it will tumble like it has before after hitting the top of the channel.

Gold 2.5-Yr Weekly Dec 19

Silver gained 19 cents last week to close at $14.08.  Copper fell a penny to $2.12.  Crude Oil, after plunging nearly $5 a barrel the week before, lost another $1 a barrel as WTI finished at $34.55, while the U.S. Dollar Index gained just over a full point to 98.62.

The “Big Picture” View Of Gold

As Frank Holmes so effectively illustrates at www.usfunds.com, the long-term bull market in Gold has been driven by both the Fear Trade and the Love Trade.  The transfer of wealth from west to east, and the accumulation of wealth particularly in China and India, has had a huge impact on bullion and will continue to support prices.   Despite Gold’s largest annual drop in 3 decades in 2013, and current weakness, the fundamental long-term case for the metal remains solidly intact based on the following factors (not necessarily in order of importance):

  • Growing geopolitical tensions, fueled in part by the ISIS and al Qaeda, and a highly dangerous and expansionist Russia under Vladimir Putin, have put world security in the most precarious state since World War II;
  • Weak leadership in the United States and Europe is emboldening enemies of the West;
  • Currency instability and an overall lack of confidence in fiat currencies;
  • Historically low interest rates/highly accommodating central banks around the world;
  • Continued solid accumulation of Gold by China which is “backing up” its currency with bullion;
  • Massive government debt from the United States to Europe – a “day of reckoning” will come;
  • Continued net buying of Gold by central banks around the world;
  • Mine closings, a sharp reduction in exploration and a lack of major new discoveries – these factors should contribute to a noticeable tightening of supply over the next couple of years.

December 18, 2015

BMR Morning Market Musings…

Gold has traded between $1,053 and $1,072 so far today…as of 8:50 am Pacific, bullion is up $15 an ounce at $1,066…Silver is 42 cents higher at $14.11…Copper has jumped a nickel to $2.11…Crude Oil is up 57 cents at $35.52 while the U.S. Dollar Index is down more than one-tenth of a point at 98.80…

Bullion suffered its biggest single-day drop since July 20 yesterday as it came within a few dollars of a near 6-year low reached on December 3…holdings in exchange-traded products shrank the most in 2 weeks yesterday to the lowest level in more than 6 years…since 2013, around 38 million ounces of Gold ETF holdings have been liquidated globally, bringing total holdings to around 50 million ounces from the all-time high, according to UBS data…

The Gold ETF market saw steady growth for a decade, reaching an all-time high of 88 million ounces in 2012…the first annual net outflow only occurred in 2013 and selling has continued since, albeit at a much slower pace…the bulk of the buying seemed to have occurred in two waves according to UBS…the first wave was when Gold was trading between $800 and $1,000 – about 43 million ounces gross buying occurred around those levels…the second wave came when Gold was trading above $1,200, where an additional 59 million ounces of gross Gold ETF purchases were made (selling pressure has come from that second wave)…

Central Bank Moves

While the Bank of Mexico raised its policy rate yesterday, in a move that is expected to help protect the value of the peso, the European Central Bank, the Bank of Japan, and the People’s Bank of China are pursuing easing policies to bolster flagging domestic demand…Bahrain, Kuwait, Saudi Arabia and the United Arab Emirates each raised key interest rates yesterday to keep pace with the Fed, while Taiwan cut its benchmark rate to combat a recession…the Bank of Canada, meanwhile, is expected to keep rates on hold for quite some time, no matter what the Fed does – hence the loonie fell to a more than 11-year low yesterday, breaking support at 72.50…the loonie is down about 17% this year – 2008 was the only year that was worse at 18.6%…

Why Pull Our CF-18’s? 

