Gold has traded between $1,226 and $1,240 so far today…as of 8:45 am Pacific, bullion is down $3 an ounce at $1,229…Silver is up 1 cent at $17.11…Copper is off 2 pennies at $2.94…Crude Oil is down nearly $3 a barrel to $60.90, a new multi-year low…OPEC has reduced its demand estimate for 2015 by roughly 300,000 barrels a day, with the cartel saying the effect of the 40% drop in prices on supply and demand is uncertain…Bank of America has warned this morning that OPEC no longer exists in any meaningful sense and Crude prices will slump to $50 a barrel over coming months as market forces shake out the weakest producers…technically, there’s a very strong case for that, especially if support at $60 for WTIC doesn’t hold…adding pressure to Crude today has been the Energy Information Administration’s latest figures showing U.S. commercial crude inventories climbed 1.5 million barrels last week…analysts had anticipated a draw down of 2.2 million barrels…the U.S. Dollar Index is off one-quarter of a point to 88.37…
Gold made an impressive move yesterday, hitting a 6-week high after pushing through key resistance at $1,220…confirmation of that breakout is required today, so another close above $1,220 would be highly encouraging…the U.S. Dollar Index has some major long-term resistance to deal with around the 90 level, so Gold bulls are likely sensing that the greenback is due for some consolidation in the near future which would be bullish for precious metals and the commodities space in general…the next key targets for Gold are $1,240 and the October high of $1,256…
SPDR Gold Trust, the world’s largest Gold-backed exchange-traded fund, said its holdings rose 0.37% to 721.81 tonnes yesterday…this total is still just shy of a 6-year low but that can be construed as a bullish indicator with the Gold Trust representing a source of potential new buying…
Strong investor demand has lifted American Eagle Silver Bullion coin sales to a record for the second straight year, the U.S. Mint confirmed yesterday…
A study by SNL Metals & Mining shows that major miners now account for 40% of global exploration allocation…in 2014, these 39 larger players budgeted a total of $4.33 billion and accounted for 40% of the $10.74 billion worldwide exploration total…the top 3 explorers were Antofagasta, a Copper producer; Vale, a diversified major; and Fresnillo Plc, a Mexican-based precious metals producer and the world’s leading Silver producer…touching on junior miners, the report stated that an unrelenting “financing drought has squeezed juniors’ budgeting to the point that the majors have become the biggest drivers of early-stage exploration.” The SNL study also noted that Chile has replaced Canada as the leading jurisdiction for allocated exploration budgets…also falling on the list were the United States, Russia and China…
Today’s Equity Markets
Asia
A volatile session in China overnight…the Shanghai Composite reversed losses to finish more than 2% higher at 2941…early in the session, the index lost over 1% after lower than expected inflation numbers added to concerns of cooling activity in the world’s second-largest economy…the CPI rose 1.4% from the year-ago period, the lowest reading since November 2009 and below a Reuters forecast for a 1.6% increase…the wholesale sector, meanwhile, remained entrenched in a deflationary spiral – the PPI fell 2.7% on year in November, worse than the 2.4% decline forecast…
Japan’s Nikkei average fell 400 points or 2.25% overnight to close at 17413…
Europe
European markets are up slightly in late trading overseas…the Athens stock market has stabilized today after plunging nearly 13% yesterday, its biggest 1-day fall since December 1987, after the Greek Prime Minister’s surprise decision to call early presidential elections…markets are nervous that the high-stakes gamble by Antonis Samaras could trigger early parliamentary elections and pave the way to the stridently anti-austerity, hard-left Syriza party assuming power…voting for a new head of state will begin next week…
North America
The Dow is down 162 points as of 8:45 am Pacific on fresh global economic growth concerns…
