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Gold is firmer this morning ahead of Fed Chairman Ben Bernanke’s speech and on new rumors the ECB has something big in the works for the euro zone…as of 5:30 am Pacific, the yellow metal is up $6 an ounce at $1,661…Silver is 26 cents higher at $30.70…Copper is up a penny at $3.43…Crude Oil has gained 66 cents to $95.28 while the U.S. Dollar Index has fallen over one-half of a point to 81.11 as it approaches a key support level…

ECB Rumor Lifts Markets

A rumor that Bundesbank President Jens Weidmann, one of the most strident holdouts against a potential European Central Bank (ECB) bond-buying plan, might resign swept through European markets on Friday…the rumor, which the German central bank declined to comment on, came after a German lawmaker from Chancellor Angela Merkel’s Christian Democratic Union party warned yesterday that Weidmann might go…European markets reversed sharply this morning, led by a rally in Italian and Spanish markets, following the speculation…Weidmann has stepped up the war of words with the ECB in recent weeks as plans by the central bank to start mass bond-buying to shore up Spanish and Italian bond yields looked more likely to come to fruition…he warned earlier this week that the bond-buying could become “addictive like a drug” (what would make him think such a thing?)…the ECB meets next Thursday and that’s what the markets will be turning their attention to today…

Bernanke In The Spotlight Today

The drum roll to Ben Bernanke’s speech in Jackson Hole has been getting louder all week, and the Fed Chairman is set to start speaking in less than two hours at 7:00 am Pacific at the Fed’s annual symposium in Wyoming…whether it’s disappointment or a hint that a further monetary boost to the economy is on its way, Bernanke’s speech has the potential of triggering a strong swing in either direction in markets across the board…

Traders and investors could be disappointed if they’re looking for something definitive from Bernanke today…some vague comments about the potential for additional easing measures are quite possible but Bernanke will likely want to keep his powder dry and pull the trigger at just the right time – probably not until after the November U.S. elections….given some of the clues of recent weeks, including minutes of the last Fed meeting, we don’t doubt that QE3, perhaps with a different twist than QE1 or QE2, is on its way but Bernanke and the Fed will want to review a slew of economic data in September…they’ll also want to see how the situation unfolds in the euro zone…however, just the anticipation of QE3 will help put a floor underneath the markets – so any sell-off today, should it occur, is likely going to be short-lived…

Wall Street Journal ace reporter Jon Hilsenrath, in an article last night, wrote that Dallas Fed President Richard Fisher expects the Fed chairman to deliver an academic commentary this morning on the costs and benefits of Fed action…”Investors,” Hilsenrath wrote, “are hoping for more than that…they want clear guidance about what the Fed will do next, though Jackson Hole hasn’t been a staging ground in the past for big policy pronouncements” (other than 2010 of course)…

A cost-and-benefit analysis from Bernanke would be interesting…we know QE has given the stock and commodity markets a boost…however, economists who have looked at the Fed’s bond-buying programs don’t see them producing big improvements in economic activity and some say the effects wear off over time…the Fed has purchased more than $2.3 trillion of bonds since 2009, yet the economy expanded at a paltry 1.7% annual rate in the second quarter of this year and unemployment was 8.3% in July, according to government data…Goldman Sachs chief U.S. economist Jan Hatzius estimates that a $500 billion bond-buying program would boost growth by 0.2% for a year and bring down the unemployment rate by 0.1%…Alan Sinai, chief economist at Decision Economics, estimates such a program would boost growth by 0.3% and bring down the jobless rate by 0.2%…

And The Real Fight Now Begins

Mitt Romney, whose business success has become his defining credential in a year of economic anxiety, accepted the Republican nomination for President last night and took aim at President Barack Obama as a failed steward of the nation’s balance sheet and its economy…Romney launched his fall campaign for the White House with a remarkably personal speech to the RNC and a prime-time TV audience, proclaiming that America needs “jobs, lots of jobs” and promising to create 12 million of them in perilous economic times…though Romney likely succeeded last night in improving his image among undecided voters, what he didn’t roll out was a specific plan or agenda to get America’s economy rolling again…defeating the “community organizer” should be a slam-dunk for a successful businessman who knows that government is the problem, not the solution, but Romney is going to have to do a better job of outlining his economic game plan and selling it to the American people…and time is running short…

