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Gold has traded in a narrow range so far today…as of 5:30 am Pacific, the yellow metal is off $2 an ounce at $1,769…Silver is down 15 cents at $34.53…Copper has retreated 3 pennies to $3.77…Crude Oil is 27 cents lower at $98.73 while the U.S. Dollar Index is up slightly at 79…

Physical Demand For Gold Picks Up In India

After a lackluster buying trend for the past few months, physical demand for Gold in India rose “dramatically” on Friday, says Barclays Capital, citing a report by Reuters…jewelers and investors scaled-up purchases despite local record prices, the firm says…“Indian buyers bought into the rally ahead of several major Gold-buying festivals”…

Chinese Silver Buying On The Rise

Buying interest in Silver is rising in China with the metal “benefiting from its status as the higher-beta, cheaper version of Gold,” according to UBS…stronger Silver prices are attracting investors, particularly in China, which had vacated the market following violent action in 2011, UBS says…they note that SGE Silver volumes are at the highest level since May, 2011, with 4,062 metric tons traded on Friday alone…this was the highest daily volume since late April, 2011 , when Silver neared $50 an ounce…the bank says action is similar on the SHFE, where combined volumes picked up significantly since late August…“It’s clear that Silver is rebuilding investor interest here…we will continue to closely monitor participation out of China as investors here have played a significant role in Silver’s powerful moves,” says UBS…

Today’s Markets

Asian markets were mixed overnight with China’s Shanghai Composite tumbling 45 points or 2.14% to 2079…the property sector was very weak after private data showed slack home sales, suggesting curbs on the sector have hit sales during the traditional peak season…bizarre growing tensions between China and Japan over two disputed islands in the east China Sea are not helping the Chinese market either…six days of sanctioned anti-Japanese protests in China escalated yesterday into a nationwide day of rage that saw Japanese businesses and diplomatic missions attacked…European shares are off mildly this morning while stock index futures in New York as of 5:30 am Pacific are pointing toward a slightly negative open on Wall Street…

Venture Exchange – Understand The Big Picture NOW To Make Huge Profits In The Months Ahead

Get ready for a MASSIVE move to the upside in the Venture Exchange over the next several months as a “risk-on” environment has emerged with no end date to the Federal Reserve’s just-announced QE3 program…add to this the ECB’s fire hose of cheap money and the likelihood of more stimulus measures from China following that country’s leadership transition in mid-October, and what we have is a Perfect Storm for junior resource investors…by late July/early August, it was clear to us – based on technical considerations – that the Venture Exchange low of 1154 in late June was in all likelihood the bottom of a 53% bear market slide that started in early March, 2011, shortly before the end of QE2…policy and political events this month (ECB, the Fed, and the growing probability of an Obama victory in November due to QE3 and an incompetent Republican campaign) have radically altered the monetary and fiscal landscapes, setting up a situation that is extremely bullish for hard assets and a speculative market like the Venture Exchange…

The Move has already started but is still in its infancy…since August 1, the Venture is up 11.4% vs. a gain of 4.5% for the Dow and 7.1% for the TSX…between now and the end of February, at the very least, we expect the Venture to be the best-performing exchange in North America and one of the best in the world…that was the case during QE1 and QE2, and there’s no reason to believe things will be any different this time around…the Venture could easily challenge the 2000 level by early next year which is almost a 50% jump from current levels…in that kind of environment, we’ll see plenty of doubles, triples, quadruples, and 10-baggers among individual stocks…

Within six months of the launch of QE1, the Venture climbed 57%…within six months of Bernanke’s infamous Jackson Hole speech in late August, 2010, which clearly signaled QE2 was on the way, the Venture rallied 67%…this time, we have an open-ended QE program from the Fed as well as aggressive action from the ECB…with loose monetary policy in place on a global scale for an indefinite period, rising commodity prices and a weak U.S. Dollar, this is the best time since the summer of 2010 to be accumulating quality junior exploration stocks…be patient but bold when you have to be…there is an “overhang” of paper in the market and some important CDNX resistance areas that will require volume and a bit of time to deal with, but once this “train” gets moving it will be unstoppable until early next year at least…

