TSX Venture Exchange and Gold
The Venture confirmed a breakout last Monday above 680 resistance, and the next key area now within shouting distance is 707 where the Index reacted January 2 and February 27. Volume picked up as the Venture posted its 4th straight weekly advance, climbing 16 points to close at 699. Non-resource issues led the way; however, it’s worth noting that late Friday morning, there was an announcement of another takeover of a junior active in Mexico. Agnico Eagle Mines (AEM, TSX-V) is acquiring Soltoro Ltd. (SOL, TSX-V) in a mostly all-stock deal valued at approximately $32 million (a spin-off company will also be created). Soltoro holds ground in Jalisco State contiguous to the El Barqueno deposit which AEM acquired after recently buying out Cayden Resources for more than $200 million (without a NI-43-101 resource). Mexico is a jurisdictional “hot spot” at the moment, and it’s reasonable to expect more deals for companies and projects there in the coming months.
Venture 4-Month Daily Chart
John’s updated 4-month daily shows how the Index is now taking direct aim at the 707 chart and Fib. resistance. The 680 level was successfully cleared, RSI(14) is rising rapidly and appears poised to move into overbought territory for a period of time, while the ADX indicator confirms the bullish trend at the moment is very strong. The possibility of a significant breakout to a new yearly high this coming week certainly exists (next measured Fib. resistance after 707 is 750), especially if the U.S. Dollar Index gets pushed back after 5 straight days to the upside.
Venture 6-Month Daily Chart
The Venture broke loose from its 50-day SMA last week which is also now rising gently. In addition (not shown on the chart below), the Venture has pushed above its 100-day SMA for the first time since last summer.
Buy pressure (CMF) needs to pick up again in order for the Venture to overcome resistance at 707 and then take an immediate run toward 750. This will require some fundamental factors to come into play – not just technical strength – to convince more investors to come back into this market.
As we noted last week, it’s interesting how the 680 area has held as support on a monthly basis through December, January, February and March, despite December’s weakness and the more than 10% pullback in Gold that started near the end of January. Each month, the Index fell below 680 but recovered and regained that level – the 2008 Crash low – by the end of the month.
The Seeds Have Been Planted (And Continue To Be Planted) For The Next Big Run In Gold Stocks
There’s no better cure for low prices than low prices. The great benefit of the collapse in Gold prices in 2013 is that it forced producers (at least most of them) to start to become much more lean in terms of their cost structures. Producers, big and small, have started to make hard decisions in terms of costs, projects, and rationalizing their their overall operations. Exploration budgets among both producers and juniors have also been cut sharply. In addition, government policies across much of the globe are making it more difficult (sometimes impossible) for mining companies to carry out exploration or put Gold (or other) deposits into production, thanks to the ignorance of many politicians and the impact of radical and vocal environmentalists (technology has made it easier for groups opposing mining projects to organize and disseminate information, even in remote areas around the globe). Ultimately, all of these factors are going to eventually create a supply problem and therefore great opportunities in Gold and quality Gold stocks. Think about it, where are the next major Gold deposits going to come from? On top of that, grades have fallen significantly just over the past decade.
The “Big Picture” View Of Gold
Gold’s performance Friday was encouraging as new support at $1,200 held for the week despite a strong move by the U.S. Dollar Index. RSI(14) on this 6-month chart corrected to the 50% level last week and has started climbing higher again, following an overall uptrend since the early March low. The $1,200 support needs to hold. For the week, Gold closed up $5 an ounce at just above $1,207.
Gold’s problem is a cluster of Fib. resistance between $1,217 and $1,264. Bullion needs to conquer that wall. Based on the current chart pattern, it will probably make an attempt to do so in the near future – a run to at least $1,240 this month seems probable. The direction of the volatile greenback, and the equity markets, will figure prominently in the equation for Gold in the coming days and weeks. Momentum, of course, is a magnet for money in the markets, and most investors/traders will gravitate toward what’s in motion to the upside.
Silver fell 27 cents last week to close at $16.48 (updated Silver charts in Monday’s Morning Musings as usual). Copper gained 2 pennies to $2.75. Crude Oil, despite getting banged down nearly 7% in Wednesday’s session, ignored President Obama’s ill-advised “framework” nuclear deal with Iran and added $2.63 a barrel to $51.77, while the U.S. Dollar Index recovered just over 2.5 points to close at 99.35.
As Frank Holmes so effectively illustrates at www.usfunds.com, the long-term bull market in Gold has been driven by both the Fear Trade and the Love Trade. The transfer of wealth from west to east, and the accumulation of wealth particularly in China and India, has had a huge impact on bullion and will continue to support prices. Despite Gold’s largest annual drop in three decades in 2013, the fundamental long-term case for the metal remains solidly intact based on the following factors:
- Growing geopolitical tensions, fueled in part by the ISIS and al Qaeda, and a highly dangerous and expansionist Russia under Vladimir Putin, have put world security in the most precarious state since World War II;
- Weak leadership in the United States and Europe is emboldening enemies of the West;
- Currency instability and an overall lack of confidence in fiat currencies, except King Dollar at the moment;
- Historically low interest rates;
- Continued strong accumulation of Gold by China which intends to back up its currency with bullion;
- Massive government debt from the United States to Europe – a “day of reckoning” will come;
- Continued net buying of Gold by central banks around the world;
- The Oil price plunge since last year which may cause destabilization of certain Oil-dependent economies;
- Mine closings, a sharp reduction in exploration and a lack of major new discoveries – these factors should contribute to a noticeable tightening of supply over the next couple of years.