Alberta’s Fiscal Time Bomb

What hope is there for the United States or governments around the world to get their debt problems under control when Alberta, long-regarded as a bastion of economic conservatism, keeps spending money like a bunch of drunken sailors?…Alberta is veering toward a deficit as high as $3 billion this year, more than three times larger than expected, which underscores the fact that the province has a spending problem just like every other jurisdiction on the planet…the Big Lie from Finance Minister Doug Horner is that a shaky global economy is to blame, that Alberta’s bottom line for 2012-13 has been hammered by weak royalties from bitumen and conventional oil, and low land lease sales to energy producers…the truth is, Alberta continues to spend more than it should and the government made unrealistic resource revenue and economic growth forecasts (conveniently, just before an election)…people need to be told the truth – that they must expect less from government and accept more personal responsibility – but not even Mitt Romney has the guts to say that…

Today’s Markets

Asian markets were down overnight, led by Japan’s Nikkei Index which fell 1.7% to a four-week closing low (the Nikkei was down 2.5%  this week but was up 1.7% for the month, its best August performance since 2006)…China’s Shanghai Index closed down just 5 points at 2048 but it was another bad month for that market with the Index shedding another 2.7% in its fourth consecutive monthly loss…European shares, as mentioned, are rallying strongly this morning while stock index futures in New York as of 5:30 am Pacific are pointing toward a solid opening on Wall Street…

India’s Q1 Economic Growth Tops Expectations

India’s economy grew at a higher-than-expected 5.5 percent in the quarter ending in June, against analysts’ forecasts of 5.3%, government data showed this morning…economic growth in Asia’s third largest economy slipped to 6.5% in the 2011/12 fiscal year ending in March from an annual rate of 8.4% in the two previous fiscal years…

Shanghai Chart

The recent fall in Chinese equities is driven by weakness in the economy and poor corporate earnings growth, but does not yet suggest that investors are in panic mode, say analysts…China’s Shanghai Composite Stock Index has shed 15%  in the past three months and is down more than 6% year-to-date, making it Asia’s worst performing major stock market this year…it has also lagged its global peers such as the S&P 500, which is up more than 12%…market sentiment this week was hit by disappointing corporate earnings, especially from Chinese banks, which have seen a slowdown in profit growth…. first-half earnings this year have been the worst for Chinese companies in three years…in addition, property stocks have been hurt by local news reports of further measures to cool the sector…

Below is an updated chart from John on the Shanghai Index which appears ready for a turnaround…the Index is now resting at wedge support and RSI(2) is once again firmly in oversold territory…September should be a better month for this market, and that’s good news for global equities in general…

Copper Chart

The price of Copper is very much dependent on the health of the Chinese economy, and so far the price has been holding up amazingly well…John’s updated Copper chart shows a market that is very close to a decision point as trading is moving closer to the apex…note the RSI(14) up trendline that started late last year, and the intense selling pressure lately that has failed to break support for Copper…that selling pressure is now starting to abate…

Venture Exchange

As expected, the Venture Exchange found support at its 20-day moving average (SMA) yesterday and we’ll see if it turns the corner today after posting declines in each of the last four trading sessions…RSI has hit support at 50% while the SS(2,3) indicator has reached extreme levels, suggesting a reversal is close at hand…the Venture closed down 11 points yesterday at 1218…the 50-day SMA has flattened out at 1200 and provides additional strong support…

GoldQuest Mining (GQC, TSX-V)

A great opportunity in our view has opened up in GoldQuest Mining (GQC, TSX-V) which has fallen in six out of the last 8 sessions to yesterday’s close of $1.42…GoldQuest’s huge move since it was trading at a nickel just over three months ago has not come without some significant corrections along the way, so the recent 30% drop to cleanse a technically overbought situation should be viewed as a very normal and healthy technical development…what we’ve seen in recent days is distribution of the stock by speculators and accumulation by value investors…below is an updated 3-month daily chart from John that shows a rebound is likely imminent…

Note:  Jon holds a share position in GQC (John and Terry do not).