TSX Venture Exchange and Gold

80% of the time over the last 15 years, the Venture’s December low has occurred by the 18th of the month (see table below).  And in every case, this was followed by a significant reversal to the upside.  In other words, it would be highly unusual if we don’t see the anticipated Venture turnaround begin this coming week which will be highlighted by a Fed policy statement Wednesday, one that’s expected to include the first interest rate hike in nearly a decade.  The move will probably be wrapped within dovish language from Janet Yellen given nervous markets and Oil prices that are likely to continue to frustrate the Fed’s attempt to jump-start inflation in 2016.  The technical posture of the U.S. Dollar Index is looking increasingly weak, an ominous sign that dollar bulls this Christmas may end up with coal in their stockings.

John’s Gold charting has been phenomenally accurate, and what his charts continue to tell us is that bullion has started a rally that is going to intensify in the weeks ahead – this is why we wisely went long on the HGU last month when the crowd was throwing Gold and Gold stocks overboard.  The most efficient Gold producers are headed higher, along with quality juniors who are active on the ground and strong in all aspects of their business.

It’s important to point out that the Venture has recently decoupled from Crude Oil and is much more closely tracking Gold.  Since the beginning of October, the Venture is off 4.4%, Gold has fallen 3.7%, Silver is down 4.3%, while Crude Oil has plummeted 21%.  This is a significant development with regard to the Venture and reinforces our interpretation that the Index at a minimum will rally in a way that’s consistent with historical averages for December, January and February (the best 3 months of the year).

Last week, aided by Friday’s sharp drop, the Dow plunged 583 points or 3.2%.  The TSX shed 569 points or 4.3%.  Crude Oil collapsed 12%.  Yet, the Venture comparatively held up well, declining just 2.9% to 502.  The Index actually out-performed the broader markets and Oil during a peak period of seasonal weakness (tax-loss selling), an encouraging pattern that is seldom seen.

Volatile Week In The Works

We expect a volatile week in the markets (the Volatility Index – VIX – is certainly suggesting this), but that’s quite normal ahead of an important Fed meeting.

The Dow is resting just above its rising 500-day moving average.  When it fell below that SMA in August for the first time in 4 years, a panic sell-off occurred that turned out to be a tremendous buying opportunity.  We’ll either see this level hold in the coming days, or the “fear factor” will come into play again.

If the Venture decides to dip briefly below 500 in sympathy with the broader markets, so be it.  The only investors who will lose will be the ones who panic and get emotional over it, while astute bargain hunters will profit.  Stay focused on the seasonal strength trend and what’s developing on the Gold front and in Gold stocks.

The Venture’s 4-month daily chart shows every indicator in the position one would expect in advance of a pending reversal to the upside.  As the month progresses, given historical patterns, the Index should overcome resistance at its EMA(8) and EMA(20) with those moving averages then turning higher to support a rally.

The Venture “December-January” Effect

Keep in mind, the Venture has posted average monthly gains for December, January and February of 4.5%, 4.3% and 4.4%, respectively, going back 15 years.  There’s no better 3-month period for this Index, so now is the time to be positioned to take advantage of that seasonal strength.

The latest date ever for the December low has been the 21st.  Last year, the low occurred on the 16th.  Interestingly, the 16th this month falls on “Fed Day” this coming Wednesday.

U.S. Dollar Index

The Dollar Index closed the week below chart support at 98, quite a U-turn after the index just recently threatened to break out above the March high of 100.71.  This could be the start of a consolidation period in the greenback that stretches well into the 1st quarter of next year.  The Fed’s decision on Wednesday, and Yellen’s remarks, will set the tone for the dollar after its huge run since the summer of last year.

There’s no reason to expect the Dollar Index to “tank” – it has multiple layers of support, but the powerful momentum from mid-October was broken December 3 when the euro took off following an ECB policy decision that was more conservative than expected.  The Dollar Index, in general, has been riding a speculative “wave” since the summer of last year with regard to the timing of the Fed’s first rate hike in almost a decade.  Smart traders exited the Dollar Index at and above 100, getting out before the news.

