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Gold has traded between $1,685 and $1,695 so far today…as of 6:50 am Pacific, the yellow metal is flat at $1,696…Silver is down 3 cents to $32.28…Copper is off slightly to $3.63…Crude Oil is up 37 cents to $87.10 while the U.S. Dollar Index has retreated one-tenth of a point to 79.53…

Gold is down just over 1% so far in December (vs. a 10% loss for the entire month last year) as it faces the possibility of a third straight monthly loss…for the year, however, bullion has gained 8% as central banks from the U.S. to China and Europe took action to prop up economies, debasing currencies and increasing haven demand…holdings in ETPs have expanded 12% this year to 2,630.703 metric tons as of Dec. 14, according to data compiled by Bloomberg…

One can’t help but be bullish regarding the prospects for Gold when one examines the balance sheet trend for the Federal Reserve…Gold really started to take off in late 2007 when the Fed balance sheet, as seen in the chart below, crossed the $1 trillion level for the first time…the Fed’s balance sheet has nearly tripled since then, and is now set to increase by $85 billion per month – it will pass the $3 trillion level by mid-2013 – as the Fed announced last Wednesday…it’s hard to imagine Gold not ultimately moving to a record high and shooting through the $2,000 mark as the Fed’s printing press goes into overdrive…

First Majestic Launches Friendly Takeover Of Orko Silver

There’s nothing like a takeover to give the Venture Exchange a lift and inject fresh cash into the market…First Majestic Silver Corp. (FR, TSX) and Orko Silver Corp. (OK, TSX-V) have entered into a definitive agreement pursuant to which First Majestic has agreed to acquire all of the issued and outstanding common shares of Orko for consideration of 0.1202 of a common share of First Majestic plus 0.01 cent in cash per Orko common share…the offer implies a value of $2.72 per Orko share based on Friday’s closing prices for FR and OK, a premium of approximately 69% to Orko’s 30-day volume-weighted average price for the period ending December 14…through the first 20 minutes of trading, OK is up 87 cents a share to $2.47 while FR is down nearly $2 to $20.81…

China and Silver

China’s role in the global Silver market has dramatically changed over the past decade…once a small player in the global market, China now is the world’s leading market for both physical investment and paper trading of Silver futures and other similar products, and is also the second largest silver fabricator…Chinese demand for the white metal is expected to achieve further strong growth in the years ahead, according to a report by Thomson Reuters GFMS released last week by the Silver Institute (www.silverinstitute.org)…

Total Silver demand in China has grown by over 100 million ounces in the past 10 years to a record 171 million ounces…the strength of the Chinese economy, assisted by a boom in the manufacturing sector, along with heavy investment in infrastructure, has boosted domestic demand for Silver since the liberalization of the Chinese Silver market at the start of 2000…this has propelled China into becoming the world’s second largest Silver fabricator, with its share of global demand standing at 17% at the end of 2011…overall Silver fabrication demand has grown from 67 to 160 million ounces from 2002-2011, a rise of 137%…

In the same time period, Chinese industrial Silver fabrication experienced an almost uninterrupted period of growth, posting an impressive 135% increase…the largest slice of industrial demand has come from the electrical and electronics sector, rising from 17 million ounces in 2002 to 40 million ounces last year…key to this development has been a rapid expansion in the country’s semi-conductor sector…similar growth across a wide range of applications has also occurred, including a surge in cell phone and computer production to account for 70% and 90% respectively, of the global total last year…additionally, strong advances have been reported in other personal electronic goods, including tablet computers, notebooks and light emitting diode backlit televisions…

Investment demand from Chinese Silver investors has jumped in recent years, making China the world’s biggest market for both physical investment and paper trading of Silver futures and other similar contracts…of note, during the first full year after the liberalization of the Chinese Silver investment market in 2009, net demand for Silver bars and coins doubled to 9.8 million ounces…in 2011, the figure soared to 17 million ounces, accounting for 8% of global net purchases of Silver bars and coins…

On the supply side, Chinese mine production has almost doubled over the last decade, assisted by the base metals mining sector, leading to a sharp rise in Silver produced as a by-product…China’s mine production of Silver now accounts for 14% of global supply, and it is likely to be recorded as the second largest Silver producing country in 2012…

Silver Short-Term Chart

Silver has outperformed Gold in 2012 and we expect that trend to continue through 2013, though Silver did suffer some minor short-term technical damage last week as it closed below the $32.50 support band…however, support is very strong between $31.50 and $32 as shown in this 9-month daily chart from John…

Silver Long-Term Chart

Long-term, nothing has changed with Silver as it remains locked in a powerful Wave 5 phase that ultimately should take it well beyond the record $50 level…John’s Fibonacci target (no timeline at the moment) for the end of Wave 5 is $78 an ounce…

