Gold has traded between $1,277 and $1,298 so far today…as of 8:00 am Pacific, bullion is up $13 an ounce at $1,294…Silver is 19 cents higher at $18.09…Copper is off 6 cents at $2.49…Crude Oil is up 44 cents at $45.59 while the U.S. Dollar Index has tumbled more than a point to 93.89…
Holdings in SPDR Gold Trust, the top Gold ETF, continue to trend higher…they rose 0.24% yesterday to 743.44 tonnes…
The Netherlands raised its Gold holdings for the first time in 16 years in December, data from the International Money Fund show, but emerging markets still dominated Gold-market activity among central banks in December…
Russia, which has one of the world’s largest holdings of the metal, added around 666,500 troy ounces to its 38.8-million ounce stockpile last month, according to the IMF data…Kazakhstan, meanwhile, lifted its reserves 2.2% to 6.2 million ounces, and Belarus 3.3% to 1.4 million…
Meanwhile, Russia’s fractured economy suffered another potential blow yesterday after credit-rating firm Standard & Poor’s cut the country’s credit rating to junk, sending it below investment grade for the first time in more than a decade…the move came as a surge in fighting in Ukraine prompted the West to threaten new sanctions against the Putin regime…
Oil Update
Crude Oil has tanked almost 60% since June as the OPEC resisted calls to cut output and the U.S. pumped at the fastest pace in more than 3 decades…when markets are oversupplied, traders/investors find a price that destroys the oversupply…the question is, what will that price be in the case of Oil?…
Energy tycoon Boone Pickens predicted late last week that Crude will be back at $70 or $80 by the fourth quarter of this year…
“The reason the Oil price has dropped is because of production here in the United States,” Pickens stated in an interview with CNBC. “No question, we were the ones that caused it, and we’ll be the ones that will fix it. And the way we fix it is our rig count will go down. Oil producers in West Texas and North Dakota can’t drill for $45 Oil,” he added. “In the last 30 days they’ve dropped 300 rigs. You’re gonna reach an all-time high on the inventory of Oil, and it will be reached within the next 6 weeks, and then it will start to decline.”
According to Reuters, Oil rig counts saw their second-sharpest weekly drop in 24 years last week, but Pickens’ estimate of 300 rigs dropping in the last 30 days is too high according to data released by Baker Hughes several days ago…
The Geopolitical Factor
The 1 factor Pickens is not taking into account is geopolitics: The Oil drop is not just about U.S. oversupply, or even a Saudi effort to maintain market share and reverse growing U.S. production…the Saudis are very concerned about regional rival Iran and how it has been extending its influence in the Middle East, from Syria to Yemen (Iranian-backed Houthi rebels seized control of the Yemeni government, heretofore pro-American, just last week)…Saudi Arabia, many officials believe, is pushing back against Iran and attempting to weaken that regime through lower Oil prices…it certainly wouldn’t be the first time in recent history that Oil has been used as a “weapon”, so to speak…
Crude Oil 19-Year Weekly Chart
The extent of technically oversold conditions in WTIC at the moment is unprecedented going back 2 decades, though this doesn’t mean that Oil has found a bottom yet…this is a deeply troubled market that appears to be in the midst of a seismic shift of historic proportions, fundamentally and technically…
Long-term support at $50 was rather weak and has been broken…at a minimum, we expect Crude to test the next long-term support level which is $35, consistent with an A-B-C corrective phase…even $20 Oil can’t be ruled out as a potential final low…
Specifically, don’t expect Oil to hit bottom until there is at least an RSI(14) divergence with price…in other words, at some point we can expect the RSI(14) to begin to push higher to “unwind” the extreme oversold conditions…this would be accompanied by a rally in the Oil price – merely a bounce, however…the “C” phase would bring a new low in the price but not in the RSI(14) – that’s the pattern to watch for to identify a possible bottom in Oil…it’s the pattern that also played out in late 2008/early 2009 when Oil crashed into the low $30’s…
Oil Price Drop Eats Canada’s Surplus
Canada’s Parliamentary Budget Officer estimates the annual impact of the Oil price decline on federal government finances will be about $5 billion annually, assuming current prices hold…that’s certainly an unfortunate development but quite manageable…the Ottawa-based agency said that if the price of WTIC remains just under $50 a barrel, the feds face the possibility of running a deficit of about $400 million in the fiscal year that begins in April, from a previously projected surplus of $4.9 billion…savings will have to found somewhere to offset the revenue loss and balance the books…
U.S. Dollar Index Updated Chart
Last week, the U.S. Dollar Index broke out above important resistance at 93 and immediately took off to the next Fib. level which was 96…the greenback is now catching its breath as that move was simply too fast…the pullback should certainly find support at 93 while exceptionally strong secondary support exists at the rising 50-day moving average, currently at 90…the Dollar Index is certainly overdue to retrace to its 50-day…
As strong as the dollar has been since mid-December, in particular, Gold has been outperforming it…it’ll therefore be very interesting to see how bullion behaves in the event the Dollar Index experiences its most significant correction since its bull run started last summer…