Gold

Gold did some “backfilling” last week as we warned it likely would after the $25 single-day jump Friday, December 4.  Support was strong around $1,065, as anticipated, and bullion finished the week down $12 an ounce at $1,074.  We expect Gold to regain its momentum this coming week and, at the very least, confirm a breakout above Fib. resistance at $1,080.

Gold is in the midst of a recovery out of unusually oversold conditions in November that were brought on by the growing belief that the Fed will finally act on December 16 to raise interest rates.  Given the “window” that Yellen now has, and the risk of losing all credibility in the markets, she almost must pull the trigger on Wednesday.  This should actually be positive for Gold because it will remove one of the key factors – speculation of a Fed policy change – that has negatively impacted the entire commodity sector over the last year-and-a-half.  It is safe to assume that virtually everyone who has wanted to sell Gold and commodities simply because the Fed is finally going to start raising interest rates (very modestly and gradually) has already done so.  Sentiment toward the Gold sector remains very negative, and that represents future buying power.

This 6-month chart shows the next key levels for bullion – $1,080 and $1,100.  Sell pressure (CMF) has declined considerably from where it was a month ago, while RSI(14) appears ready to continue its climb higher.

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 recently encouraged subscribers last month to go long on the double-leveraged HGU around the $3 level ($15 post-consolidation).  The smart-money commercial traders gave a screaming buy signal on Gold by dramatically reducing their net short positions, while the metal the week before last also hit the bottom of a downsloping channel on this 2.5-year weekly chart – consistently a major buy signal since late 2013.

It’s certainly possible we haven’t yet seen the final low for Gold in this cycle.  However, for now at least, short-term momentum is in bullion’s favor, and a test of chart resistance at $1,150 appears likely over the next month or two.

Note how each time Gold has hit the bottom of this 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 there, for some reason unknown at this time (a “Black Sawn” event), or it will break down like it has before after hitting the top of the channel.

Silver fell 66 cents last week to close at $13.89.  Copper had another positive week, adding 3 pennies to $2.13.  Crude Oil plunged nearly $5 a barrel to close at $35.36, while the U.S. Dollar Index shed half a point to 97.63.

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):

Gold has traded between $1,062 and $1,080 so far today…as of 9:45 am Pacific, bullion is up $4 an ounce at $1,075…Silver has slipped 21 cents to $13.89…Copper, bucking the trend in metals today, has jumped a nickel to $2.13…Crude Oil is under pressure again, down more than $1 a barrel to $35.63 as supply concerns continue to dominate, while the U.S. Dollar Index has fallen more than one-third of a point to 97.52…breach of support at 98 on a closing basis today could be significant from a technical perspective…

A gauge of U.S. consumer spending rose solidly in November as the Christmas shopping season got off to a fairly brisk start, suggesting enough momentum in the economy for the Federal Reserve to raise interest rates next week for the first time in nearly a decade…the Commerce Department reported this morning that retail sales excluding automobiles, gasoline, building materials and food services increased 0.6% (vs. a consensus estimate of 0.4%) after an unrevised 0.2% gain in October…these so-called core retail sales correspond most closely with the consumer spending component of GDP…

Meanwhile, the Labor Department said today that its producer price index advanced a more-than-expected 0.3% after falling 0.4% in October…on a “bigger picture” annual basis, though, deflationary pressures remain…in the 12 months through November, the PPI declined 1.1% after sliding 1.6% in October…November marked the 10th straight 12-month decrease in the index, though that’s better than China’s performance…

Crude Oil Update

Crude Oil prices hit fresh multi-year lows this morning as the International Energy Agency (IEA) warned global oversupply could worsen during 2016…prices have tumbled this month after OPEC failed to impose a ceiling on output…OPEC producers pumped more Oil in November than in any month since late 2008, some 31.7 million barrels per day as the Saudis in particular push for market share…

