BullMarketRun.com

Volatility continues to rule the markets…Gold plummeted by more than $100 an ounce for the second trading session in a row overnight, dropping as low as $1,531 – just $6 above its rising 200-day moving average (SMA)…it has since reversed, however, and as of 8:30 am Pacific, the yellow metal is down $49 an ounce at $1,607…this dramatic volatility can be unsettling to many investors but understanding volatility and making it your friend is an important part of the formula for being a successful investor…Gold had become extremely overbought last month and the possibility of a near-term decline to the outer or inner trendline support areas, as shown below in John’s most recent 2.5-year weekly chart, was considered very high…this is exactly what has occurred, albeit over a quicker period than was anticipated…since its September 6 all-time high of $1922 on the Spot Market, Gold has tumbled nearly $400 or 20% – interestingly, this is exactly in line with Gold’s average 18% correction during recent years…there is absolutely no indication that we are witnessing a reversal in Gold’s long-term bull phase…James Steel, precious metals analyst at HSBC in New York, summed it up best…”There isn’t a single macro, geopolitical or any other event that has occurred in the last three days to give evidence of a reversal in the Gold rally”…Gold’s 200-day SMA has not been breached since January, 2009…at times of economic and stock market turmoil in recent years, it also has not been unusual for Gold to initially tumble in part because traders/investors have had to cash in their Gold in order to cover margin calls on other investments…from March 17, 2008, the day after the Bear Stearns’ collapse, to a low in mid-October, bullion fell more than 30%…in the next year it surged 50%…likewise, when the Dubai world default triggered a wave of selling across global financial markets in November, 2009, Gold was not immune…it dropped 12% in the subsequent 10 weeks, only to rally to another new high…below is John’s Gold chart after Friday’s trading…notice how the RSI has gone from extremely overbought to very close to important support (entering today)…John will update the Gold chart following today’s trading…

Silver took another hit overnight and touched another support area at $26…as of 8:30 am Pacific, Silver is off $1.51 at $29.42…Copper is down a dime at $3.20…Crude Oil is 61 cents weaker at 79.24 while the U.S. Dollar Index is flat at 78.19…the TSX Gold Index is holding up well, down 3 points at 393, while the CDNX continues to suffer…it’s off another 44 points at 1502…the Venture is extremely oversold, however, and we could see an intra-day reversal…

Detour Gold (DGC, TSX) is consolidating its holdings in the Detour Lake Gold camp…in another example of what we can expect a lot more of in the coming months, DGC and Trade Winds Ventures (TWD, TSX-V) have entered into a definitive agreement pursuant to which Detour Gold will acquire all of the issued and outstanding shares of Trade Winds, by way of a court approved plan of arrangement, for total consideration of $84-million…under the terms of the agreement, Trade Winds shareholders will receive 0.0142 of a Detour Gold share and $0.0001 in cash for each Trade Winds’ share held…based on Detour Gold’s closing share price last Friday, this represents total consideration of 45.5 cents per Trade Winds share and a premium of 57% to Trade Winds‘ closing price Friday…TWD is the most active stock on the CDNX so far today and is currently up 11.5 cents at 40.5 cents…if you believe Gold stocks are due for an immediate recovery, TWD has to be considered an attractive play at the moment…

Richmont Mines (RIC, TSX), which fell $1.07 Thursday and $1.04 Friday, dropped another 84 cents this morning, touching a low of $10.15…$103 million in market capitalization (24%) was knocked off Richmont in just four trading sessions which makes no sense at all but that’s the market…fortunes are born when there is blood in the streets…

Spanish Mountain Gold (SPA, TSX-V), a company with a very attractive low grade Gold deposit in central British Columbia, touched its 100-day moving average this morning (SMA) at 66 cents…last week, it was as high as 87 cents…there are many other examples of technically very oversold situations including two companies we follow closely, Visible Gold Mines (VGD, TSX-V) and Currie Rose Resources (CUI, TSX-V)…