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Gold is under pressure but off its lows a few hours ahead of the Fed policy statement, thanks to some better-than-expected U.S. economic data…growth unexpectedly accelerated in the 2nd quarter, potentially laying a firmer foundation for the rest of the year that could bring the Federal Reserve a step closer to cutting back its monetary stimulus…GDP grew at a 1.7& annual rate, the Commerce Department reported this morning, a significant improvement from the Q1 downwardly revised 1.1% expansion pace…economists polled by Reuters had forecast the economy growing at a 1% pace after a previously reported 1.8% advance in the first 3 months of the year…so Q1 was weaker than previously thought while Q2 (at least based on the initial set of data) was better than expected…does that change anything?…meanwhile, private sector job creation surged in July to 200,000 as small businesses and services led the way, according to the latest report this morning from ADP and Moody’s Analytics…the report topped analysts’ expectations of 180,000 and sets the stage for a possibly stronger non-farm payrolls number Friday…but we’ve seen this before when the market sets itself up for a good jobs number based on the ADP report, and then the official jobs figure disappoints…

We’ll see what kind of clues the Fed may give later today regarding its bond-buying program…many analysts and investors expect the Fed will begin to scale back as early as its next meeting in September, but the doves are firmly in control at the Fed and they may wish to see a longer and sustained period of economic growth and better employment numbers before “tapering”…as of 7:25 am Pacific, bullion is down $10 an ounce at $1,317 after falling as low as $1,311…at $1,317, Gold is up 6.6% for the month and is about to end a 3-month losing skid…below $1,320, there is support at $1,300…Silver is off 9 cents at $19.65…Copper is 3 pennies higher at $3.08…Crude Oil remains within a support band between $100 and $104…it’s up slightly at $103.43, while the U.S. Dollar Index is relatively unchanged at 81.89…

UBS says the first two Gold EFT’s in China were under-subscribed but “should be kept on the radar” of market watchers in case momentum picks up…the HuaAn Gold ETF and Guotai Gold ETF began trading Monday…prices were under some weak selling pressure but transaction volume was described as active, according to Chinese media reports…UBS stated, “There was not much surprise that the first two ETF’s launched in China were under-subscribed; as expected, the bulk of investors were institutional.  Headlines two weeks ago noted that the missed funding targets were a result of investors wanting to see how things play out in the international bullion market first before increasing exposure to these Gold ETF’s further.  Ultimately, it will take time for these products to gain traction across the broader retail customer base.  ETF’s in China currently get strong competition from banks’ Gold-accumulation plans and offerings of other small retail products, which enjoy a wider distribution network. However, despite being a slow-starter for now, Chinese ETF’s should be kept on the radar – these could easily pick up momentum as distribution channels improve and the Chinese gold market becomes more and more sophisticated over time” (source: Kitco)…

Today’s Markets

Asian markets were mixed overnight…China’s Shanghai Composite added 4 points to close at 1993…important manufacturing data (the government’s official PMI) is due out tomorrow and is expected to show factory activity contracted for the first time in 10 months as the world’s largest economy suffers a deepening slowdown…a key drag on the manufacturing sector is tighter liquidity conditions, say economists, which is making it more difficult for businesses, particularly small and medium sized enterprises, to raise working capital to invest and fund their operations…Japan’s Nikkei average fell 201 points to close the month at 13668…

European markets are mixed in late trading overseas…retail sales for Germany managed to dent investor sentiment after it showed a fall of 1.5% in June from the month before, the biggest drop in a year…

The Dow is up 59 points as of 7:25 am Pacific…the TSX is relatively unchanged while the Venture, after climbing as high as 919, is now flat at 914 with the modest pullback in Gold…

CDNX Chart Update

Weakness in potash plays hurt Canadian markets yesterday…the Venture put in its 2nd-worst daily performance of the month by falling 10 points…the Index is still poised to register its first monthly gain of the year after finishing June at 881, but today and the balance of this week will be important in terms of shaping the short-term momentum as John points out in the 9-month daily chart below…the 10 and 20-day moving averages (SMA’s) are still rising and the 20-day provides support at 906…a close back above the 918 level today would be encouraging…

Potash World Turned “Upside Down”

Yesterday’s stunning announcement that Russian company Uralkali plans to break up 1 of the 2 main potash marketing groups to boost its sales sent reverberations throughout the industry, with shares in potash producers and exploration companies taking a hard hit…BMO Capital Markets analyst Joel Jackson called the announcement “the end of the potash world as we know it” as more supply hits the market (price-over-volume leadership has “crumbled”) and the industry is re-shaped…or is this perhaps some sort of “high stakes bluff?”…Uralkali has more flexibility than most rivals to operate in a lower-price environment due to its cheap costs of approximately $62 a tonne, and it says it plans on targeting China and India for more sales…Potash Corp. of Saskatchewan (POT, TSX) closed 16% lower yesterday…Karnalyte Resources Inc. (KRN, TSX) got hammered, falling 46% to close at $3.04…on the Venture, Encanto Potash Corp. (EPO, TSX-V) lost 36% to close at 16 cents and was the CDNX’s most active stock…Pacific Potash Corp. (PP, TSX-V), which has been an impressive play this year and has raised over $6 million for exploration and development of its Amazonas Potash Property in northwest Brazil, fell 2.5 cents or 14% to close at 15 cents…