“Consumption is likely to have peaked in the 3rd quarter and demand growth is expected to slow to a still-healthy 1.2 million bpd in 2016, as support from sharply falling Oil prices begins to fade,” the IEA said in its monthly report…

In today’s Morning Musings…

1.  Pending U.S. Dollar Index breakdown as “Fed Day” approaches?…

2.  The “Kaketsa Corridor” and the “Rodadero Ring of Fire”…

3.  Developments on the ground match well with bullish updated chart for Walker River Resources (WRR, TSX-V)…

4.  Oops…another CEO in China goes “missing”…

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…

The junior exploration market is in dire need of a major grassroots discovery somewhere, yet most Venture resource companies are now like a deer caught in the headlights – “frozen” on a highway to nowhere, not sure which direction to move, or how to move.

So it’s refreshing to see any company in the midst of a drill program right now.  Last Sunday, in our Week In Review And A Look Ahead feature, we highlighted a small list of explorers who are particularly active at the moment and have the potential to create tremendous shareholder value in 2016 with the right mix of expertise and good luck.  They range from the well-known Integra Gold (ICG, TSX-V), conducting one of the most aggressive exploration programs on the entire planet at Lamaque South in Val d’Or, Quebec, to Bacanora Minerals (BCN, TSX-V) in central Sonora State with a massive Lithium discovery, to the very speculative tiny market cap Ashburton Ventures (ABR, TSX-V).  Seemingly against all odds, ABR aims to become the Little Engine That Could as it drills the Buckingham Graphite Property in Quebec with some interesting early apparent success (the stock has doubled from a penny over the last 9 sessions on total volume of more than 22 million shares).  ABR is sort of the “poster child” for unloved junior exploration companies.  If it actually succeeds, well…that would restore a lot of hope throughout the industry.

“The junior resource market needs a big find.  I mean, a really big find,” stated Steve Regoci, President and CEO of Garibaldi Resources (GGI, TSX-V), in a recent video interview with BMR that we’ll be posting in the coming days.  “There’s a lot of money on the sidelines waiting to pile into a major new discovery somewhere.  The limited number of companies who are active right now with quality projects and strong management can really stand out in this market and grab a disproportionate share of the attention, especially if sentiment begins to turn as it usually does around this time of the year.  That gives shareholders of these companies a competitive advantage,” declared the former broker. 

Regoci has hit the jackpot before during challenging market conditions.  In February 2009, Garibaldi sold its option interest in the 54,000 hectare Temoris concessions in Chihuahua State, Mexico, by using cutting edge technology to correctly identify what would turn out to be a high-grade Silver/Gold deposit now being developed by Coeur Mining (CDE, NYSE).

Earlier today, Garibaldi provided a fresh update on its first-ever drill program at Grizzly Central in the prolific Sheslay district of northwest British Columbia where Doubleview Capital (DBV, TSX-V) is also gearing up to resume drilling at its growing Hat deposit.

Something unique in this district appears to be emerging along what GGI is now calling the “Kaketsa Corridor” – a large area that trends west and northwest toward the fertile Kaketsa pluton.  Historically, it was overlooked by prospectors due to what’s now known to be a thin layer (approximately 10 to 30 m) of widespread glacial till.  Garibaldi’s proven knack for finding high-grade would be a game-changer in the Sheslay region if indeed 1 or more of these holes has discovered a Gold-rich core with a porphyry system surrounding it (various clues are pointing in that direction).  The Grizzly has scale – and an all-important “heat engine”.

Meanwhile, down in central Sonora, Garibaldi has mobilized its company-owned drill rig to the Rodadero Project where an exciting shallow high-grade discovery was made last year (again, thanks to technology and proprietary data) in 15 holes completed at the Silver Eagle target.  In addition, surface sampling throughout the 50 sq. project returned impressive high-grade Silver and Gold values that defined 11 other target areas, giving Rodadero district-scale potential and drawing the early attention of some majors.

