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Gold has stabilized after a sharp two-day drop and has traded between $1,294 and $1,304 so far today…as of 7:45 am Pacific, bullion is up $9 an ounce at $1,303…Silver is 7 cents higher at $20.79…Crude Oil has recovered $1.19 a barrel to $101.15…Libya’s Oil production has returned to its highest level in five months following the faster-than-expected ramp-up of its largest Oil field, according to official data…this has contributed to Oil’s recent weakness…Copper is down a penny at $3.22 while the U.S. Dollar Index has gained more than one-tenth of a point to 80.51…

According to reports, a massive $1.37 billion sale of Gold futures hit the market at New York open Monday and that’s what got Gold off to a bad start this week…strong technical support exists in the $1,280’s, however, and the pullback was helpful in terms of cleansing temporarily overbought conditions that emerged last week…

Fed Chair Janet Yellen’s testimony before the Senate Banking Committee yesterday was mostly Gold-neutral, though about an hour into her testimony prices suddenly slipped below $1,300 an ounce for the first time since June 19…most observers said they did not feel that the Fed chief had suddenly become more hawkish – other than suggesting rates could rise sooner than expected if the labor market keeps improving rapidly.  “A high degree of monetary policy accommodation remains appropriate,” Yellen stated yesterday (she’s testifying again today before a House committee).  “Although the economy continues to improve, the recovery is not yet complete.”

Yellen gave a strong message that the Fed is going to be data-dependent, which means the markets will be more focused than ever on economic numbers over the coming months.  “If the labor market continues to improve more quickly than anticipated by the Committee, resulting in faster convergence toward our dual objectives, then increases in the federal funds rate target likely would occur sooner and be more rapid than currently envisioned. Conversely, if economic performance is disappointing, then the future path of interest rates likely would be more accommodative than currently anticipated.”

Dallas Fed President Richard Fisher, who is a voting member of the Fed’s policy committee this year, will give a speech on monetary policy at University of Southern California beginning at 9:00 am Pacific today…also, the Fed will release its Beige Book report on economic conditions at 11:00 am Pacific…

Today’s Equity Markets

Asia

China’s Shanghai Composite fell 3 points overnight to close at 2067…the world’s second largest economy grew 7.5% in the second quarter, above estimates for a 7.4% increase…meanwhile, other data showed June industrial output rising a stronger-than-expected 9.2% on year and June retail sales increasing an annual 9%, in line with expectations…the growth in Q2 GDP was aided, however, by a government mini-stimulus package designed to boost spending on infrastructure including railways and social housing…the gap between investment and consumption in China still remains wide, and consumer spending needs to pick up in order to bring more balance to growth…

Japan’s Nikkei average fell 16 points overnight to finish at 15379…

Europe

European markets are up strongly (better than 1%) in late trading overseas, bolstered by heavy buying in the basic resources sector with exposure to China…

North America

The Dow is up 41 points as of 7:45 am Pacific, hitting a new all-time high this morning…

The TSX has gained 117 points while the Venture is up 4 points at 1011 through the first 75 minutes of trading…

CRB Index Short-Term Chart

Below is an important chart going back nearly a year that shows the CRB Index (Reuters/Jeffries) in heavily oversold conditions, based on RSI(14), comparable to the situation late last year prior to a move that ultimately led to a substantial advance (nearly 12%) in just over three months…

After hitting a yearly high of 313.27 in late June, the CRB has quickly corrected by plunging 6% to an area of very strong support just above the rising 200-day moving average (SMA) coinciding with a Fib. retrace level…this is a classic pullback within a primary uptrend, so we expect the CRB to begin recovering shortly (it’s up 1 point to 297 as of 7:45 am Pacific) and ultimately push to a new yearly high during the second half of 2014…this matches well with the outlook for the Venture which has also retreated to strong support around the 1000 level – no surprise there…

CRB Index Longer-Term Chart

This 2-year weekly CRB Index paints a very similar picture as the short-term chart – the Index is now in an area of superb support…a further decline of just a few more points appears possible, but the bottom may already have been put in at 294.61 given the convergence of chart and Fib. support in the low 290’s, and the current position of the SS which is now clearly oversold…

