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Gold has traded between $1,235 and $1,245 so far today…as of 8:00 am Pacific, bullion is down $2 an ounce at $1,239 (see updated Gold chart below as there are some important technical developments)…Silver is off 9 cents at $17.36…Copper is down 3 pennies to $2.99…Crude Oil has slipped another 48 cents a barrel to $81.22 while the U.S. Dollar Index has gained more than one-tenth of a point to 85.06…

The Gold:Oil ratio, the number of barrels of Crude Oil it takes to buy an ounce of Gold, has broken out of its 8-year mean…at the moment, the ratio is 15.25 barrels per ounce of Gold, just above the 8-year mean of 14.4…the ratio dropped as low as 6.7 following Bear Sterns’ collapse in March 2008 and peaked at 22.5 when Gold made its all-time high in September 2011…until recently, the ratio was range bound between 11.8 and 14 barrels per ounce since July 2013…

Gold producers may see a powerful double benefit of higher bullion prices in the immediate future as well as continued weak or even lower Oil prices significantly below companies’ budgeted forecasts…tomorrow, we’re going to examine the explosive potential of Richmont Mines (RIC, TSX) and its 1 million ounce high-grade Deep extension at its producing Island Gold Mine in Ontario…

Commerzbank analysts say the recent downgrade in global Oil demand growth for 2014 and 2015 by the International Energy Agency is clearly bearish for Crude.   “The call on OPEC will thus decline to an average figure of 29.3 million barrels per day next year. According to the IEA, OPEC produced 30.7 million barrels per day in September. Unless production is cut, 1.4 million barrels more Crude Oil per day than is actually needed would thus flood the market next year. For as long as OPEC makes no move to tackle this threat of a massive oversupply by reducing production, prices are likely to continue to fall,” Commerzbank stated.

Gold Fever Picking Up In India

India’s trade deficit widened to $14.25 billion in September, up from $10.84 billion in August and $6.12 billion in September 2013…the increase in the monthly deficit was largely attributed to higher Gold imports, which soared a whopping 450% in terms of value (year-over-year) despite the Indian government’s continued curbs on the metal…the value of Gold imports in September was $3.75 billion vs. $2.04 billion in August…

Today’s Equity Markets

Asia

No panic in China overnight…the Shanghai Composite fell 17 points, less than 1%, to close to at 2357…the steel and real estate sectors dragged the index lower…meanwhile, Japan’s Nikkei average closed at a fresh 4+ month low of 14738 as a stronger yen ignited risk-off sentiment…

Europe

European markets are mixed in late trading overseas…yields on 10-year Greek bonds rose to as much as 8.9%…the European Commission moved to ease concerns over Greece this morning, saying it would continue to assist the country in whatever way is necessary and would ensure a smooth evolution of support for the country after its bailout program finishes…

North America

The Dow is down 85 points as of 8:00 am Pacific…the TSX has reversed sharply and is now up 100 points while the Venture, after slipping as low as 768 in early trading, is now down just 1 point at 777…the Index has fallen in 26 out of the last 30 trading sessions, including today, so conditions are ripe for at least a relief rally…

U.S. 10-Year Treasuries

Stunning action on extremely high volume in the bond markets yesterday as yields on 10-year U.S. Treasury Notes, a key barometer of the strength of the U.S. economy, plummeted as low as 1.87% before ending at 2.09%…this reflected a sudden and dramatic shift in monetary policy expectations…what traders are saying is that they now expect the Fed to hold off raising short-term interest rates until perhaps 2016, not early or mid-2015 as previously anticipated…

The record low for the 10-year Treasury yield is 1.38%, reached in July 2012 at the height of jitters over Europe’s sovereign-debt burden…

This 2-year daily chart for the TNX (10-year Treasury Note) shows that RSI(14) oversold conditions have certainly emerged (a complete reversal from just a month ago) along with a new (lower) trading range vs. what we’ve seen since the summer of last year…strong support exists at a yield level between 1.8% and 1.9%…

What The “Fear Index” is Saying

This 10-year VIX daily chart suggests that the ultimate bottom of this equity market correction may not come until we see the VIX soar even higher…it closed yesterday at 26.25 after hitting an intra-day peak of 31.06…stocks are generally in trouble when the VIX is above 25%, and important market bottoms in 2009, 2010 and 2011 did not occur until the VIX was in the high 40’s…

Interestingly, on a historical basis, November is the worst month of the year for the VIX – over the last 2 decades, 3 out of 4 Novembers have been negative for the VIX…so watch for a potential peak in the “Fear Index” during the second half of this month…

Updated Dow Chart

Below is John’s latest Dow 2+ year weekly chart…as we pointed out previously, the negative divergence between RSI(14) and price – RSI(14) in a general downsloping trend while the market continued to march higher – was a warning of potential trouble on the horizon…

The 16300 area is new Dow resistance on any rally out of temporarily oversold conditions…a retracement to the Fib. 61.8% level, which would be a normal, healthy 10% correction, would take the index down another 600 points or so to 15450…other Fib. retracement levels are 14900 and 14400…

Updated Gold Chart

Gold is showing some interesting patterns with sell pressure in rapid decline and RSI(14) breaking out above previous resistance on this 6-month daily chart…combined with a bullish +DI crossover, Gold appears poised to do something BIG and this is what could stop the bleeding on the Venture…the surge in volume in Gold yesterday was notable…

The fact Gold was able to hold above its 2013 double bottom low in the midst of a parabolic move in the U.S. Dollar Index was impressive…during bullion’s fall from an August high of $1,324 to a low of $1,183 October 6, the “smart money” commercial traders dramatically scaled back their net-short positions while the large speculators – the momentum followers who are often on the wrong side of the trade – became increasingly bearish and fearful…

Gold is now trying to work through a band of resistance between $1,240 and the low $1,250’s…today, tomorrow and next week should prove very interesting in the Gold market – an imminent breakout would not be surprising based on bullion’s current technical posture…

Eldorado Gold Corp. (ELD, TSX) Update

Gold producers are looking very attractive at the moment and Eldorado Gold (ELD, TSX) is in the bottom quartile of the industry in terms of average cash operating costs…the company expects to produce 790,000 ounces of Gold this year, slightly higher than original estimates…

Eldorado broke above a downtrend line in June and soared nearly 50% before retracing recently to support at the rising 200-day SMA…the fact it held that support is bullish…RSI(14) and the SS are both indicating momentum is to the upside, while a bullish +DI crossover has also occurred…

Note:  John, Terry and Jon do not hold share positions in ELD.  Jon holds a share position in RIC.