An inflation gauge closely watched by Federal Reserve officials has fallen to the lowest level since the financial crisis, potentially complicating the interest rate outlook as investors brace for a possible Fed rate increase as soon as mid-2015…the 5-year forward 5-year inflation breakeven rate hit 2.0185% this month, the lowest since the end of 2008, according to the data provided by Dutch-based Rabobank…the gauge measures what the average inflation rate will be during a 5-year period starting from 5 years from today, in this case between 2019 and 2024…
In Toronto, the TSX is down 260 points as of 8:45 am Pacific…on top of plunging Oil prices, the Bank of Canada came out this morning with an estimate that house prices in the country are overvalued by as much as 30% and also warned that household debt remains the biggest risk to Canada’s economy…
The Venture is off 11 points at 674…if the firmness in Gold continues, expect the higher prices to begin to resonate in the junior resource sector once tax-loss selling has exhausted itself…historically, on average, this is the week the Venture puts in its monthly low before a rebound begins…
TSX Gold Index Chart Update
It’s a Perfect Storm to fuel a significant move in Gold producers – higher Gold prices and weak Oil prices…Canadian-based producers are also enjoying the added benefit of a low Canadian dollar…the mainstream media keeps harping about the negative affects on Canada of a sagging energy sector, but no one seems to have picked up on the fact that the current environment is a screaming buy signal for Gold producers, many of whom have also trimmed a lot of fat over the last couple of years during a 40% drop in the U.S. Gold price…their cost structures are improving even more with Oil down so sharply this quarter…
TSX Gold Index buy pressure has replaced sell pressure which was dominant for 3 months starting in September…the Gold Index is now attempting to gain momentum above its 50-day moving average (SMA) which is starting to flatten out in the 150‘s…this is a bullish technical set-up that suggests the Index may push higher to test resistance in the coming weeks near its 200-day SMA around the 180 level…
The Gold Index has added another 2 points to 157 as of 8:45 am Pacific…
The GDXJ – Market Vectors Junior Gold Miners ETF
Another bullish sign for Gold stocks can be seen in the Junior Gold Miners ETF (GDXJ, NYSE) which includes the likes of Torex Gold Resources Inc. (TXG, TSX), SEMAFO Inc. (SMF, TSX), OceanaGold Corp. (OGC, TSX), Primero Mining Corp. (P, TSX), China Gold International Resources Corp. (CGG, TSX), Lake Shore Gold Corp. (LSG, TSX), Fortuna Silver Mines Inc. (FVI, TSX) and Northern Star Resources Ltd. (NST, AU)…
The key breakout point to watch for with the GDXJ is the $30 level which would also put it convincingly above the downtrend line…a double bottom appears to have formed this quarter, RSI(14) is showing a bullish “W”, and a +DI/-DI crossover in the SS appears imminent…
Richmont Mines (RIC, TSX) Update
Richmont Mines (RIC, TSX) remains our favorite producer as it has both earnings momentum and price momentum with the stock hitting a new multi-year high again this morning of $4 per share…Richmont also has a 1 million ounce high-grade resource to begin exploiting in 2015 under existing workings at its Island Gold Mine in northern Ontario…
Richmont raised production guidance for 2014 to 85,000 to 90,000 ounces…the company’s cash and short-term deposits increased to $38 million at the end of September…they’re well-positioned to “seize the moment” with development of the Island Gold deep discovery which has NI-43-101 indicated resources of 456,000 ounces grading 11.52 g/t Au and inferred resources of 3.2 million tonnes grading 9.29 g/t Au…the discovery remains open in all directions after 100,000 meters of underground drilling in 2013…
Richmont has recorded back-to-back exceptional quarters, boosting net earnings to 16 cents per share through the first 9 months of 2014…Q4 should also be strong with the company reaping the benefits of a lower Canadian dollar and a significant drop in Oil prices…Richmont’s current market cap of around $185 million is still exceedingly modest in our view given the company’s assets and ability to drive earnings and value in 2015…
Now this is high-grade – grey quartz veining with visible Gold in previously reported drill hole 425-487-118 (9,240 g/t Au or nearly 300 oz/ton in a 30 cm sample) at the Island Gold Mine deep discovery (from RIC April 1 Island Gold Mine technical report).