What’s also interesting is that Citigroup estimates that money managers poured roughly $7.5 billion into commodities markets during the first half of this year, after net redemptions of $30 billion in the year-earlier half and withdrawals of $50 billion in all of 2013…the commodities sector hit bottom last year, and that included Gold and the Venture in our view…how Goldman Sachs’ analyst Jeffrey Currie could still be calling for Gold to plunge to $1,050 later this year is beyond comprehension given the many technical indicators that give a remarkably different perspective…historically, Gold has also rebounded significantly in the year following a major plunge (the 2013 drop was nearly 30%)…

Garibaldi Resources Corp. (GGI, TSX-V) Update

The $40+ drop in Gold and the 16-point decline in the Venture the last two days impacted even the top performers this year on the CDNX, not the least of which is Garibaldi Resources (GGI, TSX-V) which pulled back from a multi-year high of 32.5 cents Friday to a 27-cent close yesterday, though on very modest volume…one of the biggest mistakes investors make is not understanding normal volatility – healthy retraces – within a primary uptrend…as a result, they can suddenly become fearful on a minor pullback when instead they should be bargain-hunting…as smart consumers, we take advantage of store sales but investors don’t often apply that principle to the emotionally-driven market…

RSI(2) on the GGI 1-year daily chart hit oversold levels yesterday not seen since the May pullback in the stock which presented an ideal buying opportunity just above 20 cents…new support is now in the upper 20’s as defined by several indicators, including Fib. levels and moving averages…

Fundamentally, there are few companies on the Venture in a better position for a discovery this summer – GGI has two growing and exciting opportunities in Mexico with Rodadero and La Patilla (early drilling success at both) and of course the Grizzly in the Sheslay district is a potentially explosive situation as the summer progresses…we expect the Sheslay area to kick into high gear shortly…to use a baseball analogy, GGI has runners on base at huge Sheslay Field with some heavy hitters getting ready to step up to the plate…others, of course, are taking big swings as well which should lead to some exciting activity in the weeks ahead…

GoldQuest Mining Corp. (GQC, TSX-V) Update

It’s safe to assume that the first batch of results should be coming soon from GoldQuest Mining (GQC, TSX-V) which commenced a 10,000-m drill program in early May in the immediate vicinity of its Romero deposit in the DR…the program is designed to identify new mineralized bodies which could increase the mineral resources in the Romero project area…geologically, this is a prolific district and the possibility of some sort of “glory hole” from GQC this summer (as we’ve seen in the past) certainly exists…an airborne program, regional mapping and ground IP have identified a number of strong targets both close to Romero and along the belt…so GQC is aiming not to not only build the existing Romero resource, but uncover fresh deposits as well that could potentially enhance the overall economics of the project…

Technically, this 2-year chart essentially tells us that GQC continues to consolidate in a channel between 25 cents and 40 cents…at 27.5 cents this morning, GQC is near the bottom of that channel where there is obviously strong support…the 200-day SMA has flattened out after a long decline and is currently sitting just a fraction below 30 cents…

Gold Bullion Development Corp. (GBB, TSX-V)

It has been a while since we’ve done a GBB chart, but some readers have requested one – we actually have two this morning…

We’ll start with the good news first…

The long-term chart (10-year monthly) clearly shows an overall trend reversal after a brutal drop from the late 2010 high in the low 90’s to the 2013 low of just 2 cents…the recent strength can be attributed to both fundamental (upcoming “rolling” production start at Granada) and technical factors…as you can see on this chart, GBB has finally broken above a long-term downtrend line…in addition, it appears that the RSI(14) hit bottom last year and it’s now moving up from a flat “W” which is bullish…

GBB Short-Term Chart

The 6-month daily chart for GBB shows overbought technical conditions emerged at the end of last week and Monday when GBB hit a new 52-week high of 7.5 cents…as a result, a consolidation is now under way and the stock needs to find a strong support level before potentially pushing higher again…RSI(14) is generally a very useful guide and the 50% level on the 6-month chart should probably hold…look for support as well at the rising 10 and 20-day moving averages (SMA’s)…

Keep in mind that GBB has 260 million shares outstanding and continued high volume is required in order to “clean up” this stock due to a lot of cheap flow-through financings…we still believe very much in the Granada Property for both its production and exploration potential…

GBB is unchanged at 5.5 cents as of 7:45 am Pacific…

 Note:  John and Jon both hold share positions in GGI.