TSX Venture Exchange and Gold
For the first time in several months the Venture finally has some momentum behind it, giving Canadian junior resource investors one extra reason to be grateful this Thanksgiving weekend after a long-awaited confirmed breakout above short-term moving averages that were restraining the Index since the beginning of May.
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Venture 4-Month Daily “Awareness Chart”
Finally, a Venture breakout above the EMA(8) and EMA(20) moving averages which have also both reversed to the upside. RSI(14) has broken above the 50% level while a bullish +DI cross has also occurred.
Next important resistance is 560. The Venture could stall around that area and consolidate for a brief period, or blast right through it and head toward the next Fib. resistance which is just under 590. Bottom line is that this is a changed market from the summer. The finish to the end of the year should be much different than what we saw over the final months of 2014. It’s time to make some money, though selectivity remains key. An important new discovery, preferably in Canada somewhere, would pour gasoline on the fire that’s now beginning to burn. Equitas Resources (EQT, TSX-V) and Garibaldi Resources (GGI, TSX-V) are in unique positions to positively influence sentiment across the entire junior resource market. If even one of them delivers, watch out.
Commodity Sector Improvement
If the broad commodity sector hasn’t finally hit bottom, it’s certainly in the throes of a rally that could have some “legs” to it, especially considering the U.S. Dollar Index is finally rolling over with greenback bulls losing hope that the Fed is going to hike interest rates anytime soon. Indeed, the Fed appears to have missed its window of opportunity which was really last year. Weakening global growth in recent months, the latest poor U.S. jobs report, deflationary concerns and even the prospect of a U.S. government shutdown before year-end thanks to a looming budget battle simply aren’t ideal conditions for a Fed rate hike. They will err on the side of caution until at least the spring of next year, in our view.
Dollar Index 9-Month Chart
Technically, as we’ve been stating for several months since the March high of 100.71 and the spring double top in the Dollar Index, the greenback is in trouble. Two uptrend support lines have been broken, resistance between 96 and 97 has been relentless since August, and RSI(14) is moving lower and will likely test support at 30% on this 9-month daily chart.
The Dollar bulls, who were stampeding on a false promise by the Fed to hike rates, have had the floor taken out from underneath them, and to add insult the injury the U.S. is losing prestige on the international stage. It’s growing increasingly likely that the Dollar Index will test base support around 88 over the next several months, and such an event will give both commodities and the Venture a boost.
Global Hotspots
A major terrorist attack in Turkey this weekend is yet another example of increasing global chaos. Russian imperialism has returned in earnest with Vladimir Putin flexing his muscles in a major way on the international stage because he knows he’s up against the weakest American President since Jimmy Carter (Justin Trudeau would make North America a complete pushover). Putin has outsmarted Barack Obama every step of the way, from the Ukraine to the Middle East where Obama’s missteps and withdrawal created a vacuum of power which the dangerous Putin, in addition to terrorist groups, have been more than eager to fill. Obama’s Syria strategy failed miserably and he completely misread and underestimated ISIS, greatly endangering American security which is his #1 mandate to protect under the Constitution. All of this has significant implications for both Crude Oil and Gold in our view, and will dominate U.S. political debate leading up to the 2016 elections.
Gold
Gold enjoyed its second straight powerful Friday, jumping $17 an ounce to close at $1,156. It has momentum in its favor with a reversal to the upside in the 50-day SMA along with other bullish technical signals. Support around $1,100 was repeatedly tested since mid-August and held. Resistance is strong at $1,160 (bullion has traded in a horizontal channel between $1,100 and $1,160 for 2 months) but we expect this area to be conquered relatively soon given the overall posture of John’s 6-month daily chart.
For the week, Gold was up $18.
Silver climbed another 56 cents last week to close at $15.82. Copper, thanks in part to supply cuts, added 8 cents to finish at $2.40. Crude Oil surged more than $4 a barrel to $49.49 thanks to fresh technical strength, dollar weakness and heightened geopolitical tensions. The U.S. Dollar Index fell a full point to 94.92.
Baker Hughes reported Friday that U.S. energy firms cut Oil rigs for a 6th week in a row, the longest streak since June, a sign low prices continued to keep drillers away from the well pad. Drillers took a net 9 rigs out of U.S. oilfields in the previous week, bringing the total to 605. At this time last year, producers had 1,609 rigs in operation.
The “Big Picture” View Of Gold
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 3 decades in 2013, and weakness this past summer, the fundamental long-term case for the metal remains solidly intact based on the following factors (not necessarily in order of importance):
- 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;
- Historically low interest rates/highly accommodating central banks around the world;
- Continued solid 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;
- 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.
Note: Both John and Jon hold share positions in EQT and GGI.
I think what is also important to note on the venture chart is the 8 day ema is about to cross over the 20 day ema. Something has to give with the venture because, and I’m sure many can attest to this, its been a really long four years!!
Comment by tony T — October 11, 2015 @ 10:54 am
Tony.. REALLLLLLLLLLYYYYYYYYYYY long 4 years.. kinda know what the US peeps are going thru with Obama..!!:)
With the job outlook in the US and printing happening everywhere except our own basements (but it is a biz opportunity yes:) ???) we may be in for a good run here…
until the rate talk comes back which may be in the spring for the March meeting…
I just cant imagine that there is actually anything left to sell!!! at least of any consequence…
but never say never… it could go to 0!!! we need volume to return as well… that has been very low… 25% of what it was 2008-2011…
Also there is some reality of BMR going to a sub service… truly believe that they wouldnt have even thought of it if as a group and with their conversations with peeps, they felt it had lower to go…
TIming may be a bit off maybe.. or maybe not …. but their foray into the sub market suggests to me that fairer winds are blowing… but just.. we have a long hill to climb…
Comment by Jeremy — October 11, 2015 @ 11:54 am
Jeremy – you haven’t seen my basement!
