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Gold briefly topped $1,400 an ounce this morning amid reports of an increase in physical demand for the metal with prices at a 2-year low…as of 7:45 am Pacific, bullion is up $18 an ounce at $1,395…Silver is up a nickel at $23.36…Crude Oil is relatively unchanged at $86.75 while the U.S. Dollar Index is down nearly one-fifth of a point at 82.47…

Physical demand for Gold at these reduced price levels appears to be picking up…the China Gold Association has reported that retail sales tripled across China Monday and Tuesday…meanwhile, HSBC says, “Although still weak, the underlying physical market is responding to the price decline…we believe coin and small bar demand is rising…this is evidenced by a rise in premiums for Gold bars in Singapore to their highest levels in 18 months, according to Reuters…we also believe central banks, notably in the emerging world, may be attracted to the market at these prices…these USD-laden central banks still require bullion to help diversify their foreign-exchange holdings”…

Holdings in bullion-backed exchanged-traded products lost 3.5% to 2,364.9 tons this month, according to data compiled by Bloomberg…holdings in the SPDR Gold Trust, the biggest ETP backed by Gold, are 1,134.79 tons, according to data on the fund’s website, the lowest level in 3 years…there is the potential for a further selloff in ETP holdings, Goldman Sachs said in a report dated yesterday…about 11% of the remaining assets were bought at levels at or above current prices, Goldman said in the report…

Updated TSX Gold Index Chart

While some pundits are saying Gold may have bottomed Tuesday when it plunged to the low $1,300’s, we’re not so sure based on John’s charts plus the fact the Gold stocks (and the Venture Exchange) have not yet signaled a turnaround in the metal…the type of day that we’re looking for to indicate that Gold may have found a bottom – even a temporary low – is when bullion is down and the Gold stocks suddenly take off in the opposite direction on strong volume, followed soon thereafter by a reversal in the metal…we haven’t seen that yet in this decline but it’s something everyone should be watching for…one of our major concerns regarding Gold at the moment is that this has the look and feel of a correction that is not normal, so extra caution is warranted as the overall pullback has the potential to be more severe than most might expect…while the buying opportunity of a lifetime may present itself at some point in the near future, the key is to be patient…unfortunately, all indications are that neither the Venture Exchange or the TSX Gold Index have found a bottom yet…it’s appearing increasingly likely that the Venture is going to test support at 860, as we suggested last weekend, while support levels for the TSX Gold Index are at 175 and 150 as shown in this 12-year monthly chart…RSI(2) is at an extreme low…this suggests that the Gold Index is in the process of trying to find a bottom but additional significant weakness could still occur…it’s up a few points at 188 in early trading today…

What Is Copper Telling Us?

With so much attention focused on Gold recently, pundits are overlooking the technical deterioration that continues in Copper as the metal has closed below $3.20 for the first time since October, 2011…earlier this month, Copper’s 50-day moving average (SMA) crossed below the 200-day SMA…RSI(14) on John’s 5-year chart is at 42% and falling quickly…Copper has a critical support band between $2.60 and $3.00 and a near-term test of the top of that support ($3.00) appears almost certain…weakness in Copper is usually not a good sign for the direction of the global economy or the broad equity markets…

Today’s Markets

Asian markets were mostly mildly lower overnight, though China’s Shanghai Composite Index posted a slight gain to close at 2198…the sudden reversal in the Chinese Index in early February corresponds with the weakness that started around that time in commodities, the TSX and the Venture Exchange…what these markets appear to be confirming is a slowdown/problems in the Chinese economy which would certainly have a negative impact on global economic growth…the Shanghai is currently caught in a downtrend with important Fibonacci support at 2150…if the Shanghai cannot hold that level, then batten down the hatches…

European shares are mixed in late trading overseas while the Dow is off 36 points through the first 75 minutes of trading in New York…weekly U.S. jobless claims gained 4,000 to a seasonally adjusted 352,000, according to the Labor Department in its report issued this morning…meanwhile, business activity in the mid-Atlantic region expanded at a smaller-than-expected rate, according to the Philadelphia Fed survey…and a gauge of future U.S. economic activity dipped in March for the first time in seven months, according to the Conference Board…the TSX is up 12 points as of 7:45 am Pacific while the Venture is off 2 points at 922…

Ainsworth Lumber (ANS, TSX) Updated Chart

Forestry/lumber stocks have significantly outperformed the TSX since last summer, thanks to a strong recovery in the U.S. housing sector…Ainsworth Lumber (ANS, TSX), for example, an OSB producer, has more than tripled in less than a year…as expected, a normal correction has started in Ainsworth and in other stocks in this sphere…for those who may have missed the initial run-up, another good entry may appear sometime this quarter…below is an updated ANS chart (2-month daily) that provides some guidance with regard to near-term support levels…the rising 100 and 200-day moving averages, not indicated on this chart, are at $3.20 and $2.80, respectively…the Fibonacci retracement levels are at $3.40, $3.57 and $3.75…as always, perform your own due diligence…and remember, patience is a virtue – the trend is your friend, and the short-term trend in the overall markets right now is negative…ANS is up 2 pennies at $3.84 as of 7:45 am Pacific…

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