BullMarketRun.com

Gold has traded between $1,381 and $1,396 so far today…as of 6:55 am Pacific, bullion is up $4 an ounce at $1,387…Silver is 3 cents higher at $22.39…Copper is off 2 pennies at $3.28…Crude Oil is 8 cents lower at $94.93 while the U.S. Dollar Index has tumbled nearly three-quarters of a point to 83.63…

The U.S. Mint is on pace to sell 62,100 ounces of Gold coins in May, 17% more than a year earlier, according to data released yesterday…the agency said yesterday that it would resume taking orders for its one-tenth ounce Gold coin after suspending sales in April while demand surged after prices tumbled…Gold has slumped 17 percent this year as investors slashed holdings in ETF’s…“In contrast to demand among institutional investors, who withdrew funds from the Gold ETF’s again yesterday, Gold demand among retail investors thus remains extremely robust,” according to Daniel Briesemann, an analyst at Commerzbank AG in Fankfurt (source: Bloomberg)…

Assets in ETP’s dropped 0.2% to 2,154.2 metric tons yesterday, according to data compiled by Bloomberg…the holdings have shrunk 18% this year, tumbling to the lowest since June, 2011, as demand for haven assets declined amid robust global equity markets and an improving economic outlook in the United States in particular…

The central banks of Russia, Kazakhstan and Azerbaijan all boosted their Gold purchases in April, according to a report Monday from the International Monetary Fund…together, the 3 countries bought up some 24,125 pounds of Gold in the month…as far as the first quarter was concerned, as a whole, central bank net purchases accounted for more than 11% of the demand for bullion according to the World Gold Council…if it weren’t for central bank buying, Gold would clearly be significantly lower than it is now…

OECD Cuts Global Growth Forecast

Signs of gathering strength in the U.S. economy were not enough to stop the Organization for Economic Cooperation and Development (OECD) from cutting its global growth forecasts today as it warned the euro zone was set to fall further behind…the OECD forecast the world economy would grow 3.1% this year and 4% next year…this was a slightly gloomier outlook than its November predictions of 3.4% growth this year and 4.2% in 2014…the forecast comes after the largest rise in U.S. house prices in 7 years and a surge in consumer confidence, bolstering hopes of recovery in the world’s largest economy…it warned the euro zone was still in serious trouble and forecast its economy would contract 0.6% this year…“Protracted weakness could evolve into stagnation with negative implications for the global economy,” the think-tank said…while calling on countries to implement more structural reforms, particularly to their labor markets, it said “reform fatigue” was mounting…

IMF Cautions On China

The International Monetary Fund has joined a host of private economists who have lowered expectations for growth in China, an outlook that has raised questions over whether Beijing will return to stimulus to support the economy…the Fund also cautioned about China’s rising debt levels and a surge in credit, which it warned could be plowed into inefficient uses if it isn’t properly managed…speaking at a briefing in Beijing at the end of the IMF’s annual review of the Chinese economy, IMF First Deputy Managing Director David Lipton said the Fund lowered its growth forecast for the Chinese economy this year to around 7.75% from an earlier forecast of 8%…he cited sluggishness in the global economy, which hurts demand for China’s exports…Lipton stressed that the new forecast still puts the Chinese economy at a brisk growth rate and that Beijing still has the ability to respond to surprises…the IMF’s new forecast puts China’s growth higher than the official 7.5% target, and the Fund expects the pace of the economy should “pick up moderately” in the second half, as the recent credit expansion takes hold (source: Wall St. Journal)…meanwhile, on Monday Goldman Sachs put out a bullish report on the Chinese stock market and stated that investors are now focusing more on the pace of reforms in that country than on government stimulus…China is trying to rebalance away from an over-dependence on exports and investments to being more consumption-led…the bank wrote that it expects reforms to accelerate further in the second half of the year which will boost investor sentiment…

