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Gold has traded between $1,693 and $1,7032 so far today…as of 7:50 am Pacific, bullion is down $2 an ounce at $1,695…Silver is 13 cents lower at $32.41…Copper is up a penny at $3.64…Crude Oil has gained 48 cents to $86.37 while the U.S. Dollar Index is off more than one-tenth of a point at 79.79…

Year-end profit taking by some large funds and “Fiscal Cliff” worries are keeping Gold in check at the moment with the yellow metal poised to decline for the third week in a row despite the Fed’s announcement Wednesday of more stimulus measures that will actually increase the size of its portfolio…Duetsche Bank reports that if the “fiscal cliff” talks were to fail, “this would result in a further decline in money velocity within the country and therefore an offset to the growth in money supply implicit in the Fed’s QE announcement”…

China’s Growing Appetite For Silver

In spite of rapid development in the Chinese Silver market over the past decade, both Silver demand and supply are expected to achieve further growth, says a Thomson Reuters GFMS study released yesterday by the Silver Institute…meanwhile, investment demand from Chinese Silver investors has jumped in recent years, making China the world’s largest market for both physical investment and paper trading of Silver future and other similar contracts, says the study…in 2011, China’s demand for Silver bars and coins soared to 17 million ounces, accounting for 8% of worldwide net purchases of physical Silver…

China Shares Soar, Manufacturing Data Shows Strength

Growth in China’s vast manufacturing sector picked up in December, a preliminary private survey showed, with rises in areas such as new orders and employment underlining a brighter outlook for the economy in coming months…as a result, onshore China shares posted their sharpest gains in more than three years today on strong volume amid speculation of new state-backed buying in mainland markets…the improved sentiment comes ahead of an annual policy-setting meeting over the weekend that will chart the course for the Chinese economy in 2013…the CSI300 Index of the top Shanghai and Shenzhen listings closed up 5.1% at 2356 while the Shanghai Composite soared 4.3%…the indices jumped 4.9 and 4.3% for the week, respectively, their second-straight weekly gain…Shanghai volume was the highest since March 14 as the financial sector led gains in mainland markets…”It confirmed that China’s ongoing growth recovery is gaining momentum, mainly driven by domestic demand conditions,” Qu Hongbin, chief China economist for HSBC Holdings PLC, said in a statement…the reading also pointed to solid economic growth in the fourth quarter…Nomura economist Zhang Zhiwei said the PMI reading reinforces his view that China’s economy “is on track for a strong recovery,” with growth likely to top 8% in the fourth quarter…the government has targeted a 7.5% rise in the economy this year…gross domestic product grew 7.4% in the third quarter from a year earlier, its slowest pace since the first quarter of 2009…

Euro Zone Downturn Slows

Euro zone business activity shrank in December at the slowest rate in nine months, suggesting that although the economy continues to weaken, the downturn may have bottomed out…data company Markit said today that its preliminary purchasing managers’ index, a gauge of activity among euro zone factories and services companies, rose to 47.3 in December from 46.5 in November…a reading above 50.0 would signal an expansion…the national measure for Germany picked up to 50.5 from 49.2 in November, indicating that activity rose in the euro zone’s largest member…”The euro-zone downturn showed further signs of easing in December, adding to hopes that the outlook for next year is brightening,” said Chris Williamson, chief economist at Markit…

Today’s Markets

As noted above, China’s Shanghai Composite posted its largest daily gain overnight since October, 2009, putting the Index at 2150 and within shouting distance of a breakout through a long-term down trendline in place since April, 2011…in fact, the top of the wedge is 2160…John reports this morning that the Shanghai is also now above its weekly EMA(20) for the first time since May of this year…European shares are mixed in late trading while North American markets including the Venture Exchange are generally flat as of 7:50 am Pacific…

U.S. consumer prices fell in November for the first time in six months, pointing to muted inflation pressures that should allow the Federal Reserve to stay on its ultra-easy monetary policy path as it nurses the economy back to health…the Labor Department said this morning that its Consumer Price Index dropped 0.3% last month as a sharp decline in gasoline prices offset increases in other areas…it was also the largest drop since May and followed a 0.1% gain in October…

CDNX Chart

Below is a 1-day chart from John that shows how the Venture Exchange behaved yesterday as it rebounded after falling within a point of critical support at 1165 to close at 1174…our view is that if the Venture cannot break to a new 52-week low this month given tax-loss selling pressures, “fiscal cliff” worries and weakness in Gold, then market psychology may change dramatically going into 2013 with the idea that the Index just isn’t going lower than the 1154 low set in late June…seasonal strength typically sets in during the week before Christmas, so the window is rapidly closing on the bears if it hasn’t already…

Discovery Ventures (DVN, TSX-V)

The market has shown a strong appetite for Discovery Ventures‘ (DVN, TSX-V) Willa deposit in the Slocan Valley as DVN has been an incredible performer during this fourth quarter…all the more reason why it would be so helpful for Rainbow Resources (RBW, TSX-V) to make a discovery at its Gold Viking Property which is just 8 miles south of the Willa…this entire area is drawing more attention given DVN’s intention to put the Willa into production…DVN is trying to crack the 40-cent barrier today on a closing basis…through the first hour + of trading it’s up a penny at 41 cents…below is an updated DVN chart from John…

Parlane Resources (PPP, TSX-V)

Parlane Resources (PPP, TSX-V), which closed up a penny at 17 cents yesterday, has shown resilience this month…it’s definitely a situation to watch closely as the company wraps up drilling at its Big Bear Property in the Blackwater district…Parlane has some strategic ground in between New Gold Inc.’s (NGD, TSX) Blackwater and Capoose deposits, so NGD itself is undoubtedly very curious about results…technically, PPP has been in an overall since August and there has also been a recent change in buying pressure (bullish) as indicated in John’s 6-month daily chart below…with less than 30 million shares outstanding, PPP has significant upside potential in the event of good results from Black Bear and/or a take-out offer from New Gold if the producer wishes to further expand its large holdings in the district…

GoldQuest Resources (GQC, TSX-V) Chart Update

The support band held for GoldQuest Mining (GQC, TSX-V), and what a steal it was around 40 cents…as of 7:50 am Pacific, GQC is up another 7 cents at 62 cents…

Note:  John and Jon both hold positions in PPP.  Jon also holds a position in GQC.