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Gold has traded between $1,460 and $1,481 so far today…as of 7:00 am Pacific, the yellow metal is down $8 an ounce at $1,468…Silver is off 43 cents at $24.16…Copper is down 2 pennies at $3.19..Crude Oil is 42 cents lower at $94.08 while the U.S. Dollar Index is down one-third of a point at 81.86…

Gold is headed for its worst monthly performance since December, 2011, though it’s not all “doom and gloom”…while assets in bullion-backed exchange-traded products shrank by the most on record,  this was countered by a sharp increase in physical demand from China, India and elsewhere following the metal’s historic 2-day mid-month plunge…Australia’s Perth Mint, which refines nearly all of the nation’s bullion, said that demand has jumped to the highest level in five years after prices plunged, with the factory kept open over the April 23-24 weekend to meet orders…coin sales by the U.S. Mint will show their best monthly performance since December, 2009, while premiums to secure supplies in India rose to five times the level before the slump…Gold jumped 4.2% last week, the most in 15 months…the volume for the benchmark contract on the Shanghai Gold Exchange surged to a record last week…Gold ETP holdings have declined nearly 170 metric tons in April, marking the biggest monthly drop on record in tonnage terms according to data compiled by Bloomberg…while the Gold price has recovered more than 11% from a two-year low of $1,322 April 16, it’s still more than 5% below the April 11 close that preceded the rout…Silver has suffered more than Gold this month – it is down 15%…

Inflation On The Decline In Euro Zone: Good Chance EBC Will Announce Rate Cut Thursday

As we’ve been pointing out recently, inflation continues to trend lower around the globe – not helpful for Gold – and that will no doubt be a concern for the Federal Reserve as it convenes today and tomorrow, and the European Central when it meets Thursday…the odds of a rate cut by the ECB increased significantly today after euro zone inflation eased to 1.2% in April, the lowest level since February, 2010, and well below economists’ expectations…the ECB’s own inflation target is 2%…meanwhile, the seasonally adjusted unemployment rate in the euro zone hit 12.1%, up from 12% in March and 11% a year ago, as reported this morning by Eurostat – the EU’s statistics office…youth unemployment was nearly double the headline rate and there was no sign of improvement in the worst-hit countries such as Spain and Portugal…

U.S. Expects First Cut In Debt Since 2007

Here’s a pleasant surprise:   The U.S. Treasury expects to pay down debt in the second quarter of 2013 as the budget deficits that has dominated national politics starts to shrink…ahead of an announcement today on the details of its quarterly borrowing schedule, the Treasury said it expects to repay a net $35 billion in the second quarter, compared with a February estimate that it would have to borrow $103 billion…“The decrease in borrowing relates primarily to higher receipts, lower outlays, and changes in cash balance assumptions”, said the Treasury…nominal spending is basically unchanged since the final quarter of 2010, one of the longest periods of “restraint” in postwar U.S. history…meanwhile, tax revenues have picked up with the economic recovery, and the expiration of a payroll tax break at the start of the year is adding about $10 billion a month to revenues…before everyone gets too excited, however, keep in mind that the second quarter is always the best for government cash flow because tax returns are due in April…the Treasury expects to issue $223 billion of debt again in the third quarter…the International Monetary Fund forecasts that the U.S. will borrow 6.5% of gross domestic product in 2013, down from 8.5% in 2012 and 10% in 2011…but analysts at Goldman Sachs estimate that in the first quarter of 2013 the deficit was running at a cyclically adjusted level of just 4.5%…