Overall, it’s important to keep in mind that the primary trend in the U.S. Dollar right now remains up, and at the very least we expect to see the Dollar Index test resistance at its long-term downtrend line in the high 90‘s…
This 6-month daily chart shows 2 uptrend lines that should underpin the Dollar Index over the coming months…meanwhile, the effects of a stronger dollar are now beginning to be felt by U.S. businesses which is why the Dow is suffering this morning…a number of Wall Street’s biggest firms missed earnings expectations as a result of the consistently strong greenback…
U.S. Dollar-Venture Comparative Chart
A strong greenback is typically a major headwind for the Venture, so a period of consolidation in the Dollar Index would relieve some pressure on the CDNX…
Below is a monthly chart going back 15 years…the Dollar Index was relatively weak during the first half of last year, which gave the Venture room to trend higher, but a major change occurred in the late summer when the greenback suddenly gained strength…the relationship between the Dollar Index and the Venture cannot be underestimated…
Today’s Equity Markets
Asia
China’s Shanghai Composite fell 29 points or nearly 1% overnight following government data that showed an 8% slump in industrial profits from a year earlier…Japan’s Nikkei average, meanwhile, was buoyed by a soften yen and jumped 300 points or 1.7% to a 4-week high…
Europe
European markets closed significantly lower today, dragged down by weakness on Wall Street…
Greece and its creditors have moved toward confrontation as the country’s new leftist government has pledged to make good on promises to reverse years of public spending cuts despite warnings from Berlin and other European capitals that doing so could plunge Greece, and the euro zone, into a deeper crisis.
“There are rules, there are agreements,” German Finance Minister Wolfgang Schäuble said of the framework for Greece’s financial rescue. “Whoever understands these things knows the numbers, knows the situation.”
North America
The Dow is down 356 points through the first 90 minutes of trading…some earnings misses are a factor in today’s drop, but the Commerce Department also reported this morning that demand for big-ticket manufactured goods tumbled last month – a sign that U.S. businesses remain cautious about spending despite the economy’s recent momentum…orders for durable goods – products like kitchen appliances and cars designed to last at least 3 years – declined a seasonally adjusted 3.4% in December from a month earlier…that marked the second consecutive monthly drop…excluding the volatile transportation sector, orders dropped 0.8%…economists surveyed by The Wall Street Journal had expected overall orders to rise 0.3% last month…
In Toronto, the TSX is off 119 points while the Venture has lost 2 points to 672 as of 8:00 am Pacific…GoldQuest Mining (GQC, TSX-V) announced this morning that it has commenced a 5,000 meter drill program at new target areas within its Tireo project concessions in the Dominican Republic…the program will cover the Imperial, La Bestia, La Bestita and Guama targets, all of which are covered by concessions granted to the company…GQC struck out on the drilling front last year – they’re overdue for a very good hole…
TSX Gold Index Updated Chart
The TSX Gold Index actually closed higher yesterday despite the drop in Gold, a sign that the mild correction in bullion would likely be short-lived…
Up momentum in the Gold Index is strong with the next resistance level at 203 as shown in John’s 6-month daily chart…yesterday’s action was certainly bullish as the Index fell to 179 intra-day but closed at 188…as of 8:00 am today, it’s up another 5 points at 193…
AuRico Gold Inc. (AUQ, TSX) Update
AuRico Gold (AUQ, TSX) has completed a confirmed breakout above a long-term downtrend line, a significant technical development that helps underscore the major trend change in Gold producers…
AUQ will be releasing its Q4 and year-end financial results for the period ended December 31 after the market close on February 19…just over a week ago, AUQ released an initial NI-43–101 compliant indicated resource of 2.1 million AuEq ounces and an inferred resource of 3.4 million AuEq ounces at the Kemess East deposit, located 1 km east of the previously delineated Kemess underground deposit and 6.5 km north of the Kemess mill facility…
AUQ is 12 cents higher at $5.01 as of 8:00 am Pacific…
Note: John, John and Terry do not hold share positions in GQC or AUQ.
GGI – I will give ya my two cents worth. If you read all the write up by Jon, you will remember a few weeks ago he said that they would be traveling to GBB site next week. So this is where I think his visited GBB and not GGI. It would be a very expensive trip to visit GGI. GGI with no news is a mystery. I myself speculating on this board that maybe a spin off of the grizzly and a buy out on Mexico. But I gave that some more thought. I can’t see GGI Mexico property getting bought out at a cheap price. Even $100 million would be a cheap price. At $100 mil, that would put GGI opening around $1.75 or so. I honestly can’t see GGI closing at .16 and a surprise news release saying they have a takeover offer for $100 mil. I also think that they need to do a lot more drilling to size up the deposit. Now, thats my take on it. Anyone want to jump in and let me know if I’m asleep at the wheel, feel free too. Oh Jon, where were you?