The Canadian fighter jets that Prime Minister Justin Trudeau wants to pull out of Iraq played a key role in helping kill scores of ISIS terrorists in a battle around Mosul late Wednesday, it has been reported…ISIS initially mounted a major offensive, using car bombs, suicide bombers, small arms and even bulldozers, striking multiple sites in northern Iraq…however, Kurdish Peshmerga forces backed by U.S., Canadian, British and French support were able to rout these thugs in a 17-hour counter-attack that left more than 200 ISIS terrorists dead, according to U.S. defense officials…Trudeau has yet to give a valid reason why he wants Canada’s CF-18’s removed from this war, especially following the recent ISIS attacks in Paris and the terrorist shootings in San Bernardino…

Crude Oil Update

Goldman Sachs sees further weakness for Oil due to the worsening of already weak fundamentals after OPEC held back from cutting production at its recent meeting…the investment bank is standing by its prediction of $20 a barrel bottom…Goldman says the rebalancing is “far from achieved” as U.S. rig count and exploration and production guidance are “too high” for the required supply decline…OPEC is also likely to pump aggressively toward the high-end of Goldman’s 32-million-barrel a day forecast as Iran resumes production after U.S. sanctions are lifted over the next few months.  “Despite the fiscal challenges that low Oil prices create now, the alternative (for OPEC) of cutting production reduces long-term revenues instead,” said the Goldman Sachs analysts…

Oil Drilling

The global supply glut that has brought prices close to 11-year lows this week means Brent Crude will post losses for a 3rd consecutive year, the first time that has happened since exchange-based Oil trading started in the 1980’s…WTI futures are set for a 2nd straight yearly loss, the first time that will have happened for the U.S. Oil pricing benchmark since 1998…

IEA Executive Director Fatih Birol said today, “The current low oil price makes me worried because it means lower investments in new Oil projects.  This year, Oil investments declined more than 20% and more importantly we expect it will decline next year as well.  We have never seen in the last 30 years Oil investments decline 2 years in a row in the world.”

In today’s Morning Musings…

1.   A profitable Venture company benefiting significantly from a low Canadian dollar…

2.  Drill result of the day – 1 m @ 572 g/t Au…

3.  Updated U.S. Dollar Index chart – what will it take to put the bulls on the defensive?

Plus more…to view the rest of today’s Morning Musings, login with your username and password, or click here to gain full access to this and other exclusive BMR content and features…

December 17, 2015

BMR Morning Market Musings…

Gold has traded between $1,047 and $1,070 so far today…as of 11:05 am Pacific, bullion is down $20 an ounce at $1,052…Silver has tumbled 43 cents to $13.74…Copper is off 3 cents at $2.06…Crude Oil is 69 cents lower at $34.83 while the U.S. Dollar Index is up again, more than half a point at 99.23…the Venture is holding steady, bucking the general downward trend today, another sign that its traditional December reversal is drawing near…

The Federal Reserve finally got a rate hike out of the way yesterday, the first in nearly a decade, but the Fed will now attempt to do what no central bank has been able to accomplish over the past decade – successfully keep interest rates above zero once they were cut that low, with recent examples that hiked and then returned to zero including the Bank of Japan and the ECB…the Bank of Canada, which raised rates to as high as 1% following the 2009 recession as the Canadian economy rebounded, reversed that hike with two cuts this year and recently discussed the possibility of negative interest rates…

When the Fed moves next will depend importantly on how inflation evolves…the Fed’s preferred measure of inflation has run below its 2% objective for more than 3 years…the central bank focused extra attention on the inflation outlook in its statement yesterday, saying it would “carefully monitor” actual and expected progress toward the goal…this point implied the Fed will be reluctant to raise rates again unless it sees inflation actually moving up…for now, officials said they were “reasonably confident” inflation would rise – but the Fed has so far underestimated deflationary pressures, including the depth of the Crude Oil problem…they’re hoping that tightness in the labor market will exert upward pressure on wages, thereby giving overall inflation a kick, but there are counter-forces at work on the inflation front including the effects of a strong U.S. dollar which has also hurt the U.S. manufacturing sector…

In today’s Morning Musings…

1.  World Gold Council sees more Gold-supportive measures on the way in Asian markets…

2.  Updated Venture chart as the Index holds up well today despite broad pressures…

3.  Gold Standard Ventures (GSV-V) challenges resistance as it hits a new 52-week high on strong volume…

4.  Garibaldi Resources’ (GGI, TSX-V) potentially dramatic high-grade “double play”…

5.  FerroAtlántica cancels major Quebec project…

Plus more…to view the rest of today’s Morning Musings, login with your username and password, or click here to gain full access to this and other exclusive BMR content and features…