Technically, Richmont appears to be warming up for a powerful move toward the next 2 Fib. measured resistance levels…with this kind of momentum, expect RSI(14) to reach into overbought territory for an extended period…this means we could see a move over the short-term to at least the first Fib. resistance level at $5…
RIC is up 14 cents at $3.87 as of 8:45 am Pacific…
Eldorado Gold Corp. (ELD, TSX) Update
Try to stick with producers with low cost profiles – Eldorado Gold (ELD, TSX) is certainly 1 of those…the company’s all-in sustaining cash costs averaged $735 per ounce in the the third quarter while cash operating costs averaged $488 an ounce (adjusted net earnings were $36 million or 5 cents a share)…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 during the sector sell-off to base support just below $6…ELD is now beginning to gain traction above $8 a share, an important Fib. resistance area…
As of 8:45 am Pacific, ELD is up 4 cents at $8.29…
Contact Exploration Inc. (CEX, TSX-V) Update
The extent of the sell-off in the Venture over the last 3+ months has had a lot to do with the increased influence of energy plays…Contact Exploration (CEX, TSX-V) is an excellent example of how Oil and gas plays started to dangerously break down in late September/early October…
Approximately $80 million has been wiped off Contact’s market cap since it hit a high of 56 cents…this 2.5-year chart shows why TA is so critical in assessing an overall trend as well as potential important turning points…CEX‘s upsloping channel stayed intact for more than a year until the beginning of October – that’s when we warned of trouble on the horizon for this play, and it wasn’t a good sign for the overall sector either…
What’s critical now is to see if CEX can hold support around 20 cents…we’re not sure that it will as oversold conditions are not yet at an extreme level…
CEX is off a penny at 20 cents as of 8:45 am Pacific…
Note: Jon holds a share position in RIC.
Ruh Roh, we are below the 2008 and 10 year low. I don’t have a 20 year chart. John, Heeeeeeelllllllpppppppp.
Comment by dave — December 10, 2014 @ 9:19 am
When I listed my holdings, I forgot that I only sold half my position in TLT. Yes Dan it is doing well. You may want to look at NPH. I took a position in this as well. The oil and metals have been getting crushed but the Pharmy’s have held up really well. I sold some of my others and I am currently in GGI, TLT, and NPH.
Comment by dave — December 10, 2014 @ 9:52 am
I am a shareholder in RIC. I like your coverage. One suggestion would be to get someone from the company on an audio mp3 podcast. You used to do company interviews, but I have not seen this in a while on your web site.
Comment by Mike — December 10, 2014 @ 10:53 am
Hi Mike, we’ll be expanding that sort of coverage early in the New Year…
Comment by Jon - BMR — December 10, 2014 @ 10:59 am
Jon, you know I like to be kinda comical with my posts, but I wonder what the next support is for the Venture. There are some stocks that have held up well and GGI is one of them, its encouraging.
Comment by dave — December 10, 2014 @ 12:09 pm
Next strong support for oil is at $33-$35 area. It broke the long-term support line (63.30ish)for the first time ever in its 15 year bull run. Not looking good at all for Canada.
Comment by chris — December 10, 2014 @ 1:42 pm
It shouldn’t surprise anyone. Years of low interest rates and reckless money printing are coming home to roost.
Comment by chris — December 10, 2014 @ 1:47 pm
Venture blows past 08 low. Now it’s a guessing game for the bottom.
Comment by tony t — December 10, 2014 @ 2:09 pm
Immediate support for Oil, Chris, is at $60, followed by strong support at $50. $50 certainly looks probable, perhaps not until sometime during Q1…a crash to the $30’s certainly can’t be ruled out – if that were to happen, the quicker the better (as opposed to a slow bleed) as such an event would likely result in a speedier recovery…just like the Venture’s crash in 2008 over 3 months was much preferable over a drawn out saga like we’ve seen from early 2011 to now…
Comment by Jon - BMR — December 10, 2014 @ 3:33 pm
Dave!! A little comedy can never hurt ya!!
Comment by Greg J. — December 10, 2014 @ 3:54 pm
Jon, understand. But I am talking long-term support(dating back to 1999). This bullmarket started when oil was trading at $10. Crashed in 2009, $33, then resumed higher. I am expecting oil to test that 2009 price again.
Comment by chris — December 10, 2014 @ 4:47 pm
It certainly could – eventually, at least – test the 2009 price again, Chris, or come close to that. The fundamentals are bearish enough to cause that, for sure. Technically, John has 2 charts for the morning that will shed some interesting light on where things currently stand.
Comment by Jon - BMR — December 10, 2014 @ 8:39 pm