Sonora seems to have it all, as evidenced by many producing high-grade mines and the huge discovery of Lithium in the central part of the state, just 30 miles or so northeast of Rodadero.

Don’t forget some producers who are also carrying out significant drill programs to expand their current high-grade resources.  Those companies include Richmont Mines (RIC, TSX), Claude Resources (CRJ, TSX) and Kirkland Lake Gold (KGI, TSX), while emerging producer Pretium Resources (PVG, TSX) is carrying out exploratory drilling at its world class Brucejack deposit in northwest B.C.

Note:  John and Jon both hold share positions in GGI.  Jon also holds share positions in DBV, ABR and RIC.

Gold has traded between $1,069 and $1,077 so far today…as of 9:45 am Pacific, bullion is down $2 an ounce at $1,071…Silver is off a nickel at $14.09…Copper is flat at $2.09…Crude Oil is off 38 cents at $36.78 while the U.S. Dollar Index has added half a point to 97.88…

Gold may be trapped in a volatile range with edgy two-way trading until the conclusion of next week’s meeting of the Federal Open Market Committee, according to HSBC…the Gold market and the broader financial markets expect a rate hike, but Fed Chair Janet Yellen’s language around that hike will be key…Fed-funds futures show an 80% chance that policymakers will raise rates next week…

Holdings in global Gold-backed exchange-traded products rose 0.2 metric tons to 1,465.4 tons as of Tuesday, data compiled by Bloomberg show…that was the first increase since November 17 and up from the lowest in more than 6 years…

Strong Chinese auto sales bode well for platinum group metals even if they are not rising in the short term, according to Commerzbank…analysts cite data from the China Association of Automobile Manufacturers showing that around 2.2 million cars were sold in the country during November, a record level…

OPEC reported today that its total production rose in November by 230,100 barrels a day from the previous month, to 31.695 million barrels a day – the organization’s highest output level since the spring of 2012…last week, the divided group decided to abandon its output ceiling as Saudi Arabia in particular attempts to increase market share…

Oil is among the markets that have become “completely unhinged”,  according to Allianz Chief Economic Adviser Mohamed El-Erian who was interviewed on CNBC’s “Squawk Box” this morning…he added that such moves can lead to “unpredictable correlations…when you get an unhinged market, good names get hit quite hard, and unjustifiably so,” he stated…

In today’s Morning Musings…

1.  “Golden opportunity” in Gold stocks…report from Morningstar plus long-term TSX Gold Index chart…

2.  Updated charts for EQT, CDB and GSV…

3.  With more than $30 million in its bank account, and a very promising joint venture with a major, Reservoir Minerals (RMC, TSX-V) is poised for a strong 2016…

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…

Gold has traded between $1,069 and $1,086 so far today…as of 9:30 am Pacific, bullion is down $1 an ounce at $1,074…Silver is flat at $14.15…Copper is unchanged at $2.08…Crude Oil moved higher initially this morning but is now off slightly at $37.35 while the U.S. Dollar Index has fallen three-quarters of a point to 97.61…important support is at 98…

The risk of short covering in Gold remains elevated, according UBS – and we agree 100%…a large number of speculators are holding short, or bearish, positions in anticipation of a rate hike when the U.S. Federal Open Market Committee meets next week. “The upcoming FOMC meeting has been well flagged,” UBS says. “Market positioning suggests that the Gold market has also been preparing itself for a Fed rate hike – net speculative longs are currently at the lowest in 14 years.”

The most recent Commodity Futures Trading Commission data show gross shorts are at 93% of the record, UBS points out.  “Extreme short positioning suggests that the risk of a more dramatic short-covering rally is currently elevated, particularly if a rate hike is accompanied by dovish rhetoric.”

