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Gold hit a 3-week low of $1,272 overnight but has started to recover…as of 7:30 am Pacific, bullion is up $2 an ounce at $1,285…Silver was lower this morning but is now unchanged at $19.49…Copper is off a penny at $3.15…Crude Oil is flat at $105.32 while the U.S. Dollar Index is down one-fifth of a point at 81.36…

Gold’s inability to push through $1,350 and its drop below 2 important support levels – $1,320 and $1,300 – as well as last Friday’s intra-day low, have combined to give bears fresh encouragement…a re-test of the $1,180 late June low can’t be ruled out given these recent developments, but there is support around $1,280 on a closing basis and below that at $1,250…bullishness in Crude Oil and a weak U.S. Dollar Index are helpful factors for Gold at the moment, so the outlook is far from totally negative…we’re also approaching a traditional period of strong physical buying out of Asia…September is typically Gold’s best month of the year…

What hurt Gold yesterday were comments from 2 Federal Reserve officials who said the U.S. central bank might start slowing asset purchases as early as next month, suggesting last week’s sluggish payrolls data were not sufficiently weak for them to take such a move off the table…Charles Evans, one of the more dovish officials at the Fed, said he would “clearly not” rule out the tapering of bond buying at the next meeting of monetary policy makers September 17-18…his remarks were significant as he’s known as a staunch defender of QE and is also a voting member of the FMOC…he said the Fed was “quite likely to reduce the flow purchase rate starting later this year”, though he added that “I couldn’t tell you exactly which month that will be”…separately, Dennis Lockhart, President of the Federal Reserve Bank of Atlanta who does not hold a vote on the FMOC this year, also suggested Fed tapering could begin next month, assuming some improvement in the data…

HSBC says it looks for the impact of potential Federal Reserve tapering of QE to be “negative but limited” for Gold…the introduction of unconventional monetary policies such as QE played a big role in Gold’s advance beginning in late 2008…“We find it logical therefore that any indication of a withdrawal of QE would act to undercut Gold prices,” the bank stated…“The underlying questions are when might QE tapering occur and how negative would any such tapering be for Gold prices?…It is safe to say that tapering, when it comes, will not be unexpected and therefore we do not anticipate a freefall in prices such as witnessed in April…Also the market has already dropped sharply this year and heavily from the peak of $1,921/oz in September 2011…We expect the fallout from tapering to be negative but limited, as traditional physical purchases such as jewelry, coin and bar purchases appear to be filling some of the slack left by institutional investors in the wake of the shift in monetary policy” (source: Kitco)…

Copper Chart Update

It has been a while since we’ve done a Copper chart update but there are some interesting developments as the trend is starting to show some bullish tendencies, despite this morning’s minor weakness…for the past 8 weeks, the metal has traded primarily between $3 and $3.20 a pound…it has attempted a breakout in each of the last 6 weeks, but the lows each week were higher…Copper appears to be forming an ascending triangle, so this is something to watch closely in the days and weeks ahead…RSI(14) is showing up momentum at 41% on John’s 2.5-year weekly chart below…the Venture should respond positively to any breakout by Copper…

The Copper market will be eyeing Chinese import and export data due tomorrow and a reading on Chinese industrial production in July scheduled for Friday…China accounts for around 40% of global Copper demand, making it the world’s largest consumer of the metal…

Today’s Markets

Asian markets were down significantly overnight with Japan’s Nikkei average leading the way with a drop of 516 points or 4% to 13825…the yen hit a 6-week high against the greenback…the Bank of Japan begins a 2-day policy meeting today with an outcome due Thursday…while analysts expect no action, the direction of the yen will hinge on the BOJ’s policy statement…China’s Shanghai Composite fared better overnight, losing just 14 points to close at 2047..

European shares are down moderately in late trading overseas…Bank of England governor Mark Carney announced that the central bank will not raise interest rates until U.K. unemployment hits 7%…it stood at 7.8% in July…this guidance, similar to that issued by the Federal Reserve in the U.S., marks one of Carney’s first departures from the reign of his predecessor, Mervyn King, who stepped down earlier this year…the former head of the Bank of Canada seemed cautiously optimistic on the U.K.’s economy…he told reporters, “A renewed recovery is now underway in the United Kingdom and it appears to be broadening” but cautioned that the recovery is “weak” by historical standards…

The Dow is off another 89 points through the first hour of trading today…the TSX has slipped 58 points while the Venture is off 3 points at 910…

Venture To Ease Rules On Consolidations

Good article by Mineweb’s ace reporter Kip Kean yesterday (www.MineWeb.com, Changes To Financing, Share Consolidation Rules On Horizon For Canadian Juniors)…TSX Venture President John McCoach told Mineweb, “We have decided to allow the temporary relief on certain policies, including pricing of private placements, lapse on August 31,” confirming earlier reports…however, McCoach added, the Venture is going to ease rules around share consolidation…the new policy the Exchange is coming out with this week, McCoach told Mineweb, is that juniors will be allowed to do consolidations without shareholder approval when the rollback is 10:1 and less…of course juniors will still have to comply with securities laws in their home provincial jurisdictions “but the majority of our companies will benefit from that change,” McCoach said…British Columbia, for example, which is home to a vast number of juniors, does not require shareholder approvals on such consolidations…so expect a considerable pick-up in consolidations during the 2nd half of this year…companies short on cash, of course, are the ones most vulnerable to consolidations, and there are plenty of those on the Venture at the moment…

