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Gold is under pressure to begin the new week…as of 6:10 am Pacific, the yellow metal is off $16 an ounce at $1,651 after dipping as low as $1,643…as John’s updated chart showed yesterday, bullion has been trading in a symmetrical triangle in recent weeks but that pattern appears to have broken down this morning…Gold does have very strong support at $1,625 and $1,645…this week’s Lunar New Year in Asia may curb physical demand for bullion as China and most Asian markets are closed…Silver is down 35 cents at $31.06…Crude Oil is 31 cents lower at $95.41…Copper is off 3 pennies at $3.70 while the U.S. Dollar Index is up nearly one-tenth of a point at 80.30…

The U.S. Federal Reserve’s balance sheet has grown to a record size according to data released by the Fed last Thursday showed…the Fed’s balance sheet – a broad gauge of its lending to the financial system – stood at $2.997 trillion on Feb. 6, compared with $2.991 trillion on January 30…the Fed’s holdings of Treasuries totaled $1.717 trillion as of last Wednesday versus $1.710 trillion the previous week…

China Equity Rally Fueled By Money Supply Growth

A significant reversal in China’s money supply growth really started to kick in late last year as shown in the Bloomberg chart below…this helps account for the upside breakout last month in the Shanghai Composite, especially after the Index pushed through a two-year down trendline as John’s charts illustrated…periods of strong growth in the money supply in China, and a rising equity market there, generally translate into a bullish environment for commodities…

China is expected to continue with its accommodative monetary policy which will lend support to the equity rally there…in addition, China’s new leadership is focused on growth as officials seek to improve and reform policies that will provide its residents with opportunities and social security, higher incomes and better standards of living…this will encourage domestic consumption which is such a key drive now of the Chinese economy…growth is set to be considerable over the next several years…some analysts expect that China’s GDP will almost equal that of the U.S. within a decade after annual compound growth of nearly 7%…

What Are Companies’ Real All-In Cash Costs Of Gold Production?

Interesting comments from Frank Holmes at www.usfunds.com over the weekend…”George Topping and David Hove from Stifel Nicolaus dug deeper into the all-in cash costs measure suggested by the World Gold Council that would vastly understate the cost of Gold production at around $1,100…Realistically, the four senior Gold producers’ real total cost of production is closer to $1,800…We commented previously on Newmont’s Gold production decrease from 7.5 million ounces to 4.98 million ounces over 10 years despite spending $16 billion in capex…Topping noted the picture was not any better for Barrick Gold according to the report; over the last six years Barrick’s Gold production declined 15% to 7.3 million ounces, all this while spending $20 billion in capex…He is completely right in pointing out that if a company is not increasing production then all capital expenditures must be considered sustaining capital expenditures…We are in agreement that if you do not measure your costs, you will not get an improvement in your performance”…

Silver Short-Term Updated Chart

Like Gold, Silver has also been trading in a symmetrical triangle recently…breakouts in patterns like this are often to the upside but not always as we’re seeing this morning…the $30.50 to $31 area is a strong support zone for Silver…buying pressure has been weakening recently…

Silver Long-Term Chart Update

Silver’s long-term chart shows it’s still in the very early stages of a powerful “Wave 5” move that is expected to ultimately carry it to new all-time highs…another test of support in the upper 20’s can’t be ruled out, however…

Today’s Markets

Most Asian markets are closed due to the Lunar New Year holidays…European shares are mixed ahead of a meeting of euro zone finance ministers…stock index futures in New York as of 6:10 am Pacific are pointing toward a slightly positive open on Wall Street…the Venture Exchange is looking to hold support at 1200 and rebound this week after declining in 10 out of the last 12 sessions…it closed Friday at 1206, a 23-point drop for the week…today is Family Day in British Columbia which may reduce trading volume on the Venture…why the B.C. government didn’t synchronize this day with other provinces in the country (third Monday in February) is a very good question…

Focus Graphite (FMS, TSX-V)

There was strength in graphite stocks last week and that trend for this quarter may certainly continue…Focus Graphite (FMS, TSX-V) is currently up 40% from its December lows…it closed Friday at 70 cents, slightly above its rising 50 and 100-day moving averages (SMA) which are providing support…a move above the 80-cent level would constitute a breakout…below is an updated 2.5-year weekly chart from John…

Graphite One (GPH, TSX-V)

John was correct in recently calling for a breakout in Graphite One (GPH, TSX-V) which climbed a nickel last week to close at 23.5 cents…the chart shows an overbought RSI(14) condition, however, and strong resistance at 25 cents, so buyers at current levels need to be very careful as far as the short-term is concerned as a near-term consolidation is likely…the company recently closed a private placement at 14 cents to raise $600,000…

Note: John, Jon and Terry do not hold share positions in FMS or GPH.