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Gold has traded between $1,231 and $1,238 so far today…as of 8:00 am Pacific, bullion is down $3 an ounce at $1,234…Silver is off 8 cents at $17.42…Copper has surged a nickel to $3.10…Crude Oil is off another $1.24 a barrel to 84.51 – under continued pressure over supply concerns and efforts by Saudi Arabia to go after market share, drive the price down and put the squeeze on American producers (more on the “Petroleum Pearl Harbor” tomorrow)…the U.S. Dollar Index is up more than one-third of a point to 85.71…

Gold has responded favorably, though not robustly, as a “safe haven” during this period of weakness in equities…the fact bullion managed to hold above its 2013 double bottom low despite the recent surge in the U.S. Dollar Index has contributed to some short-covering, while a pick-up in Chinese demand was apparent following that country’s week-long National Day holiday…technically, Gold is currently within a resistance band ranging from $1,229 to $1,240…a confirmed breakout through $1,240 would be bullish…

Singapore launched 25 kg (around 804 ounces) Gold contracts yesterday, the latest Asian country to start exchange-traded contracts with the aim of providing a regional benchmark price…the launch comes as Asia, home to the world’s top two Gold buyers, China and India, has been clamoring to gain pricing power over the metal and challenge the dominance of London and New York in trading…

Holdings in SPDR Gold Trust, the world’s largest Gold-backed exchange-traded fund and a good proxy for market sentiment, fell 2.64 tons on Friday to 759.44 tons, its lowest level since December 2008…contrarians will look at that as a positive sign…

Chinese Copper imports picked up last month and may continue to do so for the rest of the year, according to Citi Research…Chinese imports of the red metal rose to around 390,000 metric tons in September, a rise from 340,000 and 343,000 tons seen in the previous 2 month…however, the year-on-year decline was still 14.8%.  “Given September is typically a stronger month seasonally for imports, this represents only a slight increase (month-on-month) on a seasonally adjusted basis,” Citi stated. “We continue to believe that Chinese copper consumption will improve through Q4, supporting copper imports through the remainder of the year.”

Views on Global Economy

In an interview on CNBC, Bank of England Governor Marc Carney stated that while the U.K. has had a “strong recovery” in the past 18 months, “We have to take into account a more modest global recovery, particularly if that’s the case in Europe.”

Over the weekend, in a speech at the International Monetary Fund, Federal Reserve Vice-Chairman Stanley Fischer stated, “If foreign growth is weaker than anticipated, the consequences for the U.S. economy could lead the Fed to remove accommodation more slowly than otherwise.” 

Only 32% of investors polled by Bank of America Merrill Lynch in October expect the global economy to strengthen over the next 12 months, down more than 20 percentage points from September and the lowest reading in 2 years…monetary policy underlies this shift in sentiment, the bank said in its monthly fund manager survey…only 18% of fund managers now view policy as too stimulative, down 14 percentage points to the lowest level since August 2012…

Today’s Equity Markets

Asia

Japan’s Nikkei average hit to a 2-month low overnight, falling 364 points or 2.4% to close at 14937…China’s Shanghai Composite held mostly steady overnight, losing just 6 points to finish at 2360…

Europe

European markets are mixed in trading overseas…there are growing concerns over the obvious deterioration of the euro zone economy…new data showed today that German investor morale has fallen sharply this month, raising fears that the euro zone engine could contract in Q3…Germany’s ZEW index of economic sentiment fell into negative territory for the first time since November 2012 as pessimism mounted over the outlook for the euro zone’s largest economy…

In addition, data for euro zone industrial production also showed a fall…the figure for August sunk 1.8% from the month before and was worse than expected in a poll of economists by Reuters…capital goods output was the major laggard within the new figures and showed their biggest drop since January 2009…

North America

The Dow is up 73 points as of 8:00 am Pacific…bulls are hoping that a slew of Q3 earnings reports this week – several companies reported positive results before this morning’s open – will reverse the market’s direction and take the focus away from a slowing global economy, Ebola and geopolitical concerns…