Below is a chart from John that we initially posted Friday and is worth re-posting, just to drive home the message…this is a 4.5-year weekly chart of the CDNX which shows how the Index and Gold have both reacted during the Fed’s previous two QE programs…notice in this weekly chart how the Venture’s RSI(14) is ready to bust out above 50, just like it did right around the time of Jackson Hole in 2010…expect the Index to gradually move into overbought territory during the fourth quarter and remain there for a period of time…this will obviously take increased volume, and that’s exactly what we started to see at the end of last week…there’s a lot of money still sitting on the sidelines or in “safe” instruments yielding very low returns…it won’t take long for that money to start flowing into investments and assets that are going to generate much greater returns over the short to medium term…

Poor Fiscal Policy Leads To QE3

Unfortunately, the reason the Federal Reserve has had to implement QE3 is because of a lack of sustained job growth in the United States which has everything to do with poor fiscal policy…Washington is broken and Obama, unlike President Clinton, has proven to be incapable of working with Republicans…he’s probably also the most liberal President in American history who has an un-American intolerance of the “rich” and wants government to play a bigger role in citizens’ lives – exactly at a time when government just doesn’t have the resources to do that…in fact, any responsible political leader (Democrat or Republican) at the moment should be telling people the truth – we each have to accept more personal responsibility for our lives and expect LESS from government in the years ahead…for crying out loud, the U.S. federal government has an official debt of $16 trillion…that works out to $140,000 per taxpayer…unfunded liabilities are through the stratosphere…but of course few politicians, including Obama and Romney, have the courage to tell the people they must expect less from government…at some point down the road, a year or two or three from now, the chickens could come home to roost and all hell could break loose as this lack of fiscal discipline in Washington and elsewhere in the world (if not immediately addressed) blows up…you can kick the can down the road for only so long…eventually the road ends, sometimes with a steep drop off a cliff like some countries have already experienced…the current extraordinary loose monetary environment in the United States, and globally, is going to ultimately result in higher inflation, and interest rates will have to rise in order to combat that…

Romney did make some intelligent comments the other day regarding, in his words, the “sugar high” of QE3…”Recognize that, as the Federal Reserve keeps on trying to stimulate the economy by printing more money, that there’s a cost to that…the value of your savings goes down…people who are living on fixed incomes don’t see much interest income any more…and the value of the dollar goes down, and the risk for long-term inflation goes up”…

CNBC Anchor Larry Kudlow hit the nail on the head in terms of describing what the American economy really needs at the moment which is smarter fiscal policy, not looser monetary policy…“More money doesn’t necessarily mean more growth…more Fed money won’t increase after-tax rewards for risk, entrepreneurship, business hiring, and hard work…keeping more of what you earn after-tax is the true spark of economic growth…not the Fed…in the supply-side model, the combination of lower marginal tax rates, lighter regulation, and a downsized government in relation to the economy is the growth-igniter”…

TSX Gold Index

John’s latest TSX Gold Index chart is another classic example of how important it is to buy on weakness…just like with the juniors, producers were being thrown overboard by investors during the spring and the TSX Gold Index hit a low of 266 even though it was clear valuations had hit ridiculous levels based on historical data and common sense…since the May low, the TSX Gold Index has climbed 30% after closing Friday at 346…we do believe the speculative juniors will outperform the producers over the next several months as production costs can be expected to accelerate thanks to rising commodity prices, especially Oil which makes up such a large component of a producer’s cost structure, and this will somewhat offset the benefits of rising Gold, Silver and Copper prices….the next major resistance for the TSX Gold Index is 360, at which point experienced and astute traders may wish to take a look at the HGD (short ETF) for a very short-term trade (the HGD has support around $7.75)…the Gold Index may need to pause around 360 and retreat in mild fashion in order to cleanse temporarily overbought conditions and lay the groundwork for another leg up to higher levels…