Today’s Markets

Japan’s Nikkei average fell 23 points overnight to close at 13861…conflicting economic data came out of Japan today…on a positive note, household spending surged 5.2% in March over last year and the unemployment rate fell to 4.1%, below forecasts of 4.3%… however, retail sales disappointed, actually declining 0.3% against expectations of a 0.6% rise…industrial output, meanwhile, posted a meager rise of 0.2% in March over the previous month…markets in China remain closed for the Golden Week holiday – trading resumes Thursday when important PMI manufacturing data will also be released…as of 7:00 am Pacific, the Dow is off 66 points at 14752 while the TSX has shed 67 points to 12246…the Venture is off a point at 964…the S&P 500 closed at a new all-time high yesterday, 1594…about half of S&P 500 companies have reported first quarter earnings with 69% topping estimates., according to Thomas Reuters…revenue numbers, however, have been surprisingly weak with nearly 60% of companies missing forecasts…this is not good for the hiring outlook as employment tends to become the victim of a disappointing revenue backdrop…companies unable to expand their top lines likely will focus on cutting expenses to achieve profits…

TSX Gold Index Through The HGU

While Gold itself has climbed more than 10% above its April 16 intra-day low of $1,322, the TSX Gold Index is only 9% higher than its April 17 intra-day low of 183…at yesterday’s close of 200, the Index is down 21.5% for the month vs. a 7.9% drop in Gold…for the year, the Gold Index is off a whopping 34% and has been in a consistent decline since late September when it rallied to just above 350…a rebound is certainly overdue after a drop of 43% during the last 7 months, and May appears to be a logical time for that…for the Gold stocks to stage a decent recovery, the metal will need to work its way through resistance at the Fibonacci $1,484 level where it reacted last Friday, and climb back above $1,500…this is certainly possible, but the declining 50-day moving average (SMA) at $1,550 and other resistance at that previous support area will probably prove troublesome for Gold…a move above $1,550 seems much less likely than a brief surge past $1,500…Yamana Gold (YRI, TSX) and New Gold (NGD, TSX) both report earnings after the close today and tomorrow, respectively, and reports from those companies that exceed expectations would certainly help to restore confidence in the sector…there’s a strong case to be made that the TSX Gold Index will rally somewhat in May, along with the Venture, but both are still vulnerable to another plunge in Gold prices later during the quarter or the year – a drop that would serve, at the very least, as a re-test of the April 16 low…John’s 1-year HGU (TSX) chart shows the recent dramatic sell-off below channel support on huge volume, creating what’s called an “exhaustion gap” and then an “island”…typically in a case such as this, you’ll see a recovery back to the old channel support which is now resistance (just under $4 for the HGU)…the HGU closed yesterday at $3.12 and is down 16 cents at $2.96 through the first 30 minutes of trading today…

Trueclaim Exploration (TRM, TSX-V) Chart Update

Like many juniors, Trueclaim Exploration (TRM, TSX-V) is working hard to raise cash and make things happen…it won’t be easy…the Trueclaim chart, however, does offer some hope…the stock fell as low as 4.5 cents April 15 during the Goldman Sachs Gold Smash, but has since climbed back up to the 7-cent level…technically, for TRM to gain further traction, it must get above the 8-cent resistance level – plain and simple…TRM’s rising 200-day SMA is currently at 6.5 cents while the 100-day SMA has flattened out at 7.5 cents and is threatening to go into decline…May will be an important month for TRM…

Graphite One Resources (GPH, TSX-V)

A graphite stock we like with a very positive overall chart is Graphite One Resources (GPH, TSX-V) which we’ve mentioned in this space before…the company’s Graphite Creek Property in Alaska is a substantial resource, just 3 kilometres from tidewater, and the deposit remains open along strike to both the east and west, and downdip…yesterday, GPH announced that an initial test at Activation Laboratories Ltd. has demonstrated a leaching process capable of producing a high purity of 99.2% graphitic carbon (Cg) from a rough concentrate from Graphite Creek…the company is hoping to position itself in the $13 billion synthetic market with what it claims is the largest known flake graphite deposit in North America (for a public company at least, as we believe privately-held Eagle Graphite has one of the largest flake graphite deposits in the entire world in the West Kootenays)…below is a 2.5-year weekly chart for GPH…it has shown nice overall progression, slow but steady, since last November…it closed yesterday at 19 cents…there’s very strong technical support between 15 cents and the EMA(20) which is currently at 17.3 cents…as always, perform your own due diligence…

Note: John holds a share position in TRM while Jon holds share positions in GPH and HGU.