China’s central bank has lowered the yuan’s peg against the U.S. dollar to its lowest level in 4 years…the move by the People’s Bank of China is meant to create better demand for China’s goods on the world market…another report from China overnight said producer prices were down 5.9% from year-ago levels as deflationary pressures continue…

Banks including HSBC say that even the drastic cuts announced yesterday by Anglo American might not be enough should weak commodity prices prevail…Anglo fell more than 10% today to a new record low in London…the stock has slumped nearly 80% this year and is the worst performer in the benchmark FTSE 100 Index…with the announced cuts, the company will eventually employ 50,000 people, 85,000 fewer than now…it will control of maximum of 25 assets, down from 55 today…any mines that don’t make money will be put for sale or simply shut…Anglo American is the classic tale of over-extending during the good times only to be left with too much debt and too little money when markets take a dive…

Crude Oil Update

WTIC is being supported today by a report from the U.S. Energy Information Administration that Crude inventories fell by 3.6 million barrels in the last week, compared with analysts’ expectations for an increase of 252,000 barrels…Crude stocks at the Cushing, Oklahoma, delivery hub rose by 423,000 barrels…meanwhile, the International Energy Agency is expecting no recovery in Oil prices in 2016, and possibly even lower prices, and predicted another year of plunging Oil development spending by energy companies…

Husky Energy Inc. (HSE, TSX) is considering the sale of part of its vast midstream business and will cut capital spending – particularly in Alberta – in 2016 to make itself more resilient in a low oil price environment…in capital spending plans for next year announced yesterday, the Calgary-based integrated Oil company said it would trim investment to about $2.9 billion to $3.1 billion in 2016, from $3.1 billion in 2015, and from $5.1 billion in 2014…Husky will also reduce the break-even Oil price it uses for planning purposes to sub-U.S. $40 West Texas Intermediate, from the mid-U.S. $50’s last year…Asim Ghosh, President and CEO of Husky, said he is strengthening the company to succeed in a post-OPEC world…

TFSA Petition

As mentioned a few months ago, we’re surprised this wasn’t more of an election issue…Canadian Finance Minister Bill Morneau confirmed the other day what the Liberals promised earlier – starting January 1, 2016, they are cutting back Canadians’ eligible annual TFSA (Tax Free Savings Account) contributions from $10,000 to $5,500 (the Conservatives had increased the limit to $10,000 this year)…

Such a move by the Liberals, in essence, is equivalent to a HUGE potential TAX HIKE for millions of Canadians over a period of several years…it will have a life-long impact on your ability to create and build wealth that’s protected from any government taxation…the TFSA was one of the best new measures introduced by the previous Conservative government (along with the First Nations Financial Transparency Act which both the Liberals and NDP strangely opposed during the most recent election campaign)…

A Benefit Just For The “Rich”?

The Liberals’ silly argument, and that of others, has been that increasing the annual TFSA contribution limit was benefitting the wealthy more than middle and lower-income segments of the population…but the evidence simply doesn’t support that…the TFSA has proven to be popular with low-income Canadians who gain no real benefit from registered retirement savings plans, which are geared toward people with high marginal tax rates in their prime working years wanting to defer tax into the future, when they will have a lower marginal rate…

About half of adult Canadians currently have TFSA’s, which is a very high level of participation in a program that has only been available since 2009…of those TFSA holders who have taken advantage of the current $10,000 limit, 60% earn $60,000 per year or less, demonstrating that the current TFSA limit is not a tool only for the “rich” (liberals in North America have a very curious way of defining who is “rich”)…

If used effectively, the TFSA is also a tremendous vehicle for average Canadians to build substantial tax-free wealth…Canadians’ TFSA’s can still continue to grow under a Liberal government, but certainly not as fast as they would have if the annual limit had stayed at $10,000…this move by the Liberals will more than off-set any “middle class” tax cuts they have been promoting…

Petition Launched By Working Canadians & Officially Sponsored By MP Peter Kent

An official online petition against the Liberals’ decision was recently launched by Catherine Swift of the group Working Canadians.  “This government claims to be concerned that average Canadians are not saving enough for their retirement, and then weakens one of the key means for Canadians to save in a tax-efficient way?”, Swift wrote in a news release.  “That certainly doesn’t sound like a consistent policy approach at all.”