Comments (18)

December 16, 2015

BMR Morning Market Musings…

Gold has traded between $1,062 and $1,078 as the FOMC prepares to announce a likely 1st hike in the Fed funds rate in nearly a decade…as of 9:45 am Pacific, bullion is up $14 an ounce at $1,075…Silver has surged 43 cents to $14.19…Copper has added 2 pennies to $2.09…Crude Oil has fallen more than $1.50 a barrel to $35.80 on bearish new supply data, while the U.S. Dollar Index has gained one-tenth of a point to 98.21 (98 is resistance, we’ll see if that’s a level the index can hold following the Fed’s policy decision)…

Investors continue to dump holdings of Gold-backed ETPs…assets fell to 1,464.24 tons on Monday, the lowest since February 2009, according to data compiled by Bloomberg…

Since 2013, around 38 million ounces of Gold ETF holdings have been sold, but over 50 million remain, UBS points out…

“We do not anticipate a repeat of 2013 ETF liquidations,” UBS says. “That Gold ETFs are back to 2008–2009 levels suggests a lot of adjustment has already taken place. That holdings are more geographically diversified also suggests that ETFs outside the U.S. are likely to be more resilient amid monetary policy easing elsewhere and broader macro risks. While some more fine-tuning may still be in store, we expect this to be limited.”

China Growth Update

China’s annual economic growth is likely to slow to 6.8% next year from an expected 6.9% this year, the People’s Bank of China said in a working paper published today…the world’s 2nd-largest economy still faces downward pressure and the impact of fiscal and monetary policies that were rolled out this year will be evident by the first half of 2016, the central stated in its report:  “Although downward pressures on growth will persist for a while due to overcapacity, profit deceleration, and rising non-performing loans, we expect that the number of positive factors will gradually increase in 2016.”

Meanwhile, the Chinese Academy of Social Sciences (CASS), a top government think tank, predicted in its “blue book” the economy could expand at a slower pace in 2016, between 6.6% and 6.8%, due to weak external demand and cooling domestic investment…the think tank recommended that China should widen its fiscal deficit to 2.12 trillion yuan ($327.6 billion) next year from a planned 1.62 trillion yuan in 2015, keeping the deficit to GDP ratio within the warning level of 3%…

Crude Oil Update

The OPEC cartel will be forced to call an emergency meeting within weeks to stabilize the market if Crude prices fail to rebound after crashing below $35 a barrel earlier this week, two member states have warned…Emmanuel Kachikwu, Nigeria’s Oil minister and OPEC President until last week, said the cartel was still hoping the Oil market would recover by February as low prices squeeze out excess production from U.S. shale, Russia and the North Sea (not likely in our view)…nerves among some OPEC members are beginning to fray…

“If it doesn’t, then obviously we’re in for a very urgent meeting,” he said (so what, the Saudis and their Gulf allies are probably thinking)…Indonesia has issued similar warnings over recent days, suggesting the OPEC majority may try to force a meeting if Saudi Arabia’s strategy of flooding the market creates a deeper crisis…

Meanwhile, as WTI trades in the mid-to-upper $30’s, some producers are already living with the reality of much lower prices… in western Canada, some producers are selling heavy Oil for less than U.S. $22 a barrel (getting Oil to market in Alberta is critical)…a mix of Mexican Crudes is already valued at less than U.S. $28, an 11-year low, according to data compiled by Bloomberg…Iraq is offering its heaviest variety of Oil to buyers in Asia for about U.S. $25…

“More than one-third of the global Oil production is not economical at these prices,” Ehsan Ul-Haq, senior consultant at KBC Advanced Technologies Plc, stated in a news report.  “Canadian Oil producers could have difficulty in covering their operational costs.”