Comment by dave — October 11, 2015 @ 12:42 pm
EQT – Should be an interesting week with the PP closing and a possible drilling update. An update on the new targets and ground geophysics results may give investors a clearer picture on what they are chasing at the Garland and may very well explain why the extra staking and rush by other companies as well.
Comment by Dan1 — October 11, 2015 @ 2:18 pm
New tweet on Twitter by Equitas. Interesting – one of the pics is a gentlemen inside one of the camps holding up the book “The Big Score”
https://twitter.com/equitascorp
Comment by Dan1 — October 11, 2015 @ 3:00 pm
Actually it is Dan Lee that is holding up the book “The Big Score” His demeanor seems to say, just wait and only a matter of time it will be “The Big Score 2″ Had to get that one in!
Comment by Dan1 — October 11, 2015 @ 3:11 pm
That is interesting, must be a reason he is holding it up. I read the book a couple weeks ago, a great read. The thing I learned from reading the book is to have a little patience with this play, when they drilled Voisey Bay they certainly didn’t hit on every hole and neither will Equitas. I have taken a little off the table though, always protect your original capital when you can.
Comment by Danny — October 11, 2015 @ 3:40 pm
Yes, I took some off the table at 21 cents on Friday as well to protect my original capital, but still very heavily weighted in EQT. Back to that photo, it may not mean anything but then again it could. Why would Dan Lee, who was there when Voisey’s was discovered hold up the book? It may be a hint that we have nickel. Here’s to hoping.
Comment by Dan1 — October 11, 2015 @ 5:48 pm
Maybe it’s what he uses for TP while in the bush.
Comment by Ivan — October 11, 2015 @ 6:28 pm
No Ivan, that’s what birch bark is for.
Comment by Danny — October 11, 2015 @ 7:40 pm
are the Asian markets open tonite? it looks like rocking upwards…oil at 50$….
Comment by STEVEN1 — October 11, 2015 @ 8:18 pm
Jon
what do you think the market caps could be of GGI and DBV if GGI also finds a deposit or has even better grades that DBV?
thanks
Comment by GREGH — October 11, 2015 @ 9:31 pm
Maybe a good week coming up for EQT and GGI, we shall see.
Comment by dave — October 12, 2015 @ 7:00 am
Hi Greg, I’m doing a recalculation of that after the exclusive report we just posted.
Comment by Jon - BMR — October 12, 2015 @ 11:53 am
Thanks Jon
Look forward to seeing what you come up with…
Comment by GREGH — October 12, 2015 @ 4:13 pm
Greg, there are of course a lot of variables involved here. First, the reason a GGI discovery would be so significant is that it would demonstrate, beyond any doubt, that the Sheslay district is indeed “pregnant” from one end to the other, along a very broad corridor. With a “hat trick” in the district, so to speak, the economies of scale for a potential mining operation start to look a whole lot better. Multiple deposits and a high-grade starter area are the key ingredients to turn this into a profitable mining camp from a major’s point of view.
A third district discovery would certainly create a higher valuation multiple for all players in the area. If it also comes with really nice grade, watch out. Ultimately, if you have a scenario down the road where large-scale deposits are proven up on at least 3 separate properties, and there’s a high-grade starter area to go with that, then you’re talking about individual market caps potentially in the hundreds of millions of dollars and a district “take-out” that could be absolutely staggering.
Grade at Grizzly Central will determine just how high GGI goes in the early stages, and therefore DBV and the others. If, for example, GGI pulls off a hole such as 300 m grading anywhere from 0.50% to 0.80% or higher CuEq, then it’s really “game on” immediately for a very big run that would initially easily justify a 5-fold move from current levels IMHO for GGI (of course they also have Mexico).
Keep in mind, CXO attained a $75 million market cap in a bad market in the spring of 2013 after its first hole at North Rok returned 333 m grading 0.51% Cu and 0.67 g/t Au – a truly exceptional hole, but unfortunately they weren’t able to repeat that. So 1 or 2 good holes right off the bat are great, but they need to be followed up with consistent and even better results to demonstrate there’s a substantial deposit.
DBV took off from under a dime to 40 cents (about a $20 million market cap) in early 2014 on 300 m of 0.30% CuEq in holes 8 and 11, which ended in higher grade mineralization. The market will want to see something comparable from GGI within the first several holes, and I believe those odds are very good. GGI’s current market cap has plenty of room to grow just in the speculation (pre-result) phase.
There’s a feeling there’s something special under Grizzly Central, perhaps even a Gold surprise. The question is, how early can GGI get into the meat of a system there? The geology, the geophysics, the geochem – they’re all saying a discovery should be made somewhere at Grizzly Central, and probably rather quickly – within several holes quite possibly given the advantage GGI has of seeing the signatures of other drill holes in the district. Only God knows what those grades will initially be at Grizzly Central. Are there reasons to believe that those grades could be higher than what have been seen so far elsewhere in the district? Yes. But that’s certainly no guarantee.
What I like a lot about how the Hat has come together is that a) it, like the Grizzly, was a never-previously drilled property until DBV started in 2013; and b) the results have gotten better through each round of drilling with higher grades kicking in. That’s when you know you’re on to something potentially very big.
The market is starving for a discovery right now. If GGI can deliver, a lot of money is going to come into this play from all over, and of course into DBV as well. That’s the advantage of making a discovery at or near the bottom of a market cycle – you’re suddenly a huge fish, almost a whale, in a small pond. That can really power a stock, and a district, sometimes beyond levels we would normally expect.
Comment by Jon - BMR — October 12, 2015 @ 8:30 pm