Today’s Markets

Asian markets bounced around overnight with Japan’s Nikkei average finishing almost flat, up 14 points at 14326…Japan’s government said today that it would announce next week its draft road map for a comprehensive 3-year economic overhaul, as Prime Minister Shinzo Abe tries to convince potentially skeptical investors about his vision for ending years of deflationary pressures…the release of the third pillar of Abe’s economic revival plan – alongside aggressive monetary easing and fiscal stimulus – will be the first test of whether the stock market rally over the past six months under this administration was based on reality or merely inflated expectations…China’s Shanghai Composite was up 3 points overnight to close at 2324…European shares are lower in late trading overseas…German labor data showed that more people than expected had been added to the unemployment rolls for the month of May…in North America, the Dow has retreated 90 points through the first 25 minutes of trading…the TSX is down 50 points at 12700…helping the TSX recently has been the strength of the energy index…since mid-April, when it hit its lowest point in 2013, the energy index has risen 8.5%, although in the past year its growth is still only half that of the main index…the energy index has been given a boost by rising bitumen prices (heavy oil is now trading at a discount of only $20 a barrel to WTI as opposed to $40 earlier in the year) as trains are helping to clear export clogs…the Venture opened slightly higher but is unchanged at 954 as of 6:55 am Pacific…a very bullish signal in the coming days would be a close above important resistance at 970…

Pacific Potash Corp. (PP, TSX-V) Appoints New President, CEO

A company we continue to track more closely is Pacific Potash (PP, TSX-V) which seemingly strengthened itself yesterday with the appointment of Andre Costa as President and CEO…Costa has nearly 2 decades of geological experience in Canada and Brazil, and most recently was the chief geologist for Brazil Potash, a private company with operations surrounding the majority of Pacific Potash’s claims…”Working on this basin for five years gave me strong understanding of the drilling program logistics, drilling methods, stratigraphical correlations, depositional environments, structural constraints, mineralization spatial distribution and seismic correlations,” Costa stated in yesterday’s news release announcing the appointment…”This knowledge will be important to achieve positive potash intercepts and consequently advancing to the next stages…all the efforts will now be focused on the upcoming drilling program in order to confirm and evaluate the potash mineralization to be found on Pacific Potash claims that would be developed into potash resources on this new and already-confirmed world-class potash basin”…

Pacific Potash closed down a penny at 15 cents yesterday….technically, a bullish cup-with-handle pattern is what appears to be coming together on the 2.5-year weekly chart as you can see below…the handle is currently forming, so expect some continued consolidation in the immediate future as this plays out…the 50-day moving average (SMA) at 12 cents should provide excellent support and could be a terrific entry point heading into the summer and PP’s drill program…as always, perform your own due diligence…

Amarc Resources Ltd. (AHR, TSX-V) Chart Update

Volume has picked up considerably in Amarc Resources (AHR, TSX-V) over the last 6 sessions…the stock hit an all-time low of 4.5 cents this month and closed yesterday at 6 cents…the company has 5 high-quality projects in central and northern B.C., and a significant rebound in the stock price certainly seems possible this summer as long as the company carries out some planned drilling…AHR had $6 million in cash at the end of December…they’ll need to make things happen to do another raise at higher prices (hopefully) later this year…there are indications the strong bearish trend is beginning to weaken and that AHR may have finally bottomed out…the stock is now above its 10 and 20-day moving averages (SMA’s) for the first time in nearly 5 months…below is a 2.5-year weekly chart from John…

Trueclaim Exploration Inc. (TRM, TSX-V)

Trueclaim Exploration (TRM, TSX-V) has recovered nicely from its April dive and bears watching as it continues to work on closing a financing…as investors know, the current environment is not a friendly one for most companies who need to raise money…we see strengths in TRM that should enable it to succeed, but we’d like to see the completion of their financing very soon and then the outlook for the company will improve…right now, the chart is looking quite positive…

Note: John holds a share position in TRM.

Other Views

Interesting “Guest Blog” on CNBC.com this morning from Marshall Glitter, Head of Global FX Strategy at IronFX, an on-line trading firm specializing in Forex, CFDs on U.S. and U.K. stocks, and commodities:

I recently wrote an article for CNBC about why I thought Gold was going down. It was a pretty straightforward article, I thought, maybe even a bit dull with its echoes of Economics 101.

