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Gold climbed as high as $1,343 overnight before staging a very normal pullback within the current uptrend…as of 7:55 am Pacific, bullion is off $10 an ounce at $1,327…Silver continues to out-perform Gold (good sign)…it’s ahead 2 pennies at $21.90…Copper is off 3 cents at $3.28…Crude Oil has gained 14 cents to $106.99 while the U.S. Dollar Index is up slightly at 81.69…

Assets in the SPDR Gold Trust, the biggest bullion-backed exchange-traded product, climbed yesterday to 913.23 metric tons after gaining on August 9 for the first time in 2 months…in China, the volume for Shanghai’s benchmark spot contract increased to 10,739 kilograms yesterday, the most since August 6, according to the Shanghai Gold Exchange…China is on track to overtake India this year as the world’s largest Gold consumer…physical demand, especially in Asia, remains supportive of Gold which appears to be headed for a 2nd monthly advance after rising 7.4% in July, the best gain since January 2012…a key technical hurdle for Gold to overcome, as John has pointed out on numerous charts, is $1,350…

A U.S. filing showed billionaire John Paulson reduced his holding in the SPDR Gold Trust by 53% in the 2nd quarter…

Gold demand fell 12% to a 4-year low during its dismal 2nd quarter as record exchange-traded product sales and less central bank buying countered surging jewelry, bar and coin purchases, according to the World Gold Council…global demand slipped to 856.3 metric tons in the quarter, from 974.6 tons a year earlier, the London-based industry group said in a report released yesterday…consumer demand in India, the biggest buyer, jumped 71% while China gained 87%, helping to push global bar and coin purchases to a record and jewelry usage to the most since 2008…Central Bank buying fell 57% from a record a year earlier, the WGC stated..

Today’s Markets

Asian markets were weak overnight with Japan’s Nikkei average losing 297 points or 2% to close at 13753…the drop was due to a higher yen and followed comments from Japanese ministers that downplayed the idea of corporate tax cuts…earlier this week, the Nikkei newspaper reported that Tokyo may be considering cutting corporate tax rates to offset the impact of a consumption sales tax hike…China’s Shanghai Composite slipped 18 points to finish at 2082…

European shares were off significantly today but it was a lighter day of trading in Europe with financial markets closed in Italy, Portugal, Luxembourg, Greece and Austria…

North America

The Dow is off sharply again today as events in Egypt are unsettling some investors…as of 7:55 am Pacific, the Dow is down 216 points…the number of Americans filing new claims for unemployment benefits fell to a near 6-year low last week, hinting at a pick-up in job growth in early August…meanwhile, factory activity in the U.S. mid-Atlantic region weakened in August as new orders fell and the pace of hiring slowed, a survey indicated this morning…the Philadelphia Federal Reserve Bank said its business activity index fell to 9.3 from 19.8 in July, undershooting economists’ expectations for a reading of 15.0…in a separate release, U.S. consumer prices remained largely benign in July…yesterday, St. Louis Fed President James Bullard said the Central Bank needs to see more data in the 2nd half of the year before it starts to cut back on its stimulus, and if it tapers while inflation is too low, it risks deflation…

The TSX is down 66 points through the first 85 minutes of trading while the Venture is holding up well, down just 2 points to 924…more good news from the Patterson Lake South uranium discovery…Fission Uranium Corp. (FCU, TSX-V) and joint-venture partner Alpha Minerals Inc. (AMW, TSX-V), both halted yesterday, reported this morning that they’ve discovered a 4th zone of uranium mineralization and off-scale radioactivity located 165 metres grid east of zone R780E (and the hole is still in progress)…this 4th zone is referred to as the R945E zone…there are now 4 mineralized zones on strike with each other along a trend of just over 1 km…both stocks have hit new highs…as of 7:55 am Pacific, FCU is up 9 cents at $1.30 (it hit $1.34) while AMW has gained 36 cents to $6.60…they resumed trading at 7:30 am Pacific…

TSX Gold Index Long-Term Chart:  Reversal Time

Yesterday, we posted a 6-month TSX Gold Index daily chart that showed a bullish ascending triangle and the imminent possibility of a breakout above that triangle and important resistance at 190…sure enough, the Gold Index surged 9 points yesterday to close at 196…the 50-day moving average (SMA) for this Index is also very close to reversing to the upside – it has been in decline since November of last year…new support is now at 190 with the Index off a point at 195 as of 7:55 am Pacific…

Further evidence of a powerful reversal in Gold and Gold stocks comes from the 10-year monthly TSX Gold Index chart below…this is a great example of how technical analysis can be used to detect a trend change…everything here points to a higher Gold Index in the coming weeks…a break above the 210 resistance would be a very significant move…

Yesterday’s and today’s Gold Index charts (they are often reliable leading indicators when they correlate with other technical data we look at) tell us that Gold is gearing up for a breakout through $1,350 in the near future (immediately or in the short-term) and could take a run at the $1,500-$1,600 area (where it broke down from in the spring) during the 2nd half of the year…

It’s safe to assume that rising Gold prices and a higher TSX Gold Index, over the short-term at least, will translate into a strong rally by the Venture Exchange…firm Oil and Copper prices will also help…the Venture is looking much healthier from a technical standpoint these days and a move above critical resistance at 970 will indeed signal a serious breakout…a rising tide, however, will not lift all boats on the Venture – many of those boats, in fact, remain in serious danger of sinking before the end of the year, even in an environment of stronger Gold prices…the chickens are coming home to roost for many of these “lifestyle” companies that have fleeced the public over the years…when looking at companies, as individual investors, each one of us should commit to performing even better due diligence to ensure the following conditions are met:

A company must have…

1. A superior management team with proven track records at building value and executing both on the ground and in the market;
2. A strong working capital position;
3. An attractive share structure (many companies have been forced to do cheap financings over the past 2 years);
4. An exploration program(s) in progress or about to begin at a property (or properties) with strong geological and upside potential with limited jurisdictional risk;
5. A healthy stock chart;
6. A simple but exciting and compelling story.