Nice gold and cdnx charts guys.
What do think of the possibility of gold putting in a bearish head-and-shoulders pattern? If gold can’t take out $1240 and starts rolling over seems like a possibility. I’m not bearish but just think cdnx and gdxj look bullish but gold needs to get some legs.
Let me hear your thoughts. Thanks Matthew
Comment by Matthew — April 12, 2015 @ 5:14 am
More on Lion
Information on Company
It is difficult to find old info. I’ve spent days searching for as much as I can find, particularly about Emperor’s prospecting at Tuvatu and the history of the Vatakoula mine but haven’t found a whole lot. The Tuvatu Emperor feasability study I posted earlier was copied from a LIO web page I can’t find anymore, but i’m sure its out there in webspace.
Lion’s website presentations on their site only go back 18 months but they’re definitely worth looking at. The newest presentation says nothing about LIO’s other (irons near the fire} which you can read about in the older presentations., Particularly, Olary Creek, a large iron project in n Austrailia. Lion has an advantagious JV with a huge Chinese conglomerate on a very promising property.. (Especially if iron ever decides to go up again)
Also they have promising gold and uranium prospects in Western Austrailia and Argentina via LIO’s merger with Avocet, (the word is that part of the reasons for the merger were not just the properties, but that they had some money, and also Stephan Mann who then became , Lion’s managing directot/geologist, who is highly respected in mining circles.
Particularly intriguing to me are Lio’s tenements on the northern Fiji island of Vanua Levu.
Regarding the exciting feasability study by Emperor at Tavuta, it was done by the Bateman Engineering company which was a large, highly respected firm that wouldn’t put its name on a study it didn’t believe in. I say was, because Bateman was acquired by Venova in 2011. (at the time Bateman was generating revenues of $1.1 billion annually)
The Emperor/Bateman Tavatu feasibility study mentions production of 80,000 oz. Au per annum at a rate of 400,000 tonnes. (seems optimistic short term to me-but who knows?) The modular mill, Lion is considering buying, can do something like 200,000 tonns a year but thats why they call it modular. To get more capacity they can add more to the plant like an erector set. Remember drilling and milling technology has improved a lot in the last 15 years also. Hopefully we’ll be adding.
My wild guess—The 43-101 will say 40 to 50 million dollar capex US at a cost per ounce of $800 US or less. If thats true, the company is worth a lot. (There’s a decent chance my guess on cost per oz. is too pessimistic, but we must remember they set a conservative g/t and width of veins cut off. Its a visible gold type of mine.
The report will be very intersting reading)
Even if gold went down a lot they would make money and be worth a lot more.than they are now. Even at a $1000 gold US they would turn a decent enough profit. With a very conservative PE ratio of 10, it seems they would still be multiples of their present MC.
Hopefully Lion can do borrowing and not diluting for their, (our?) capex. Maybe Berukoff can lend it to us-we’ll pay him a great interest rate)
Just $28,000 US would buy up the next 5 levels of price asks. It would be interesting to see if they were replaced quickly which would likely mean some nut wants to liquidate or a guy at a fund has orders to keep liquidating. Even so they can only have so much to get rid of.
(DO YOUR OWN DD, of course)
Comment by Carl — April 12, 2015 @ 6:44 am
Matthew – I was thinking the same thing.. but because a lower low was made in Mar negates it I think .. waiting for John to chime in:)
Comment by Jeremy — April 12, 2015 @ 7:32 am
Hi Matthew
I am bullish about GOLD because the weekly chart shows a strong Double Bottom Pattern and the other indicators support this. We will see.
Comment by John BMR — April 12, 2015 @ 8:02 am
Hope you guys are right as a big part of the Venture exchange are gold exploration . The move up over the last week in the Venture may be attributed to Jr. Oils as the price of oil has come up also.
Comment by Les — April 12, 2015 @ 8:25 am
Les, over the past couple of years, Gold has been trading within a downsloping flag, and we’ll update that 2.5-year weekly chart tomorrow. At some point, Gold will either break out decisively above this flag, in which case a major trend change would be apparent, or it will break down below that flag and perhaps test the $1,000 level in a final capitulation. These moves between the bottom of the flag and the top of the flag have persisted since 2013. Right now Gold seems to be pondering about making another attempt at the top of the flag, which right now would be in the $1,280’s.
Non-resource issues led the way for the Venture last week. If the Venture’s current move can broaden out into the Golds and Oils, then for sure we’ll have a major pick-up in momentum and enough new energy for this market to power thru resistance. You can make a strong argument that both Gold and Oil are well positioned to rally over the last half of the month.
Comment by Jon - BMR — April 12, 2015 @ 10:03 am
Thanks for the feedback – I will get excited for gold if we see a 50$+ move up above 1240 and then 1300..
On a different note LIO looks very interesting especially at this market cap. 95% of venture listed stuff I wouldn’t touch – I work in the industy even had the opportunity to travel to see the project back in 2011. I’ve also met Berukoff a few times. This looks like it has potential and I like mgt.
Matthew
Comment by Matthew — April 12, 2015 @ 4:14 pm
Will GGI release more news this week? Hoping to see news on Grizzly drilling and an update on Rodadero.
Comment by Dan — April 12, 2015 @ 4:24 pm
VID was one of the non-resource that led the way. Conference tomorrow with Google. This one can have legs.
Comment by dave — April 13, 2015 @ 6:50 am