Comment by dave — January 27, 2015 @ 8:57 am
Any thoughts on Ecuador gold and copper, EGX? They have a massive resource and a PEA set to be completed any day now. And from what I understand, mining friendly tax law changes are happening in Ecuador now. What do you think?
Comment by Sam — January 27, 2015 @ 9:20 am
we are all in the dark about GGI having no idea how much drilling has actually been done is all we have is pictures of core
Comment by brian — January 27, 2015 @ 9:27 am
Also, I mentioned a while back that I purchased some NAR. I would suggest for those who don’t work and watch the market to keep an eye on this one for any kind of volume buying. This stock is not very liquid, but can double in a heartbeat probably by early March. If they get a $200 per carat on the diamonds, this puppy is gone. what is very interesting to me is this stock had a resistance of .55 until it broke above a couple of days ago. Right now, it has a huge support at .55 with a Confluence number of .35 – This is a huge confluence number at .55 – This tells me it will take very bad news to break below .55 – Worth keeping an eye on.
Comment by dave — January 27, 2015 @ 9:29 am
Dave
I don’t think you are asleep at the wheel, otherwise you would not
have come to the conclusion that we should be trading higher, if
indeed there was something going on, because i bet that one, or all
of the management team talk in their sleep.
Comment by Bert — January 27, 2015 @ 11:09 am
NAR is another quality play, Dave, that could really ramp up later this quarter. We’ll be doing an update in the coming days—-I believe you’re right on the importance of the move above .55, we’ll have John do an updated chart.
Comment by Jon - BMR — January 27, 2015 @ 11:10 am
thanks Jon, however, to my surprise, it did break below .55 today. House #9 killed it for some reason. The program I use is very acurate, but sometimes it fails momentarily. I say momentarily cause NAR won’t be below .55 long. Well, thats why I am at 85% green trades. However, I am not selling NAR, so I can’t put it in the 15% losing trade catagory just yet.
Comment by dave — January 27, 2015 @ 12:27 pm
Geez Jon, talk about games. Look at the trades on Nar. Twice it traded below the .55 and anon took out 500 at .58, once at the close to keep it with a close above .55 – This is about the craziest thing I’ve seen in a while. Haywood snaked out all those shares at .51
Comment by dave — January 27, 2015 @ 1:04 pm
Dave, cost to fly to Mexico not much more than as it is to Quebec.
Comment by Dan — January 27, 2015 @ 1:05 pm
Hey Jon and John. Do you.see.any.concern the longer the venture trades within this current range?
Comment by tony t — January 27, 2015 @ 1:32 pm
Hi Tony, John can add to this, but in my view the Venture is behaving well considering the experience it just went thru Sept-Dec with a 40% drop. It’s trading right now within resistance (680) and support (low 650’s) as John’s charts have shown, and today’s action was encouraging. With any luck we may get a push thru 680 for month-end which would be nice to see. Buying interest will also intensify once the Venture is able to overcome its 50-day SMA and it reverses higher. This is a process.
Comment by Jon - BMR — January 27, 2015 @ 2:26 pm
Been looking into cannabix tech since u guys mentioned it. Thinking about getting in on this play, any idea at all as to when the prototype is supposed to be done?
Comment by Sam — January 27, 2015 @ 2:31 pm
thanks Jon. Has the venture ever traded in this range for this long?
Comment by Tony T — January 27, 2015 @ 3:48 pm
Sam, I’m certain we’re going to see some exciting things out of BLO during this first quarter, including the prototype. I’m positioned and patient because when BLO blows, she’s going to blow big IMHO. I wouldn’t wait to get positioned in this or try to “time” your entry around the prototype release date, otherwise you may be paying considerably more. Certainly do your DD, talk to Rav, management is very approachable, but this is a fantastic deal. I’ve been bullish on this since Day 1 and have bought as high as .24, as low as .05.
Comment by Jon - BMR — January 27, 2015 @ 3:59 pm
Thanks Jon for your insight. Very helpful. Any thoughts on EGX? That is another play I’m considering getting in on. They have a PEA due very soon. Not sure if you have heard anything about it but thought I would ask.
Comment by Sam — January 27, 2015 @ 4:07 pm
You’re welcome, Sam. I know of EGX but my issue is that it’s in Ecuador. That’s where my beautiful fiancee is from, but I don’t trust the politics down there. Wouldn’t buy any stock with operations in Ecuador. The bananas are delicious, the scenery is beautiful but the politics and the attitude toward mining are brutal.
Comment by Jon - BMR — January 27, 2015 @ 5:16 pm
Yea I remember the whole situation with kinross down there and the whole tax issue. But apparently the president Rafael correa is pro mining and in the process of changing the mining laws. With the amount of gold they have I think it would be worth more than 6 cents a share. But yea I guess it’s risky due to politics. Thanks a lot for your advice. I’m also in DBV and hopefully it explodes thru the roof once we have the rest of the results from H-23!
Comment by Sam — January 27, 2015 @ 5:32 pm