Well, I couldn’t have imagined the response I got, which were mostly negative and angry. The experience made me wonder: why were so many people so upset with me for trying to explain why gold has been going down?

Gold peaked in September 2011 and the decline has accelerated recently, with the price down over 20 percent since last October. This is a fact. You would think that investors in gold would want to understand why it’s falling so that they can decide whether to get out now or, if they think the reasons for the decline are wrong, buy more. So why get so upset? The answer to that has a lot to do with what makes someone a good investor. It’s a lesson that everyone should learn if they are going to invest in anything.

The reason is what behavioural finance calls cognitive dissonance. Cognitive dissonance is what you experience when you find out something that goes against your beliefs. The best example is the typical TV news interview with a murderer’s mother. She always says what a good boy her son is, he would never do anything like that, he loves his mother, he loves his dog, etc. etc. This is normal. When faced with some new information that goes against our long-held beliefs, most people prefer to ignore the new information or rationalize it away rather than change their beliefs.

The more time and effort people have invested in those beliefs, and the more costly it would be for them to admit that the new information is true, the greater the dissonance that they experience and the greater the need that they feel to reduce it. Reduce it not by changing their beliefs, but by ignoring or discrediting the new information.

So a mother, who’s spent years and years raising her son and does love him, would naturally just refuse to believe that he’s a murderer. And an investor who owns a lot of gold, subscribes to newsletters about gold, talks about gold with his friends, and has made a lot of money in gold in recent years, is likely to refute or reject any new information that says now might not be the best time to buy gold.

This is especially so because most people have a lot more confidence in themselves, their knowledge and their decision-making abilities than they should. I could see that in the responses to my article, some of which showed an imperfect understanding of economics at best.

For example, one reader who execrated me for saying bank reserves aren’t money, argued that they are money because the U.S. Federal Reserve pays interest on them, which ignores the fact that the Fed didn’t pay interest on them before 2008, the European Central Bank currently doesn’t pay interest on them, and the National Bank of Denmark actually charges a fee for holding them! Yet they were very confident in their opinion. Overconfidence is a big problem in investing.

Unfortunately, if someone does begin to feel unsure about their beliefs, then they usually won’t try to learn more to see if their beliefs really are true. On the contrary, they’ll generally take action to justify their existing beliefs. This is called confirmation bias. They will sort through the article and pay greater attention to any facts that support their position than the facts that don’t. They’ll try to find some small part that they “know” is wrong, and will therefore feel justified in ignoring the whole thing.

The important point to learn from this is that investors have to realize their own biases and tendencies and deal with them when investing. The market doesn’t care what you believe any more than the rain cares whether you get wet. You can’t let your emotions get in the way of your understanding the market, otherwise you can get swept away.

Cognitive dissonance can be deadly when it comes to investing. When you’re investing, it doesn’t matter whether you are right or wrong; what matters is whether you make money. You shouldn’t invest to prove something about yourself, to prove to other people that you’re smart or that you’re right, because at some point you’re definitely going to be proven wrong. Some losses are inevitable in investing. It’s not a shame. It’s not a disgrace. It’s normal. One of the keys to being a good investor is therefore to minimize your losses.

Confirmation bias can also be deadly. Naturally, it’s more pleasant to read things that you agree with than things that you don’t agree with. But if you don’t try at least to understand why some people think differently from you, you’re going to lose money sometime. It doesn’t matter how smart you are; nobody can know everything. That’s why stop-loss orders were invented. As the famous investor Howard Marks said, “you can’t predict. You can prepare.”

You have to have a plan before you go into a trade. You have to understand why you are taking a position, you have to have a target for how far you think it will go (since nothing goes up forever) and you need to decide on the stop loss level: the point at which you decide you were wrong and get out of the trade.

If you want an emotional experience, go on a date! Get married! That’s where your emotions should come into play. In investing, our emotions are our enemies. We have to understand them and conquer them or else they can cause us to defeat ourselves.

The author is the Head of Global FX Strategy at IronFX, an on-line trading firm specializing in Forex, CFDs on U.S. and U.K. stocks, and commodities. He was previously Head of the Forex Committee at Deutsche Bank Private Wealth Management.