In situations like this, investors get scared and markets often over-react…some excellent buying opportunities typically emerge – not necessarily immediately, but over time…so we’ll see how this plays out…

Below are some comments from a news release this morning from Passport Potash (PPI, TSX-V) which dropped just a penny yesterday to 13 cents:

“The downward volatility being witnessed in potash stocks across the board…is, in our opinion, a knee jerk reaction to unsubstantiated claims being made from Uralkali. It is instructive to note that when Vale S.A. announced that it was pulling out of its 4.3 million tons per year (“MTPY”) Rio Colorado project in Argentina, and BHP Billiton Ltd. put its 8 MTPY Jansen project on hold the markets did not see an associated upward volatility in potash stocks. It is important to keep in mind that the fundamental demand for potash on a global scale has and will likely remain consistent. Regardless of the activities of potash producers big and small, the following fundamentals remain true:

1. Global population is expected to grow by approximately 300 to 400 million every 5 years;

2. As income growth in developing countries continues to rise, diets change and become more crop intensive;

3. Arable land is flat in absolute terms and falling per capita, and opportunities to increase arable land are limited;

4. Crop prices remain high by historical standards and supportive of robust demand for agricultural inputs, like potash.

“It is our opinion that the present turmoil is likely to have more of a regional than a global impact.”

As far as Pacific Potash is concerned, below is an updated chart from John for guidance…the stock closed at important support yesterday, but the likelihood of additional weakness and a consolidation phase has to be considered high given yesterday’s external shock…the 50-day moving average (SMA), which has been on the increase since late March, is in imminent danger of reversing to the downside (the same with the 200-day)…that’s definitely a warning sign…but keep in mind that PP plans to drill in September, so any potential August weakness that would create oversold conditions could be quickly followed by a powerful rally…as always, perform your own due diligence…as of 7:25 am Pacific, PP is off half a penny at 14.5 cents…this company has done an excellent job this year of executing its game plan…

Garibaldi Resources Corp. (GGI, TSX-V) Chart Update

One of the best Copper-Gold exploration plays in the country is about to unfold, in our view, in the Sheslay River Valley of northwest British Columbia – about 60 miles west of Colorado Resources (CXO, TSX-V) North ROK discovery where drilling continues…Garibaldi Resources Corp. (GGI, TSX-V), already anchored by some strong projects in Mexico, has a game-changing situation on its hands in B.C. as Pete Bernier and his Prosper Gold (PGX.H, TSX-V) get set to start drilling the highly prospective and advanced-stage Sheslay River Project (6,800 hectares) which borders GGI’s 17,000-hectare Grizzly Property…GGI has perked up considerably in recent weeks, hitting a new 52-week high Friday of 17 cents, so the pullback witnessed over the last 2 days is quite normal and healthy from a technical perspective (a cleansing of temporarily overbought conditions)…the primary trend remains very bullish, and below is John’s chart update showing strong support at current levels after yesterday’s close at 9 cents…Garibaldi is in an enviable position with its Grizzly Property…with a strong management team that understands the special dynamics of this situation, we strongly suspect they will take full advantage of this opportunity to build value both on the ground and in the market…as of 7:30 am Pacific, GGI is up a penny at 10 cents…

Fission Uranium Corp. (FCU, TSX-V) Chart Update

John often amazes us with his understanding of Fibonacci analysis and his ability to apply it to Venture stocks…the latest example is Fission Uranium (FCU, TSX-V) which we believe will be a major focus of investor interest over the summer with its important discovery at Patterson Lake South in Saskatchewan…Fission reacted Monday after touching the Fib. $1.10 level, as John had predicted, and retraced yesterday to an intra-day low of 93 cents…below is an updated chart with Fib. support levels…the primary trend remains very positive…FCU is unchanged at 94 cents through the first 55 minutes of trading…

Alberta Oilsands Inc. (AOS, TSX-V) Chart Update

The last several trading days have been quite dramatic for Alberta Oilsands Inc. (AOS, TSX-V) which issued a corporate update this morning…over 60 million AOS shares have changed hands (all exchanges) since last Friday as the stock broke out dramatically, supported by news Monday morning regarding its Clearwater leases in Alberta…AOS closed up 2.5 cents at 17 cents yesterday, and is off 2.5 cents at 14.5 cents as of 7:25 am Pacific…below is an updated chart…

Note: John and Jon both hold share positions in GGI.