Last week, anticipating the official TFSA announcement by the Finance Minister, Conservative MP Peter Kent sponsored Swift’s online petition, which went live last Friday…it is titled e-3 (Tax System) and can be directly accessed through the link below…

It takes just a few minutes to view and sign this simple online petition…all of our Canadian readers are impacted by this Liberal “tax hike” (to be sure, there will be more tax hikes to come because their pre-election math was made up on the fly – Canadians will find out the hard way in due course)…

TFSA Petition

In today’s Morning Musings…

1.  Updated chart for the Venture – more technical evidence that this market has a strong rally ahead of it…

2.  The world’s 14th highest grade undeveloped Gold deposit in the world – with great expansion potential (for only 10.5 cents a share)…

3.  Two advanced Lithium plays (deposits) and a Lithium explorer that has retraced to a favorable level…

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…

Gold has traded between $1,067 and $1,080 so far today…as of 9:45 am Pacific, bullion is up $1 an ounce at $1,072…Silver is off 11 cents at $14.13…Copper is flat at $2.08…Crude Oil is relatively unchanged at 37.62 after hitting another nearly 7-year low, while the U.S. Dollar Index is off about one-fifth of a point at 98.46…

A lot of good news has been priced into the U.S. dollar and a lot of bad news has been priced into Gold…when almost everyone says you have to be out of Gold, you know that’s the time to look the other way…negative sentiment in the Gold space continues to grow as hedge funds and money managers, who are typically the most bearish or the most bullish at precisely the wrong time, increased their short bets to record highs for the 2nd consecutive week, according to the latest data from the Commodity Futures Trading Commission (CFTC)…the smart money commercial traders are seeing things differently, and that’s what counts…

Commerzbank looks for Gold to strengthen in 2016 as the metal starts to find support once the U.S. Federal Reserve gets its first interest-rate hike out of the way. “We expect to see prices perform better in the new year once the Fed has implemented its first rate hike in mid-December, thereby dispensing with one key factor that has been weighing on prices this year,” Commerzbank said. “Supported by robust demand from Asia, Gold should climb to $1,200 per troy ounce by the end of 2016. Silver should likewise make gains in Gold’s slipstream, especially since rising physical demand will meet with falling supply.

“Platinum and Palladium will remain in supply deficit for the 5th consecutive year in 2016, meaning that higher prices are also justified here.”

HSBC On Silver

HSBC looks for Silver prices to rise in 2016, citing a move on the back of the bank’s expected rise in Gold as well as stronger supply/demand fundamentals…the bank has trimmed its previous Silver forecast to an average of $15.90 an ounce for full-year 2016, although this is above early-December prices…HSBC projects a full-year range of $13.25 to $16.75 an ounce…it then looks for Silver to average $18 an ounce in 2017…

More Cost Cuts – A Sign Of The Times

Anglo American PLC unveiled plans today for a sweeping restructuring of its business that it said would result in the loss of 85,000 jobs…the plan includes asset sales, large cost cuts and a suspension of dividend payments in a bid to weather a severe slump in commodity prices…it marks one of the most drastic restructuring moves by a major mining company in the face of commodity price weakness amid softening demand from China and a strong U.S. dollar…U.K.-based Anglo, the world’s 5th-largest mining company by market value, said it plans to reduce its portfolio of assets by 60% to focus on a smaller pool of assets that are able to generate cash flow through the commodity price cycle…

China’s Imports Better Than Expected In November

Copper imports by China, the biggest refined metal producer and user, surged in November to the highest in 22 months as traders sought to profit from cheaper prices in London while financing demand rose before the end of the year…China’s overall imports were down last month but did not decline as much as expected…

Meanwhile, a new report, from Geneva-based asset manager Unigestion, says Canada is one of five countries most exposed to China’s slowing growth…Malaysia is the most vulnerable, followed by Australia, South Korea, Switzerland, and then Canada..