Oil Rig

Crude came under pressure again this morning after data from the U.S. Energy Information Administration showed Crude inventories rising by 4.8 million barrels in the last week, compared with analysts’ expectations for a decrease of 1.4 million barrels…the global oversupply problem will only be solved by lower prices that boost demand and take excess supply off the market – more rebalancing is required…

In today’s Morning Musings…

1.  The myth that Gold suffers during a Fed rate hike cycle…

2.  How the broader equity markets normally behave after the start of Fed rate hike increases…

3.  Two Uranium plays well-positioned for a recovery during the Venture’s period of seasonal strength…

Plus more…to view the rest of today’s Morning Musings, login with your username and password, or click here to gain full access to this and other exclusive BMR content and features…

Comments (49)

December 15, 2015

BMR Morning Market Musings…

Gold has traded between $1,057 and $1,069 so far today…as of 9:45 am Pacific, bullion is up $5 an ounce at $1,065 as the FOMC begins a 2-day meeting after which it’s expected to announce a quarter point hike in the Fed funds rate…Silver has added 13 cents to $13.78…Copper is off 4 cents at $2.07…Crude Oil has rebounded $1.22 a barrel to $37.53 while the U.S. Dollar Index has climbed half a point to 98.21…

Money managers and hedge funds remain very bearish toward Gold, cutting back only modestly (5%) on short positions in the metal after breaking records for 2 consecutive weeks, according to the latest trade data from the Commodity Futures Trading Commission (CFTC)…analysts at Commerzbank agreed that pessimism continues to dominate the Gold market, though this can be a bullish contrarian indicator…

“Market participants are eagerly waiting to see what happens at the U.S. Federal Reserve’s meeting on Wednesday. As the Fed Fund Futures show, a rate hike is now fully priced in. Market participants are likely to be more interested in hearing the Fed’s plans for its future monetary policy. If the first rate hike happens on Wednesday, one major uncertainty will fall away that has been weighing on the Gold price in recent weeks,” the bank noted…

BMO Capitals Markets on tomorrow’s big day:  “The rate hike won’t be a shocker, but we still expect a slight, knee-jerk decline in precious metal prices.  However, we also believe there could be some buying interest on the back of tomorrow’s release – some pent-up demand, perhaps short covering.”

More Data For The Fed To Ponder

Underlying inflation pressures rose in November even as renewed weakness in gasoline prices kept overall U.S. consumer prices in check…the Labor Department reported this morning that its so-called core Consumer Price Index, which excludes food and energy, increased 0.2% last month – the 3rd straight month that the core CPI increased by 0.2%…in the 12 months through November, the core CPI picked up to 2.0%, the largest gain since May 2014…

The Fed, however, more closely follows the price index of personal consumption expenditures, which is running at 0.2% in the year through October, and just 1.3% excluding food and energy…that’s well below the Fed’s preferred 2% target…if the PCE number doesn’t track higher next year, the Fed may have to be more restrained in terms of the pace of rate hikes…at the moment, markets expect the Fed to hike interest rates as many as 3 more times in 2016 according to the latest CNBC Fed Survey…and most of those respondents believe that would be bad for stocks, housing and the economy…as a result, the 42 respondents, including money managers, economists and strategists, have boosted the probability of a recession in the next year to 23%, the 5th-straight increase and the highest level since 2012…

CRB Index

The battered CRB Index, which is closely watched for signs of product inflation, is at levels last seen in 1973…generally, the index is made up of 40% of food stuff, 40% energy, and 20% metals and other commodities such as lumber…every now and then the commodities change, but the index remains and can be used as a history lesson…it has dropped a whopping 63.1% from its high in 2008 – its biggest drop ever…

Chicago Research Bureau Commodity Index

Unnatural Moves In Natural Gas

Natural gas prices plunged to a 14-year low yesterday as the warmest start to winter on record in the U.S. has weakened demand for the heating fuel…this is yet another blow to struggling energy companies…yesterday’s 4.8% decline brought year-to-date losses to 34%, making natural gas the 3rd-worst-performing commodity so far in 2015…on an inflation-adjusted basis, yesterday’s settlement price for natural gas was the lowest since February 1992 and was within 10 cents of the inflation-adjusted record low from January 1992 of $1.80 per million BTUs…