It’s one thing if a company with the above characteristics drills a property and the results just aren’t there – that’s the nature and the risk of the exploration business, and as an investor one has to be prepared for that…never invest money you can’t afford to lose…but you can reduce the “other” risks that come from a company not possessing all of the above qualities and tripping over its own feet…there is plenty of speculative money sitting on the sidelines, in our view, that can propel the Venture significantly higher as this quarter progresses (historic opportunities exist)…but this money will be more selective than ever in terms of the companies it’s flowing into…

Colorado Resources Ltd. (CXO, TSX-V) Update

Colorado Resources (CXO, TSX-V) closed above resistance at 80 cents yesterday, and is looking solid so far today as investors sense that drill results from North ROK are just around the corner…there are several interesting technical features at the moment with CXO, as John outlines below in a 7-month weekly chart…strong support has held around 70 cents…not shown on this particular chart is the 50-day SMA which has provided resistance over the past couple of months and has been in decline since last month…however, it’s now flattening out and will reverse to the upside in the coming days if the share price continues to trade around current levels (above 80 cents)…so the stock is at a critical juncture from a technical standpoint…it’s up a penny at 83 cents as of 7:55 am Pacific…the technicals are encouraging but drill results, obviously, will determine whether CXO explodes higher or breaks down…

From our perspective, it’s reasonable to conclude that the upcoming batch of drill results from North ROK should contain some excellent numbers given the apparent quality of the targets there…summer drilling has focused on a continuous and strong magnetic high core that is 300 to 400 metres wide and 1200 metres long, trending southeast from holes #1 and #4…where Colorado has intersected the magnetic high feature in 3 drill holes reported to date, the average grade over 694 metres of cumulative length is 0.40% Cu and 0.60 g/t Au…CXO has hopefully stepped out slowly and gradually, with the goal of staying in strong mineralization (not always easy when attempting to define a porphyry deposit) to keep the market happy in these early stages…when a geologist tries to be a hero by attempting a bold step-out too soon, that’s often a recipe for disaster…ultimately, North ROK is going to require hundreds of drill holes…some will be dusters (like hole #2), others could be home runs…Imperial Metals (III, TSX) missed on 25% of the holes it drilled at Red Chris in 2011 and 2012, but they still have a world class Copper-Gold porphyry deposit with very robust economics that goes into production next year…at Kennecott’s giant Bingham County open-pit Copper Mine in Utah (porphyry), there are barren areas bigger than the size of football fields…that’s just the nature of porphyry deposits…Colorado’s job is to smartly start to nail down the geometry, size and grade of what appears at this point to be a potentially large Copper-Gold system, and we believe they have the expertise to do just that…

B2Gold Corp. (BTO, TSX)

A quick follow-up to Monday’s short piece and chart on B2Gold Corp. (BTO, TSX)…the company reported a big jump in 2nd-quarter earnings yesterday on a royalty sale as well as increased revenues…BTO earned $33.1-million, or 5 cents per share, up from $11.9-million, or 3 cents per share, as Gold revenue rose to $122.6-million from $57.3-million a year ago…no writedowns…lower operating costs…upgraded production guidance…improved earnings picture…increased reserve estimates…it’s rare to read or hear those words from any producer these days, but that’s what’s happening with BTO during a challenging market environment… “With the company’s proven technical team, strong operational performance, financial strength, and high-quality development and exploration projects, B2Gold is well positioned to continue its rapid growth as an intermediate Gold producer,” stated company President and CEO Clive Johnson in a news release last week…

Technically, BTO closed above resistance at $3.20 yesterday…we’d like to see another close above $3.20 today to confirm that breakout and new support…the next major resistance is around the $4 level…as of 7:55 am Pacific, BTO is down 8 cents at $3.20…

Azincourt Uranium Inc. (AAZ, TSX-V) Update

A couple of days ago we were happy to be able to finally produce a chart for Azincourt Uranium (AAZ, TSX-V), after its 23-cent close Monday, which was finally added to the StockCharts.com database at the urging of BMR and some of our readers (thank you)…AAZ enjoyed quite a move yesterday as it jumped 8 cents to finish at 33 cents as FCU and AMW were halted…

Since April, AAZ has been trading in a horizontal channel primarily between 20 cents and 33 cents where it met resistance yesterday…AAZ closed a $1.5 million financing in June at 15 cents and currently has 27 million shares outstanding…the trend here is definitely bullish and any pullbacks are likely opportunities as the probability of a breakout (eventually) above the horizontal channel seems high…as always, perform your own due diligence…as of 7:55 am Pacific, AAZ is off 4 cents at 29 cents…