U.S. small business optimism fell in September as more owners said they expected a slowdown in profits and sales, tightening credit conditions and a harder time filling job openings, according to a survey released this morning…the National Federation of Independent Business said its Small Business Optimism Index fell 0.8 point to 95.3…the index is now 5 points below where it was before the start of the 2007-2009 financial crisis and recession…

Yesterday, the S&P 500 breached its still-rising 200-day moving average (SMA) for the first time since 2012…interestingly, according to Morningstar data, the index is positive 69% of the time 1 month after breaking through that average…3 months out, it’s up 86% of that time…however, in this case as we showed in a chart yesterday, a bigger concern is that 1900 was an area of significant chart support, beyond just the 200-day, and an uptrend channel in place since the late 2012 low of 1343 has also been broken…

Dow Chart Update

This 2-year weekly Dow chart shows a trend of negative divergence between RSI(14) and price that began over the summer…RSI(14) has also broken below support at 50%…

Investors should keep in mind these Fib. support levels on the Dow – 15591, 15047 and 14503…that implies the potential for a deeper correction…what we may also be witnessing – though it’s too early to tell at this point – is the possible emergence of a head-and-shoulders pattern…if such a pattern develops, and penetrates the below the neckline, then a test of support around 15600 would certainly be expected…

TSX Chart Update

The TSX broke below an upsloping channel (in place for over a year) and key support at 15000 at the end of September, so the plunge since then is not hugely surprising…the sell-off in Oil has not helped matters…

Major support levels for the TSX are 14200, 13500, 12800 and 11500…a relief rally out of temporarily oversold conditions is certainly possible…

The TSX is down 200 points at 14028 through the first 90 minutes of trading today…

Venture Chart Update

Below is a long-term (10-year monthly) Venture chart…next major support is 800…note the peak levels (circled in blue) for +DI and -DI at the bottom of this chart…those levels have defined important reversal points going back to the Crash of 2008…in this case, -DI would have to move higher to match previous peak levels…

The Venture is off 16 points at 811 as of 8:00 am Pacific…

Richmont Mines (RIC, TSX) Update

Canadian Gold producers stand to benefit from lower Oil prices and a weak Canadian dollar…combine that with stronger than expected production levels, exploration success at its Island Gold Mine in Ontario (substantial high-grade resource defined below existing workings), and fresh earnings momentum, and that’s a formula for better things to come from Richmont Mines (RIC, TSX) which is bouncing back from a very difficult 2012 and 2013 as we’ve pointed out on a few occasions recently…

After losing $1.9 million in Q1 this year, RIC achieved net earnings of $4.6 million in Q2, and last week raised 2014 production guidance to between 85,000 and 90,000 ounces (up 10,000 ounces)…the company will be releasing Q3 earnings November 6…RIC had $38 million in cash as of September 30 and has a current market cap of approximately $135 million…

Technically, RIC recently held important support around $2 and had a “gap-up” this morning on the TSX to $2.65 (it also trades on the NYSE where it had a strong day yesterday)…as of 8:00 am Pacific, RIC is up 25 cents to $2.70…

Ascot Resources Ltd. (AOT, TSX-V) Update 

Ascot Resources (AOT, TSX-V) continues to aggressively drill its Premier Property in northwestern British Columbia with assays from more holes reported this morning…while overall results were promising, they weren’t spectacular – with the exception of hole P14-707 in the West Zone area which intersected 0.75 m (from 167 to 167.75 m) of 14,394.5 g/t Au…the Premier is a high-grade past producer and, encouragingly, Ascot is finding extensions to mineralized structures there which appear very similar to the multi-million ounce Big Missouri-Martha Ellen-Dilworth system to the north…

Ascot will spend the remainder of the 2014 season drill testing, with up to 4 rigs, the southern two-thirds of the Premier system in a series of widely spaced drill patterns, to demonstrate strike and dip continuity…in addition, drilling will also focus on specific very high grade Gold targets recently intersected…

AOT opened slightly higher this morning but is now down 10 cents at $2.00 as of 8:00 am Pacific…a strong band of support exists between $1.73 and $1.90 with the rising 50-day SMA resting in between…that support must hold or AOT is vulnerable to a significant sell-off, especially in the current market environment…

Note:  John, Terry and Jon do not hold share positions in RIC or AOT.