Silver – The “Poor Man’s Gold”

John has two charts on Silver this morning, a short-term chart (6-month daily) that shows very overbought conditions and resistance at $35.50, and a long-term chart showing a Fibonacci target level of $78 an ounce…any near-term profit-taking in Silver would be a healthy technical development and should not take Silver below $30 an ounce as the strong support areas above $30 indicate…Silver has been rising at a much faster rate than Gold and that trend can be expected to continue over the next several months during this powerful new cycle…

Silver – 6-Month Daily Chart

Silver – 15-Year Monthly Chart

The “big picture” for Silver is hugely bullish, and a couple of months ago we were screaming from the rooftops regarding an “historical buying opportunity” in Silver when RSI(2) reached one of its most oversold levels in the last dozen years…that’s when Silver was trading at just $26 an ounce and since then it has surged by more than 30%…Silver is now in a confirmed “Wave 5” phase…RSI(2) has gone into overbought territory but history shows it can remain overbought for an extended period, and that’s exactly what we expect over the coming months…the next huge opportunity in Silver would be on a minor correction that could knock it down by about 10% from current levels…investment demand and industrial demand will ultimately power Silver to new all-time highs…

Rainbow Resources (RBW, TSX-V)

A 1-2-3 punch between now and mid-October should create Perfect Storm conditions for Rainbow Resources (RBW, TSX-V) which will also have the wind at its back in terms of the overall market…recent news confirms that shallow drilling is hitting the International vein structure…assays, which are pending, will confirm just how rich the mineralization might be, and how long the intersections are…there is plenty for the market to speculate about over the coming days and weeks…meanwhile, the company is also gearing up for two additional drill programs – one at Gold Viking, about 70 kilometres to the south of the International and immediately adjacent to the village of Slocan, and the other at Jewel Ridge in the heart of the Battle Mountain-Eureka Trend in Nevada…both are Gold and Silver targets and former producers…with drilling at three highly prospective properties, Rainbow has a fabulous opportunity for a “discovery hole” that could send the stock soaring in an instant – especially in a bullish overall market environment…that has always been the key part of our rationale behind being so excited about the prospects for RBW – this is a pure discovery play offering incredible potential near-term leverage (from three properties) at 20 cents with just 40 million shares outstanding…we’ve already stated the case for the International…below are some facts to consider regarding Gold Viking and Jewel Ridge…

Gold Viking

An old mill is still standing right next to the Gold Viking Property which is also contiguous to the past producing Ottawa Mines that delivered nearly 2 million ounces of Silver in the early 1900’s at an astonishing average grade of 60+ ounces per ton (top producer in the area)…there are numerous historical adits throughout Gold Viking, and records from the B.C. Ministry of Mines show high-grade Gold and Silver ore were shipped from the property to the Trail smelter in the 1930’s…no drilling has ever occurred at Gold Viking…what has Rainbow’s geologists excited, and us quite intrigued, is that a very low resistivity feature from a Fugro heli-borne electromagnetic survey earlier this year corresponds exactly to a strong multi-element geochemical anomaly over the central portion of the property…this feature is 1,400 metres long and 320 metres wide and may represent a structural break that could have acted as a conduit for mineralizing hydrothermal fluids…a north-south trending mafic dike is exposed within the same corridor…the geological richness of the area, and the past historical production, combine to give RBW an unusual opportunity for a discovery….

Jewel Ridge

Nevada is hot, yet investors haven’t caught on yet to the fact Rainbow is about to follow up on a superb and shallow drill hole from 2004 that returned 2.1 g/t Au over nearly 40 metres near the past producing Hamburg pit at Jewel Ridge…a company that would come out with that kind of a result in today’s market would see its share price leap in a hurry…this very interesting property is contiguous to Barrick Gold’s Ruby Hill Mine which produced over 120,000 ounces of Gold last year and has total reserves and resources in excess of 3 million ounces…immediately to the south of Jewel Ridge is Timberline Resources‘ (TBR, TSX-V) advanced-stage Lookout Mountain Project…Rainbow’s drilling strategy will be to extend the past producing shallow pits at Jewel Ridge to depth, and follow the north-south geological contact directly toward the Ruby Hill Mine…long intersections (100 metres+) of economic grade (1 g/t Au+ in addition to Ag) are quite possible at Jewel Ridge given what’s known historically about the area…

