Note From Terry re: Easter Posting Schedule
BMR will be taking a four-day Easter break Friday through Monday with the next Morning Musings on Tuesday. Tomorrow’s Morning Musings will be replaced by an end-of-day, end-of-week wrap-up of the Venture and Gold prior to the Good Friday holiday. This will give our team some much-needed rest and will also allow them to prepare coverage of some exciting special situations (current and new), including the Sheslay Valley as we have an immense amount of material to review from our recent site visit. We appreciate your understanding and we extend best wishes to each of our readers and their families for an enjoyable and peaceful Easter.
Gold has traded between $1,293 and $1,308 so far today…as of 8:30 am Pacific, bullion is down $1 an ounce at $1,301 after yesterday’s weakness…Silver has added a nickel to $19.61…Copper is also up a nickel to $3.03 as China’s Q1 GDP slightly exceeded expectations…Crude Oil is unchanged at $103.75 while the U.S. Dollar Index is up slightly at 79.85…
Gold’s 2% sell-off yesterday, its largest one-day drop since a 3.4% decline December 19, a day after the Federal Reserve said it would begin winding down its stimulus program, was likely triggered by predictions of a moderation of demand growth in China this year after a 30% jump in 2013…a significant drop in money supply growth in China was also probably a factor…an argument has also been put forward that the drop was the result of the “shock and awe” tactics of a short seller to break the backs of the Gold bulls…
There was plenty to be encouraged about, however, in the report on Gold released yesterday by the World Gold Council which sees growth in Chinese demand in volumetric terms of 25% over the next three years to about 1,350 tonnes…the next six years will see China’s middle class grow from 200 million people to 500 million. “Comparing this to the total population of the U.S., which stands at 319 million, puts the size of this new market of affluent consumers, with the propensity to buy Gold, in perspective,” the WGC’s report stated.
Check out www.mineweb.com for a very informative interview between Kip Kean and WGC Managing Director Marcus Grubb (“There Will Be Gold – WGC Reports On China’s Precious Decade”). “Our base case as outlined in the report is a growth in demand in volumetric terms of about 25% over the next three years to about 1,350 tonnes. However, if there’s a likelihood that’s going to be out, it’s a highly conservative estimate. I think that’s an important point to make. And I think the reason is: It really comes down to the long-term trends. And they’re not even that long-term,” Grubb told Kean.
“It’s in the next two, to three, to four years. Look at the growth in urbanization – now 170 cities with a million people or more; and probably another 200 million people coming into the middle class in China. Add to that likely growth in household income…which is higher than GDP growth. Real household incomes are variously estimated at between 15 and 20% growth in the next few years on a real basis. And then you’ve got the high savings rate, which is again well documented. As it’s generally known, Chinese households tend to have a higher savings rate than households in Western countries…somewhere, depending on how you measure it, between 20 and 45%.
“At the end of the day, unless you get a protracted economic downturn, a readjustment of significant proportions, these factors are likely to stimulate Gold demand into the next half decade driven by the growth in household income, growth in savings, in urbanization and prosperity of the Chinese middle classes – and that really is the big driver,” Grubb concluded.
Chinese Q1 GDP Weakens But Exceeds Expectations
In the three months to the end of March, China’s GDP expanded 7.4% from the same period a year earlier, a slowdown from 7.7% growth in the fourth quarter but faster than the 7.2% pace that some analysts had predicted…the first quarter expansion, revealed by China’s National Bureau of Statistics today, was the slowest since the third quarter of 2012 when the government loosened monetary policy and accelerated infrastructure investment as growth dropped to 7.4%…
Reduced momentum in investment and consumption – key drivers of the economy – were behind the moderately weaker Q1 growth…industrial production grew 8.8% in March, slightly below analysts’ expectations of 9%…this compares with 8.6% year-over-year growth in January and February, combined to limit distortions from the Lunar New Year holiday…fixed-asset investment – covering areas such as machinery, land and building – edged up to 17.6% in the first quarter, compared with 17.9% year-over-year in January-February, which analysts attributed in part to problems in the housing sector…retail sales, meanwhile, posted 12.2% year-over-year growth for March, in line with the consensus and a modest increase over the 11.8% year-over-year rise seen in January and February…the PMI Index for March, another indicator of the health of the manufacturing sector released earlier this month, was also less than robust…
WTIC Chart Update
Crude Oil continues to look strong, bolstered in part by the Russia-Ukraine situation…strong technical support has been established around $100 a barrel, buy pressure has been increasing in 2014 and RSI(14) at 59% on this 1-year weekly chart has plenty of room to move higher and is also climbing a trendline…a test of a resistance band between $108 and $110 appears to be in the works…some energy plays should perform quite well in this environment, and firm Oil prices are a supportive factor for Gold…