West Cirque Resources Ltd. (WCQ, TSX-V)

West Cirque Resources (WCQ, TSX-V) continues to hold up extremely well as it continues work on 2 significant projects in British Columbia…a Phase 2 drill program, following up on promising results last year, commenced 3 weeks ago at the company’s Castle Property 15 km west of Colorado Resources’ (CXO, TSX-V) North ROK discovery…the work at Castle is being financed by Freeport McMoRan of Canada Ltd. as part of its JV with West Cirque, but the latter remains the operator of the project…in addition to the drill program, mapping and sampling will be carried out in order to better define geological controls and to outline additional targets within the 5.5-kilometre-long Castle porphyry system…meanwhile, keep an eye on WCQ’s 100%-owned Aspen Grove Project halfway between near Merritt and Princeton…this 8,000-hectare property, 85 km south of New Afton and 45 km north of Copper Mountain, covers part of an extensive belt of alkalic porphyry Copper-Gold-Silver mineralization hosted by Upper Triassic Nicola group volcanic rocks and late Triassic to early Jurassic intrusions…numerous Copper-Gold occurrences are being investigated, and 3 separate porphyry systems have been outlined…the company also announced last week that it has acquired a package of historical technical data concerning the property, information that we suspect could be quite significant…

Below is an updated chart from John (3-year weekly) on WCQ which closed yesterday at 40 cents where’s it’s trading as of 7:30 am Pacific…WCQ has the potential to be one of this summer’s market surprises given the strong potential of their Castle and Aspen Grove projects…

Fjordland Exploration Inc. (FEX, TSX-V) Begins Drilling Dillard Property

Other companies are currently active in the promising Princeton-Merritt area including Fjordland Exploration (FEX, TSX-V) which announced this morning that it has commenced a 2,500-metre Phase 1 drilling program at its Dillard Porphyry Copper-Gold Project as part of its joint venture with a subsidiary of Sumitomo Metal Mining Co. Ltd. of Japan…drilling is designed to test for additional Copper-Gold mineralization, including possible depth extensions in holes that bottomed in mineralization during Placer Dome’s 1991 program when drilling intersected 207 m grading 0.25% Copper…first-time drilling will also test recently discovered high-grade Copper and Gold mineralization at the Dillard East property, where surface rock sampling yielded assays up to 1.6% Cu and 28.9 g/t Au, respectively…geophysical surveys completed in June and July, combined with historical data, have outlined two large anomalies at Dillard…1 includes the historic “Dill” target drilled by Placer Dome in 1991 and measures approximately 1,400 m by 1,200 m and is open to the north and west…the eastern anomaly, which includes the “Dillard” target identified in 2011 by Fjordland, measures approximately 2,000 m by 1,500 m and is open to the north and east…both areas also have Copper and Gold soil anomalies coincident with the geophysical anomalies…FEX closed at 2.5 cents yesterday…

Probe Mines Ltd. (PRB, TSX-V) Update

We’ve stated this many times before – one of the best exploration stories in the country at the moment is Probe Mines‘ (PRB, TSX-V) Borden Lake Gold Project in northern Ontario where the company is outlining a high-grade system southeast of the main deposit…Agnico Eagle Mines (AEM, TSX) took a slice of Probe last spring (9.9%) and for good reason, as this deposit continues to look better all the time…4 rigs are carrying out expansion and infill drilling in the southeast, and an updated NI-43-101 resource estimate will be released later this year…Probe has weakened slightly recently due to the 6-session losing skid for Gold stocks, but any weakness in Probe in our view is an opportunity worth pouncing on…Fibonacci support at $1.70 coincides with the EMA(20) on John’s 2.5-year weekly chart at $1.67…in addition, the rising 50-day SMA is at $1.71, immediately beneath the rising 200-day SMA…so there’s tremendous support around current levels…as always, perform your own due diligence…as of 7:30 am Pacific, PRB is up 2 cents at $1.75…

GoldQuest Mining Corp, (GQC, TSX-V) Update

Initial results from GoldQuest Mining’s (GQC, TSX-V) drill program along the Guama trend, immediately west of the company’s Romero discovery, are due shortly, but the market’s expectations seem to be somewhat subdued – especially given yesterday’s bearish trading activity…a support band was broken yesterday, but this will require confirmation today as shown in John’s 2.5-year weekly chart…on a positive note, RSI(2) on the 1-year daily chart has dipped to an extreme level not seen since the end of June, immediately prior to the start of a new uptrend…technically and from a momentum standpoint, however, there’s no question that GQC is at a critical juncture as far as the short-term is concerned – an important move in one direction or the other is coming (at least that’s what the chart is saying)…all’s quiet in GQC through the first hour of trading today…

Note: Jon holds share positions in PRB and GQC.