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Gold’s volatility continues…as of 6:45 am Pacific, bullion is up $16 an ounce at $1,386…Silver is up 12 cents to $22.39…Copper is off 9 cents to $3.25 on weak data out of China, but a shutdown at one of the world’s biggest mines in Indonesia has capped losses…Crude Oil is off $1.52 a barrel to $93.76 while the U.S. Dollar Index has fallen half a point to 83.86…

China Factory Activity Contracts

Fresh signs of of a slowdown in the Chinese economy…the flash HSBC Purchasing Managers Index (PMI) for May that was released this morning slipped to 49.6, falling under the key 50 level, which divides expansion from contraction, for the first since October…last month, the final HSBC PMI stood at 50.4…most alarming in the PMI was the fact that declines in the gauges of new orders and employment appeared to be driven by a slump in domestic demand rather than external weakness…the question is, will Chinese authorities see the need to implement a more expansionary fiscal policy this summer or will they continue to focus on a “re-balancing” of the economy and structural reforms?…

Today’s Markets – Nikkei Plummets 7.3%

Investors discovered overnight that Japan’s Nikkei average can’t defy the laws of gravity after all…the Index rose another 2% in early trading, only to quickly and brutally retreat to finish 7.3% lower as it lost 1,143 points to close at 14484…a lower-than-expected PMI number out of China, confusion over Ben Bernanke’s comments yesterday in testimony before the Senate, surging Japanese bond yields and a strengthening yen all contributed to the sharp sell-off which everyone knew would come sooner or later after such strong gains so far this year…it was the biggest plunge in the Nikkei in over 2 years since the massive earthquake and tsunami in Japan in early March, 2011…this is what central bank intervention brings – volatility, and it can come in either direction…

We don’t see a collapse of the Nikkei anytime soon, however, with the Bank of Japan continuing to pursue an unprecedented expansionary monetary policy…below is a chart from John that shows strong support for the Nikkei around 14000…

China’s Shanghai Composite held up reasonably well overnight, falling just 27 points to 2276…European shares are down significantly in late trading overseas – most markets are off a little more than 2%…the euro zone is likely to remain in recession in the second quarter, a business survey showed today, with both France and Germany, the two biggest economies, still in contraction territory…the Dow is off 94 points at 15214 after the first 15 minutes of trading…U.S. manufacturing slowed for a second straight month in May as weak overseas demand and government belt-tightening at home led to the sector’s most sluggish rate of growth since October, a survey showed this morning…financial data firm Markit said its “flash,” or preliminary, U.S. Manufacturing Purchasing Managers Index fell to a 7-month low of 51.9 in May from 52.1 the previous month…a reading above 50 indicates expansion…meanwhile, initial claims for state unemployment benefits dropped 23,000 to a seasonally adjusted 340,000, the Labor Department announced earlier this morning, pushing back below the 350,000 mark that economists normally associate with a firming job market…the labor market of course is being watched closely by the Federal Reserve as debate over the future of its expansive monetary stimulus heats up…after yesterdays remarks from Bernanke, and the release of the minutes from the last FMOC meeting, many analysts believe Bernanke and other senior Fed members have enough influence to persuade the committee to wait at least through to September before deciding on tapering back QE3..as of 6:45 am Pacific, the TSX is down 117 points while the Venture has slipped 10 points to 932…

Gartman’s View

“Yesterday was a tectonic plate shift between the feet of the market…reversal day in the stock market, reversal day in the bond market, very strange movement in the foreign exchange markets…I think yesterday was an extremely important trading session and many, many things shifted and changed,” Dennis Gartman, the founder and editor of The Gartman Letter, told CNBC…

Iskut River Play

We’re continuing to work on a major piece that we expect to be able to post on Monday that will review all the key players in the Iskut River area, including some of the companies that have just recently staked ground or completed property option agreements…our favorites at the moment, besides Colorado Resources (CXO, TSX-V), are Victory Ventures (VVN, TSX-V) and West Cirque Resources (WCQ, TSX-V)…

First off, before we get to Victory and West Cirque, plus another company that has caught our attention, below is an updated chart for Colorado which pulled back 17 cents yesterday to close at $1.39…it was, however, CXO’s third-lowest volume day since the announcement of their discovery April 25…the 10 and 20-day moving averages have been providing very strong support so far, so it’s wise to continue to use those as a guide (approximately $1.30 and $1.10, respectively, at the moment)…John has a detailed chart below with Fibonacci levels…RSI(14) on the 6-month chart has unwound from a very overbought condition to 64%…as we’ve mentioned previously, there’s always a lot of volatility in these early-stage discoveries…understand the risks along with the potential rewards, and never invest money (in anything) that you can’t afford to lose…