Today’s Equity Markets
Asia
Japan’s Nikkei led Asian markets higher overnight, posting a gain of 421 points or 3%…China’s Shanghai Composite digested a slew of economic data and recorded a 3-point advance to finish at 2015…
Europe
European shares were up significantly today…on the data front, U.K. unemployment hit a new five-year low as pay growth and inflation grew by the same level for the first time in almost four years…
North America
The Dow is up 101 points as of 8:30 am Pacific…the Nasdaq, which staged its biggest intra-day turnaround in five years yesterday, has added another 27 points to 4061…the Nasdaq fell as low as 3946 in trading yesterday – nearly a 10% correction from its March 6 high – before surging nearly 100 points…there are a number of Fed speakers today, but the most important by far is Fed Chair Janet Yellen who speaks to the Economics Club of New York at 9:25 a.m. Pacific…Yellen will also answer questions from economists…
The TSX is up 108 points through the first 2 hours of trading…on the political front, Ontario’s governing Liberals say they’ll table their crucial budget on May 1…it’s a high-stakes spending plan that could trigger an election if the minority government can’t win the support of at least one opposition party…
The Venture is off a point at 991…Canadian Mining Company Inc. (CNG, TSX-V) is one of the volume leaders this morning after announcing an MOI with Thelon Capital Ltd. (THC, TSX-V) to test the company’s zeolite in the growing of medical marijuana…interestingly, CNG has an historical, non-compliant resource of zeolite near Princeton, B.C. (Sun Group Zeolite Project) which Thelon will have an option to earn a 50% interest in…CNG is up half a penny to 2.5 cents on total volume (all exchanges) of 6.5 million shares…the fact CNG may actually have something of value in the ground may attract the attention of speculators…CNG’s 200-day SMA has reversed to the upside after being in a steady decline since 2010…
Venture 9-Month Daily Chart
As we’ve pointed out on several occasions, the Venture is underpinned by a tremendous band of support stretching from the 940’s to the 980’s…a divergence between RSI(14) and price in March gave a fair warning of a possible retrace which is what occurred…yesterday, the Venture touched the top of its support band (for the second time since March 27) and reversed during the day to close down just 4 points…in the next few trading days it’ll be interesting to see if RSI(14) can push above the downtrend line…the intra-day turnaround in the Venture yesterday was unusual given the fact that Gold was down by 2%…
Agnico Eagle Joins With Yamana To Top Goldcorp Offer For Osisko
Osisko Mining Corp. (OSK, TSX), Yamana Gold Inc. (YRI, TSX) and Agnico Eagle Mines Ltd. (AEM, TSX) have entered into an agreement pursuant to which Yamana and Agnico Eagle will jointly acquire 100% of Osisko’s issued and outstanding common shares for total consideration of $3.9-billion or $8.15 per share…the total offer consists of approximately $1 billion in cash, $2.3 billion in Yamana and Agnico Eagle shares, and creation of a new company (“New Osisko“) with an implied value of approximately $575 million (Canadian dollars)…the offer represents an 11% premium to the current Goldcorp hostile bid, and Osisko shareholders would own approximately 14% of Yamana and approximately 17% of Agnico Eagle…OSK is up 44 cents to $7.87 on the news in early trading today…it’ll be interesting to see what Goldcorp Inc.’s (G, TSX) next move is…OSK is up 47 cents at $7.90 as of 8:30 am Pacific…
Nevada Sunrise Gold Corp. (NEV, TSX-V) Update
Nevada Sunrise Gold Corp. (NEV, TSX-V) has approved an increase of $1.57-million U.S. to the 2014 exploration budget at Kinsley Mountain for an amended total of $6.04-million…Pilot Gold Inc. (PLG, TSX), the operator of exploration at Kinsley Mountain, proposed a budget increase to the Kinsley Mountain JV after strong Gold mineralization was encountered in the 2013 and 2014 drilling programs at the Western Flank target…results are still pending from the 2014 phase 1 drilling for an additional five holes in the Western Flank that targeted the promising Secret Canyon shale…a phase 2 drill program of approximately 25,600 metres is scheduled to begin with two drills on May 7…NEV is unchanged at 91 cents as of 8:30 am Pacific…
North American Nickel Inc. (NAN, TSX-V) Update
Keep a close eye on North American Nickel (NAN, TSX-V) which continues to make preparations to commence drilling by mid-June at its 100%-owned Maniitsoq Nickel-Copper-Cobalt-PGM Project in southwest Greenland…the company announced the awarding of drill and camp contracts earlier this month, and will be following up on an important discovery made last year…ground geophysics deep-penetrating electromagnetic (DPEM) and gravity surveys were scheduled to begin by the middle of this month at the Imiak Hill conduit complex, to define new drill targets there, while other drilling this summer will focus on priority regional EM exploration targets about 25 km northwest of Imiak Hill…
Technically, NAN’s rising 100-day moving average (SMA), currently at 32.5 cents, has provided strong support so far in 2014, while the rising 200-day SMA is at 29 cents…this coincides with strong Fib. support between 27 and 30 cents…a band of resistance starts at 38 cents…the overall trend remains very bullish and NAN has the potential to be quite an exciting play this summer given how prospective its large land package in Greenland is for new discoveries…NAN closed at 35 cents yesterday…
Note: Jon holds a share position in CNG.
