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Gold has traded between $1,310 and $1,323 so far today…as of 7:00 am Pacific, bullion is down $1 an ounce at $1,318…Silver has gained 6 cents to $20.98…Copper is up a penny at $3.13…Crude Oil is 38 cents lower at $105.65 while the U.S. Dollar Index has fallen more than one-tenth of a point to 80.17…Iraqi Prime Minister Nouri al-Maliko refused today to bend to international appeals to form a more broad-based government to curb the country’s Sunni Muslim insurgency…in a televised address, Maliko said calls to form what he described as a “national emergency government” represented a “coup against the constitutional and the political process.”

The head of the state-backed Shanghai Gold Exchange (SGE) said yesterday (source: Reuters) that China must have a bigger influence on the global Gold market as the top consumer of the precious metal, as the country targets establishing its own pricing benchmark…China, along with exchanges in Singapore and Hong Kong, are launching Gold contracts this year in a bid to tap a market looking for a viable alternative to the metal’s global benchmark that is under regulatory scrutiny…

There are no signs yet that physical demand is picking with Gold over $1,300 an ounce – reports are that Asian demand remains soft…the physical market will be important to watch in the days ahead…as John’s recent 6-month daily chart showed, current technical support for Gold is between $1,294 and $1,310…

Interesting report from Reuters this morning (certainly supports the case for a “melt-up” in various markets):

“Federal Reserve Chair Janet Yellen wants to see U.S. wages climb at a much brisker clip to boost consumer spending and help workers recoup ground they lost in the last recession, but she’ll have to fend off policymakers who fear that could cause inflation to surge.  As she seeks to maintain a consensus at the central bank, Yellen will have strong arguments in favor of nursing the recovery for longer and should be able to counter any calls for an early interest rate hike.  Research from the Fed’s staff and her own past academic work both suggest there may be more slack in the economy than inflation hawks believe, and that businesses in recent years have been slower to raise prices than they were previously.  If that is the case, then interest rates could remain lower for longer and inflation allowed to push beyond the Fed’s 2% target without fear of it losing control (our emphasis).  It’s a policy Yellen has indicated she is willing to pursue to encourage wage growth and bring as many workers as possible back into the full-time labor market.  

“The connection between faster wage gains and a healthy jobs market is emerging as a core principle for the new Fed chief, who has said she expects pay to accelerate to something close to the long-run growth rate of 3% to 4% a year from the current level of around 2%.”

Yellen:  “My own expectation is that, as the labor market begins to tighten, we will see wage growth pick up some to the point where…nominal wages are rising more rapidly than inflation, so households are getting a real increase in their take home pay,” she said last week, adding: “If we were to fail to see that, frankly, I would worry about downside risk to consumer spending.”

Today’s Equity Markets

Asia

Asian markets fell modestly overnight as concerns over Iraq overshadowed better-than-expected U.S. economic data…China’s Shanghai Composite fell 9 points to close at 2025 while Japan’s Nikkei average slipped 110 points…

Shanghai Long-Term Chart

The reason we’re showing this 20-year monthly chart of the Shanghai Composite is to demonstrate that the odds favor an upside reversal in this market in the near future, after softness since 2011, and that likely bodes well for commodities and the Venture Exchange…note how overbought the Shanghai became during 2007, which also coincided with a peak in the Venture…

Europe

European markets are under pressure and at three-week lows in late trading overseas – Iraq tensions cited as the main reason for weakness…

North America

After its sharpest decline in a month yesterday, the Dow is up 29 points as of 7:00 am Pacific…the Dow reversed in early trading following a report showing expansion in the service sector which countered worse-than-anticipated reports on the economy’s performance in the first quarter and an unexpected drop in orders for durable goods in May…

The U.S. economy contracted at a worst pace than previously estimated in the first quarter, marking its sharpest pullback since the recession ended five years ago…GDP fell at a seasonally adjusted annual rate of 2.9% in the first three months of the year, according to the Commerce Department’s third reading released today…that was the fastest rate of decline since the first quarter of 2009 when output fell 5.9%…

Meanwhile, a pullback in military spending dragged down overall orders for big-ticket items from U.S. factories in May with demand for durable goods – products like airplanes, cars and refrigerators that are designed to last at least three years – declining a seasonally adjusted 1% from April…the number was below expectations and marked the first decline in four months…

The TSX is up 29 points as of 7:00 am Pacific while the Venture is off 3 points at 1013…

America’s Best & Worst States For Business

CNBC yesterday unveiled results of its eighth annual list of America’s Top States for Business with Georgia ranking first, buoyed by its well-developed infrastructure and top-notch workforce…Texas, Utah, Nebraska, North Carolina, Minnesota, Washington, Colorado, Virginia and South Dakota rounded out the top 10…at the bottom of the list are New York, Vermont, New Jersey, Pennsylvania, Maine, Connecticut, Alaska, West Virginia and Hawaii…

Madalena Ventures Inc. (MVN, TSX-V) Update

John’s charts for Madalena Energy (MVN, TSX-V) late last year/early this year showed a Fib. resistance band between 81 and 95 cents, and sure enough MVN reached a multi-year high of 83 cents in mid-January before retracing…some large financings have out some pressure on the stock price, including a recent bought deal for $50 million at 51 cents, but to make good money in the market you need to buy when stocks are on sale – and right now there’s an “on sale” sticker attached to MVN according to this 2.5-year weekly chart…as always, perform your own due diligence…

RSI(14) at 38% in now at previous support on this 2.5-year weekly chart…in addition, it seems unlikely the 45-cent support is going to be broken, and that level also coincides with the rising 500-day moving average (SMA)…in other words, we expect a recovery in MVN over the summer…it’s also a good time to be bullish on the energy sector as a whole in our view…

MVN is off 1.5 cents at 49.5 cents through the first 30 minutes of trading…

Contact Exploration Inc. (CEX, TSX-V) Update

Calgary-based Contact Exploration (CEX, TSX-V) has been one of our favorite energy plays since it was trading in the 20′s last year…Contact continues to accelerate its key Kakwa Montney asset, and is poised for further increases in production as East Kakwa pushes westward…total company reserves (net proved and probable) increased by 43% in the year ended March 31 while total company net present value (net proved and probable reserves discounted at 10%) increased by 69% to $174.4-million…

On June 5, CEX announced the closing of a non-brokered private placement of flow-through and non-flow-through common shares (at 44.5 cents and 39 cents, respectively) for total gross proceeds of just over $10 million…

Technically, Contact staged a confirmed breakout above Fib. resistance at 38 cents during this second quarter, and climbed as high as 48 cents earlier this month….the rising 50-day SMA at 40 cents is solid new support…note also the upsloping channel in place since last year – there’s no reason for CEX to break below that channel, at least not during the upcoming quarter…

CEX is up a penny at 44 cents as of 7:00 am Pacific…

Great Prairie Energy Services Inc. (GPE, TSX-V) Update

Another interesting oil and gas play worthy of our readers’ due diligence, as we’ve mentioned previously, is Great Prairie Energy Services (GPE, TSX-V) which closed yesterday at 49.5 cents…it has more than doubled so far this year, and the company reported net income of $1.4 million on total revenue of $5.3 million for its first quarter ended March 31…

GPE faces Fib. measured resistance at 52 cents…any pullbacks in GPE this year have stayed within the rising 20 and 50-day SMA’s, currently at 45 and 40 cents, respectively…there is also Fib. support at 40 cents…

Note:  John, Terry and Jon do not hold share positions in MVN, CEX or GPE.