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Gold fell as low as $1,554 overnight before rebounding…as of 7:10 am Pacific, bullion is up $6 an ounce at $1,566…Silver is 16 cents higher at $27.81…Copper is off a penny at $3.41…Crude Oil is down 46 cents to $94.18 while the U.S. Dollar Index has fallen one-third of a point to 82.20…

Cyprus Denies Rumors Of Plans To Sell Gold

The Central Bank of Cyprus denied that it will sell 400 million euros ($525 million) worth of its Gold reserves as part of the conditions of Europe’s bailout of the island state…Aliki Stylianou, a spokesperson at the central bank, told CNBC this morning that there was “no such thing being discussed…the decision to sell the Gold is a decision to be taken by the board of the Central Bank of Cyprus…no such thing has been discussed or is in the process of being discussed…there are so many rumors flying about and this is just one of them”, she said…Bloomberg News reported yesterday that, according to a draft of a European Commission report it had obtained, Cypriot authorities committed to sell “the excess amount of Gold” owned by the state, yielding an estimated $525 million…Cyprus had 13.9 metric tons (446,895 ounces) of Gold as of March 31, according to data from the World Gold Council…the holdings are worth nearly $700 million based on today’s Gold price…if Cyprus were to sell most of its Gold, this would be the biggest euro zone bullion sale in four years (France sold 17.4 tonnes of Gold in the first half of 2009 – bad timing by the French)…in addition, although obstacles do stand in the way of way of euro zone central banks selling Gold to meet financing needs, any such move by Cyprus would no doubt focus attention on other heavily indebted euro zone Gold holders…

Updated Gold Chart

Gold got hit hard yesterday but managed to hold support at $1,550…Goldman Sachs lowered its Gold price forecast for the second time in 6 weeks while the Cyprus rumors and the Fed minutes weren’t helpful to bullion either…the technical trend for Gold is clearly bearish (this really became evident in February as shown in John’s chart below), so the key to Gold holding support around $1,550 is going to be physical demand…the market will be watching that closely…Gold will need a catalyst to push decisively through resistance beginning at $1,590 where it pulled back from yesterday…the possibility of Gold dropping this year to the $1,400 area certainly can’t be ruled out but wouldn’t necessarily change the bullish long-term picture…

U.S. Dollar Index Updated Chart

The greenback continues to be under pressure, and this could be a factor that allows Gold to hold support (for now at least) at $1,550…below is a 6-month daily chart for the U.S. Dollar Index which shows momentum is clearly to the downside after the Index failed to push through a resistance band between 83 and 84…key support levels to keep an eye on are 81.5, 81, and 80.5…the COT structure is not favorable for the Dollar Index either, as commercial traders have built up a large short position, so this adds further credence to the negative short-term outlook…

Bank Of Japan:  Ambitious Inflation Target A “Flexible” One

The Bank of Japan will pursue its 2 per cent inflation target “flexibly” and would consider adjusting its aggressive easing policy if it led to unwanted side-effects such as asset bubbles, Haruhiko Kuroda, the central bank’s governor, said in an interview with foreign media today…“If there is any serious asset market bubble appearing or approaching, of course we will take necessary measures”, Kuroda stated…“All central banks that adopt a so-called inflation targeting policy manage the inflation target very flexibly”…although he said he saw no sign of bubbles “now or in the near future”, the emphasis on flexibility added a new and more ambiguous shade to official BOJ rhetoric…

Q1 Credit Growth Increases Sharply In China

China is once again facing heavy capital inflows after its foreign exchange reserves posted their biggest quarterly increase since the second quarter of 2011…reserves jumped $130 billion to $3.44 trillion in the first quarter…the return of cash from abroad helped stoke fast credit growth amid concerns about the level of debt in the economy…new financing in the economy during Q1 increased 58% to $1 trillion compared to the first three months of 2012…Fitch this week cut China’s sovereign credit rating, the first such move by a major international agency since 1999 – on worries that local governments and companies had racked up too much debt…the rating agency also raised concerns about the rise in shadow banking, which continued unabated in the first quarter…the increase in outstanding bank loans was moderate at 16% year-on-year, but credit outside the formal banking system, including trust loans and corporate bonds, more than doubled…

Today’s Markets

Markets are generally quiet so far today…the number of Americans filing new claims for unemployment benefits fell more than expected last week, by 42,000 to 346,000, which could ease fears of a deterioration in labor market conditions after a surprise stumble in job growth in March…the Dow is up another 34 points in early trading…the TSX is down 30 points as of 7:10 am Pacific while the Venture Exchange is flat at 1047…the CDNX needs to close at 1042 or higher tomorrow in order to avoid a 10th consecutive weekly loss…the rough Venture market is certainly adversely affecting the number of new listings and the ability of companies to raise money…the Venture Exchange handled only six initial public offerings last month, down from 23 in March, 2012…in addition, Venture companies managed to raise only $471 million last month, down from the $920 million raised in March, 2012, and $1.6 billion in March, 2011..majors are facing their problems, too, of course, with the TSX Gold Index down nearly 25% so far this year as producers are having their problems as well…a good example yesterday was Barrick Gold (ABX, TSX) which fell another 8% after suspending construction in Chile on its Pascua-Lama Gold and Silver project, responding to a court order that further delays work on a mine already behind schedule and billions over budget…the appeals court said Pascua-Lama should be halted amid allegations the project is polluting groundwater and rivers in the Atacama desert…the chart for Barrick shows very oversold conditions and a support band between $22.50 and $23.50…as of 7:10 am Pacific, ABX is up 33 cents to $25.14…

Barrick Gold (ABX, TSX) Chart

New Gold Inc. (NGD, TSX) Updated Chart

New Gold Inc. (NGD, TSX-V) in our view is one of the best-run producers in the sector and recently came out with a highly encouraging resource estimate update for its huge Blackwater Gold-Silver deposit in central British Columbia…technically, the stock is struggling, however, which demonstrates how investor sentiment toward this sector is so negative at the moment (and ultimately could become even more negative)…the NGD chart shows a double top pattern last summer/early fall, and an important support band between $8 and $9 which really needs to hold…NGD touched its 1000-day moving average (SMA) just recently for the first time in three years…it closed yesterday at $8.44…

Jurisdictional Risk

Strapped-for-cash left-wing governments, lunatic environmentalists and some native groups are all posing serious risks to Gold miners, explorers and investors, and this has contributed to the current difficult market conditions…in Quebec, the leftist, separatist PQ government, which fortunately only holds a minority, would rather take the short-sighted approach of hiking mining royalties in an attempt to increase revenues as opposed to focusing strictly on reducing expenditures and the size of government which is the real problem there…a public petition circulated by the Quebec Mining Association is calling on the PQ government to review its plan to change the mining tax regime in the province has been signed by over 10,000 people…”The fact that 10,000 people have taken the time to sign the petition to indicate their support for the mining industry shows that the population is on our side and that people appreciate the positive impact of our industry in Québec”, stated Josee Methot, QMA President and CEO…”It is interesting to note that the messages of support we have received come from all across Québec, and not just from the mining regions”…the QMA petition reads: “I am not against mining royalties, but I believe they must allow a form of mineral resource development that is profitable and economically acceptable…a change to the current tax regime could lead to mine closures and the postponement of several key projects; it could also drive away investors and lead to a loss of jobs throughout Québec…I am therefore opposed to any change to the mining tax system“…good luck to the QMA – they have their hands full…