Kinder Morgan Makes Pitch Before National Energy Board

This week in Calgary, Kinder Morgan Canada stands before the National Energy Board to present its final argument for tripling the capacity of its Trans Mountain pipeline that terminates in Metro Vancouver…there is plenty at stake for western Canadians who care about quality projects running through their provinces and local communities…it’s not only about jobs and investment from a $5.4 billion U.S. project…all Canadians stand to benefit from the lasting legacy of energy infrastructure…

In today’s Morning Musings…

1.  Rick Rule on the Venture: “The Index is weighted down by the zombies…the higher quality issues have bottomed as a whole.”

2.  Nemaska Lithium (NMX, TSX-V) gears up for another challenge of Fib. resistance…

3.  Continued encouraging drill results from high-purity quartz play in Quebec…

Plus more…to view the rest of today’s Morning Musings, login with your username and password, or click here to gain full access to this and other exclusive BMR content and features…

Comments (47)

December 14, 2015

BMR Morning Market Musings…

Gold has traded between $1,065 and $1,078 so far today, just over 24 hours from the start of what’s expected to be an historic Federal Open Market Committee meeting…as of 3:30 am Pacific, bullion has shed $7 an ounce to $1,067…Silver is off 18 cents at $13.71…Copper has retreated 2 pennies to $2.11…Crude Oil is down for a 7th straight session, off another 65 cents at $34.97, while the U.S. Dollar Index is relatively unchanged at 97.70…

Multiple indicators – technical and fundamental – are flashing positive for Gold right now, despite this morning’s minor pullback, as the metal recovers out of extreme oversold conditions brought on by the assumption that the Fed will finally act on Wednesday to raise interest rates…read below why a Fed move will likely be bullish for the yellow metal, triggering an even stronger advance in Gold stocks…

The Venture in this 4th quarter, meanwhile, has been doing the opposite of what it did in Q4 last year when it led commodities to the downside…the Venture is down just 4.5% this quarter, a far cry from a nearly 30% decline during the same period last year, and the Index has interestingly outperformed Gold, Silver, Copper and Oil since October 1…keep in mind, as well, that 80% of the time over the last 15 years, the Venture’s December low has occurred by the 18th of the month…there is no better time than right now to be shopping for pre-Christmas bargains in the junior resource sector, particularly quality opportunities with exposure to Gold…

This is a special early edition of Morning Musings as we’re in preparation meetings this morning for an imminent visit to Grizzly Central and the prolific Sheslay district of northwest British Columbia, an opportunity to fully capture for our readers the excitement and importance of a potential new drilling discovery that could breathe fresh life into the junior resource sector (read more below)…

Gold, The Dollar, & The Fed

The highly anticipated December Fed meeting tomorrow and Wednesday comes on the heels of a fresh spike in volatility, signs of distress in the high-yield market, and falling Oil prices…in addition, the world as a whole is growing increasingly chaotic with hotpots all over the map…however, Fed Fund futures are pricing in a more than 80% chance that the Fed will indeed announce a 25 basis points increase in interest rates on Wednesday – the first hike in nearly a decade…the Fed has been promising, but not delivering on, a rate hike for a year-and-a-half, so Janet Yellen is faced with a credibility problem if she doesn’t act as expected this week…the tone of the central bank’s monetary policy statement will be key, along with Yellen’s subsequent news conference…

Fed-inspired speculation surrounding a rate hike since mid-2014 has been a driving force behind the U.S. dollar’s record run over the last 18 months…the “sell on news” part is now coming into play, and that bodes well for Gold and Gold stocks…the smart-money commercial traders understand this, and that’s why they’ve dramatically reduced their net-short positions in the metal recently while large speculators/money managers became increasingly more bearish toward Gold – a very favorable contrarian sign…the COT structure is incredibly bullish at the moment, so much so that it’s hard to imagine Gold won’t enjoy at least a major bounce in the weeks ahead with gains magnified in Gold stocks…