Elsewhere in B.C. – Opportunities At Blackwater

A lot of exploration money is being spent this year in mineral-rich British Columbia, and another important area we’re focusing on besides the West Kootenay region is the central part of the province where New Gold Inc. (NGD, TSX) is developing its massive Blackwater Gold-Silver deposit while numerous juniors including Parlane Resource Corp. (PPP, TSX-V) and RJK Explorations are also active in the area…both Parlane and RJK should be drilling the very near future…on Friday, John posted a weekly chart on Parlane and we’ll be watching the stock closely today for confirmation of a breakout…at 16.5 cents with just 28 million shares outstanding (and no need for a financing anytime soon), PPP is well positioned for a strong move in this bullish new market…Parlane’s Big Bear Project (14,000 hectares) is strategically located between the Blackwater deposit and the Capoose deposit which raises the possibility of a potential New Gold takeover of the company, especially in light of NGD Execuive Chairman Randall Oliphant’s recent comments that he wants to control the entire area – not just for the geological possibilities, but also for access/infrastructure and other issues…New Gold, of course, has already bought out Silver Quest Resources and Geo Minerals and completed a cash transaction with Gold Reach Ventures for ground in the area…

RJK is gearing up for more drilling after intersecting 3.3 metres of 79 ounces per ton (BWE12-06) in the spring at their Blackwater East Property…the Blackwater area has plenty of Silver, and New Gold has been intersecting much higher Silver grades this year…so RJK’s discovery of super-rich Silver could be just the tip of an iceberg…technically, RJK is beginning to rebuild after a spring plunge that took it to a low of 8.5 cents…below is a 3-year weekly chart from John that shows now is an ideal time for accumulation…things should heat up significantly for RJK once drilling commences…interestingly, the stock has held support at its 1,000-day moving average (SMA) at two critical periods – late 2011, and again over the last few months…

Comstock Metals (CSL, TSX-V)

We warned our readers about this one in August, and CSL has enjoyed a spectacular September now that the company is following up on impressive trenching results with a drill program at its QV Property in the White Gold District of the Yukon…a significant discovery could be in the making here, so speculative interest should remain high…CSL climbed 12.5 cents Friday to 58 cents…below is an updated chart from John…as always, perform your own due diligence and understand that the Fibonacci numbers are not price targets but merely theoretical levels based on Fibonacci analysis…

Critical Elements Corporation (CRE, TSX-V)

Critical Elements Corporation (CRE, TSX-V) has been interesting to follow from a technical perspective recently, and the stock has climbed 53% over the last nine sessions…it gained another 2.5 cents last week to close at 23 cents…it is firmly in overbought territory, however, so chasing this in the mid-to-upper 20’s in the immediate future is probably not a good idea…there is significant resistance on the chart at 27.5 cents…CRE will likely soon need to pause and catch its breath, though we will continue to watch it closely…

Mineral Mountain Resources (MMV, TSX-V)

We’ve mentioned Mineral Mountain Resources (MMV, TSX-V) on at least a couple of occasions recently as we’re quite intrigued by the land package the company has assembled in South Dakota…the company has consolidated eight former high-grade Gold deposits in the Keystone mining district, so this is certainly a story worthy of our readers’ due diligence…technically, the stock is looking enticing and has strong support at 25 cents, just a penny below Friday’s close…the 100-day (SMA), currently at 20 cents, has just recently reversed to the upside after a decline that started in late 2011…MMV has just over 93 million shares outstanding but its project in South Dakota is likely strong enough to give this play more upside potential than downside risk at current levels…below is an updated 2.5-year weekly chart from John…

Notes: John and Jon both hold positions in RBW, PPP and RJX.A.