Victory Ventures (VVN, TSX-V)

We’ve written a lot about Victory recently, and the stock is up more than 75% since we first introduced it to our readers 3 weeks ago…Victory will be first company other than Colorado to drill (starting in early June) in the general North ROK-Red Chris area since the North ROK discovery was announced April 25…VVN has several well-defined targets at its Copau Property based on a very revealing IP survey carried out last summer, and it’s also reasonable to speculate that the company is looking at how it can expand its footprint around Iskut River…Victory understands the region very well…VVN’s share structure is tight (21.6 million currently O/S) and the stock has undergone heavy accumulation for 19 straight trading days since Colorado announced its discovery…folks, this is smart money accumulating prior to the start of a drill program that is going to garner considerable attention and speculation given what’s unfolding at North ROK…it’s a major coup for Victory to be first on the scene with a drill program after Colorado, on a land package immediately to the west of North ROK and contiguous to Imperial Metals‘ Red Chris claims…Copau has never been previously drilled, so anything remotely encouraging in terms of results could send Victory much higher than its current $2.3 million market cap…at this point in our view, the upside potential far outweighs the downside risk…as always, perform your own due diligence…what we’re also impressed about with Victory is that they have been very good at preserving cash and there has also been strong demand for their private placements this month when many other companies can’t even raise a nickel…as the saying goes, follow the money…we see the potential for a significant near-term victory with VVN…

West Cirque Resources (WCQ, TSX-V)

One company with excellent prospects in the Iskut River area that has been overlooked by investors so far is West Cirque Resources (WCQ, TSX-V), but it hasn’t gone unnoticed by Freeport-McMoRan Canada which has cut a deal with West Cirque to explore the junior’s Castle, Tanzilla and Pliny properties…Freeport-McMoRan will finance cumulative exploration expenditures of $8 million over a 4-year period while West Cirque will remain the operator which, importantly, gives them a strong measure of control over the news flow…the Castle Property, in particular, holds excellent promise…it’s 15 km west of Colorado’s discovery and covers a 5.5-km long alteration zone associated with Gold-Silver-Copper mineralization…Teck did some work at Castle in the 1980’s and got some encouraging results…Freeport jumped into the picture this spring after reviewing historical data and results from West Cirque’s 6-hole drill program last summer (1,800 metres) that intersected broad zones of mineralization over a strike length of 1,000 metres, interpreted to be the outer pyritic shell to a porphyry system which remains open in all directions…it’s going to be a busy summer on the ground for West Cirque, and that’s what’s going to give investors such a great shot with this deal…the company has just 26.5 million shares outstanding, and much of that came from a May, 2011, financing at 40 cents ($4.2 million was raised)…WCQ still had $1.7 million in its treasury as of the end of December…2.3 million warrants are exercisable at 15 cents until March, 2014, while another 6.6 million warrants at 55 cents are set to expire next month…this is a fairly tight deal and management certainly has the confidence and respect of Freeport which is good enough for us…West Cirque has other properties in B.C. and Nevada…do yourself a favor and check this company out, we like this deal A LOT…

Ashburton Ventures Inc. (ABR, TSX-V)

We spoke with Ashburton’s Mike England recently, and we do believe he’s putting together more than just a “closeology” play with ABR as he continues to pick up ground in the area…first off, you’re obviously not in the game at all in the Iskut River if you don’t have claims, so England and his crew have been busy scooping up some parcels of land to get the ball rolling…he’s also determined to put boots on the ground up there as quickly as possible…so from a speculator’s standpoint, ABR has very good potential – lots of news flow – and should be quite active in terms of trading volume throughout the summer…the company needs to close a financing at a nickel, but other companies in this play have been able to pull that off…the stock gained a penny-and-a-half yesterday, closing at 5.5 cents on volume of 1.2 million shares…activity in ABR has picked up considerably ever since the company announced its foray into the Iskut River area May 2…ABR was rolled back 1-for-10 last summer…it currently has about 16 million shares outstanding, so the market cap is just under $1 million which makes this the least expensive deal in the area right now…you may recall that England got Geo Minerals into the Blackwater play and then it got taken out for about $20 million by New Gold Inc. (NGD, TSX-V) in late 2011…England brings plenty of energy and experience to Ashburton and he’s correct in sensing an opportunity in this other prolific part of British Columbia…

Below is a 2.5-year weekly ABR chart from John that shows increasing up momentum…

Note: John and Jon both hold share positions in VVN.  Jon also holds share positions in CXO, ABR and WCQ.