Interestingly, during the last 3 rate hike cycles beginning in 2004, 1999 and 1994, the Dollar Index was down 4.6%, 3.3% and 5% after 90 days…over 180 days, the average decline was even greater – better than 5% as you can see in this chart from www4.dailyfx.com…

US Dollar Index and Rate Hikes

Historically, it’s also just not true that Gold gets “slayed” during Fed hike cycles…between June 2004 and June 2006, for example, the Fed more than quintupled its federal funds rate to 5.25% through 17 consecutive hikes totaling 425 basis points…Gold powered 49.6% higher over that exact span…

Redefining The Sheslay District

As far as pure exploration plays go on the Gold side, especially when it comes to high-grade possibilities which the market favors, Garibaldi Resources (GGI, TSX-V) clearly stands out as a compelling immediate opportunity given developments at Grizzly Central in northwest B.C., and in Mexico…GGI, in our view, is about to redefine the Sheslay district as not only prospective for multiple porphyry deposits across a broad corridor, but as an area that is an ideal host for epithermal-style Gold deposits…this would be a serious game-changer for the district, and consistent with Garibaldi’s proven ability to sniff out high-grade deposits across large land packages in Mexico…

“The broad regional NW/SE trend of porphyry deposits and high-grade Gold deposits is very obvious and prolific,” stated Steve Regoci, GGI President and CEO, in an interview following the company’s update last Thursday of its Grizzly Central drill program that has intersected mineralized structures over a broad area (assays pending), apparently trending toward the fertile Kaketsa pluton 2 km to the west…

“You look to the west of Grizzly proper, and just 20 miles away you’ve got the Golden Bear which was a super-rich mine that justified the construction of a 150-km long road that runs through Grizzly Central on the southern border,” Regoci continued.  “You have high-grade systems in all directions surrounding the Sheslay district, and within this under-explored district we’re seeing greater opportunities than ever before in terms of discovering different deposit types.  There’s an awful lot going on here – we’re seeing it at the Grizzly, at the Hat Property adjoining us, and to the north.  Probably the comparable is the Ring of Fire in Ontario.  That’s why the AMEBC calls this the #1 greenfield district in the province and one of the best in Canada.” 

GGI Video clip 1

We’ll have more with Regoci tomorrow regarding the Grizzly and the Sheslay district…

As for Mexico, GGI announced Thursday that it has mobilized its company-owned rig to the Rodadero Project in central Sonora State to follow up on a series of high-grade discoveries from drilling and surface sampling last year that helped push GGI’s share price to a 4-year high…the 2014/early 2015 results from Rodadero speak for themselves…

To date, GGI has only drilled a portion of the western side of Rodadero where the shallow Silver Eagle discovery (15 holes) is confirmed to be structurally linked with the adjoining Reales target to the south to form the “SR” high-grade zone with a potential strike length in excess of 2 km…Rodadero appears to transition, west to east, from a high-grade Silver-Lead-Zinc system to a high-grade Gold-Silver system…Silver Eagle and Reales are just two of a dozen targets defined to date over the nearly 50 sq. km project…this is an emerging new mineral camp in central Sonora that was discovered through the use of GGI’s remote sensing technology and proprietary data collected from deposits across the Sierra Madre – the same technology and data that allowed GGI to cash in big on its Temoris option (San Miguel high-grade deposit) in 2009…

The diversity and richness of deposits in central Sonora is phenomenal…just a few years ago, Bacanora Minerals (BCN, TSX-V) took a few initial samples from a property about 30 miles northeast of Rodadero, and now has a world-class Lithium deposit that has given the company a market cap in excess of $160 million…this has also sparked a great deal of interest in the overall potential for Lithium in this part of Mexico, a point investors should keep in mind regarding GGI given its established presence there…   

In today’s Morning Musings…

1.  The Oil War – how low can Crude go?…

2.  Attractive Gold producers and near-producers…

3.  Two non-resource plays ending the year on a strong note…

Plus more…to view the rest of today’s Morning Musings, login with your username and password, or click here to gain full access to this and other exclusive BMR content and features…

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