More Reforms Coming In China As Country Focuses On Urbanization

China’s new leaders over the weekend sent their strongest signal yet that their top economic priority is to remake the economy so it relies more on domestic demand and less on exports and investment in capital-intensive state-owned companies, even if that reduces short-term growth…in a statement issued after the annual Central Economic Work Conference, a weekend meeting of senior officials to assess economic and international challenges, Beijing’s leadership said it wanted to boost imports and speed the integration of rural migrants into cities as ways to spark domestic consumption, according to reports in China’s state-owned news agency, Xinhua…China needed to show “more courage to reform”,  the statement said…the conference was chaired by the incoming premier, Li Keqiang, and focused on one of Li’s top economic priorities, urbanization, which the group’s statement called an “historic task” and “the biggest potential driver of domestic demand”…rural migrants can earn far more money working in China’s cities than they can in their home villages, giving them a lot more cash to spend…China’s State Council, the government’s top body, is now looking at a land reform plan that would increase the payments to farmers whose land is seized by local governments and later used in real-estate development…such payments would make it easier for farmers to move to China’s cities…China’s population became more than 50% urban last year…

Shanghai Index Close To Breakout

It has been a tough year for China’s Shanghai Composite Index which recently fell below 2000 and touched its lowest level since early 2009…but a major turnaround appears to be on the way, which we also view as a good sign for the Venture Exchange as the two speculative markets have interestingly been very much in sync over the last several years…the Shanghai climbed 10 more points overnight to close at 2160, putting it exactly at the top of a downtrend line in place since April, 2011…a breakout above this downtrend line would be hugely bullish…

Shanghai-CDNX Comparative Chart

Below is a very interesting long-term chart from John that shows how closely the Shanghai and the Venture have been in sync over the last several years, with the Shanghai typically taking the lead in one direction or the other…if this pattern continues, expect the Venture to have a strong 2013 and break above its downtrend line in the near future…note that both the Shanghai and the Venture appear to be at the end of a Wave 2 consolidation…

Euro Chart Update

The euro is heading into 2013 on a strong note, and that has to be viewed as bullish for Gold and the Venture Exchange, and bearish for the greenback…the euro has formed a classic cup-with-handle pattern as John shows in this 2.5-year weekly chart…

Today’s Markets

Asian markets were mixed overnight but Japanese equities jumped to an eight-month high after the Liberal Democratic Party’s (LDP) electoral triumph propelled the yen to a 20-month low…Shinzo Abe, leader of the LDP, is expected to usher in a government committed to a tough stance in a territorial row with China and a potentially risky prescription for hyper-easy monetary policy and fiscal spending to beat deflation and tame a strong yen…European shares are modestly lower in late trading overseas, while North American markets are in the green so far today…as of 6:50 am Pacific, the Dow is up 52 points while the Venture has edged 5 points higher to 1189…

Canamex Resources Corp. (CSQ, TSX-V) Updated Chart

Below is a chart update on Camamex Resources (CSQ, TSX-V) which is making progress with its Bruner Gold Property in Nevada, and recently completed a $2.5 million strategic private placement with a wholly owned Canadian subsidiary of Hecla Mining…CSQ is unchanged in early trading at 20.5 cents…

Note: John, Jon and Terry do not hold share positions in CSQ.

Deceased Nevada Man Stashed Away Millions In Gold Coins

A substitute teacher from California was found to be the only heir to a fortune of Gold coins discovered by a cleaning crew in the home of a reclusive cousin who quietly stashed away a treasure of more than $7 million before he died this year…Arlene Magdon is the lone heir to the treasure valued at $7.4 million found in the home of Walter Samaszko Jr. who lived a quiet life in Carson City, Nevada, since the late 1960’s and no one apparently knew of his wealth…records show he withdrew just $500 a month from his stock accounts to pay modest bills…Samaszko apparently had no living family in Carson City, so genealogical researchers went to work to find relatives elsewhere…they found Arlene Magdon is the only living heir to what appraisers say is an estate worth more than $7.4 million…a crew hired to clean up the man’s house discovered the eye-popping stash: boxes of Gold coins and bullion in the garage…more boxes were later found…the Gold coins, some neatly wrapped in foil and plastic cases, were enough to fill two wheelbarrows…Samaszko also had money market, stock and bank accounts totaling $165,570 and $5,330…but the vast majority of the fortune was in Gold coins…appraiser Howard Herz filed his report several weeks ago listing a total of 2,695 coins appraised at more than $7.4 million…”What some individuals have called a hoard of Gold is, in fact, a quite well-thought-out investment in Gold,” he wrote…