In today’s Morning Musings…

1.  Two WTIC charts paint a clear picture for Crude entering 2016…

2.  Two more Gold producers who should finish 2015 on a strong note…

3.  An attractive junior with a high-grade, fully-permitted Gold project featuring low start-up costs and robust economics…

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…

Gold has traded between $1,073 and $1,087 so far today…as of 9:45 am Pacific, bullion is down $9 an ounce at $1,077 after Friday’s powerful move…Silver is off 19 cents at $14.36…Copper is down 2 pennies at $2.08…Crude Oil has tumbled nearly $2 a barrel to $38.04, pushing the CRB Index to a new all-time low, while the U.S. Dollar Index is up nearly one-third of a point to 98.62…

China likely increased central bank Gold reserves in November by about 21 metric tons, the most in at least 5 months, as prices experienced the sharpest drop in more than 2 years…the value of China’s Gold assets was $59.52 billion at the end of last month compared to $63.26 billion at the end of October, according to data posted today on the People’s Bank of China website…however, given lower prices, that works out to 56.05 million troy ounces or about 1,743 tons, based on the London Bullion Market Association afternoon price auction on November 30, Bloomberg calculations show…the stash was 55.38 million ounces a month earlier…

China ended 6 years of secrecy in July over how much Gold it’s hoarding as it seeks to spur greater global use of its currency and diversify its $3.44 trillion in foreign-exchange reserves…the International Monetary Fund last week approved the inclusion of the yuan in the fund’s Special Drawing Rights basket, alongside the dollar, euro, pound and yen, with that change taking effect in October of next year…

Capital expenditures by Gold producers tracked by Barclays have hit the lowest level in more than 6 years, the bank reported today. “Although Gold miners this year have been posting solid operational performances and are in positive cash-flow positions generally, there are risks of long-term supply due to lowered capex spending along with weak prices.”

Analysts collected data for 34 producers…Q3 capital spending of $2.56 billion was down 20.6% year-on-year and was the lowest quarterly capex spending since the first quarter of 2009…miners’ Gold reserves also declined to the lowest level since 2007 due to the fallback in exploration and upgrading, plus the fact that lower prices have made some mines uneconomical (removing them from reserves)…

The pace of outflows from Gold exchange-traded funds has slowed from 2 years ago and there is potential for new inflows to return, according to Citi Research…the bank estimates that $30 billion in cumulative outflows from passive index and exchange-traded products linked to precious metals, of which 85% to 90% is Gold-related, occurred from January 2013 to mid-November 2014…this includes a record 870 tonnes of redemptions across physically backed bullion ETFs in 2013…by comparison, the fund outflow from physically backed ETFs has been far more muted this year, down 148 tonnes through November 20…

Crude Oil Update

OPEC ended its policy meeting on Friday without agreeing to lower production…in fact, for the first time in decades, Oil ministers dropped any reference to the group’s output ceiling, highlighting disagreement among members about how to accommodate Iranian barrels once Western sanctions are lifted…Saudi Arabia seems to think it’s “winning” this Oil price war, by increasing market share while damaging U.S. producers and hurting arch-rival Iran, but the Saudi deficit is now 20% of GDP, the country has burnt through $100 billion from its forex reserve, and now it’s going to borrow from the international market…

In today’s Morning Musings…

1.  Richmont Mines (RIC, TSX) – one of the best out-performers in the Gold sector…

2.  Doubleview Capital (DBV, TSX-V) resumes exploration at the Hat Property…

3.  Silver backs off from Friday’s strong advance but short-term chart shows encouraging trend (plus key near-term resistance)…

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…