Gold continues to power higher, underpinned by numerous supporting factors including the tense situation in Syria, a drying up of ETP selling, falling Gold inventories, short-covering, impressive Asian demand, strong Oil prices, weak currencies, a growing belief that a scaling back of the Fed’s bond-buying program will not occur in September as previously believed, and the fact the U.S. is expected to reach its debt ceiling limit in mid-October according to the Treasury Department…add to that some additional fuel in terms of fresh technical support, and you’ve suddenly got a very bullish recipe for Gold after the yellow metal hit a multi-year low of $1,180 in late June…as of 6:45 am Pacific, bullion is up $14 an ounce at $1,419 – a fresh 3-month high…it traded as low as $1,396 overnight…Silver has jumped 29 cents to $24.62…Copper is up a penny at $3.33…Crude Oil has surged $2.69 a barrel to $108.61 while the U.S. Dollar Index is down more than one-tenth of a point to 81.19…with tensions escalating in the Middle East, it’s interesting that Gold is drawing the safe-haven buying and not the greenback…

Bloomberg reports that most unexpectedly, since Germany’s request for partial Gold repatriation, the Gold inventory of the COMEX has fallen from 11 million ounces to some 7 million, a drop of about 36%, the lowest level in 5 years…clearly, dealers have demanded physical delivery on Gold purchase contracts on an increasing scale throughout 2013…some dealers, according to Euro Pacific Capital, may even have been prompted to take delivery by the news that bullion banks, including Morgan Stanley, were rumored to have experienced serious runs on the physical Gold held in their vaults for their clients…as early as January 23, 2013, The Wealth Cycles site commented, “The issue…is the near certainty that not all the Gold recorded to be held in the bullion banks is really there. Much of it has been pledged and re-pledged against the debt that keeps the world’s monetary system afloat.”

You can certainly see the sentiment changing toward Gold in the latest Commodity Futures Trading Commission’s weekly Commitment of Traders Report (COT) as fresh longs are being added to positions…

Special BMR audio interview this morning – Greencastle CEO on the hot seat (see below)…

Today’s Markets

The Dow is off 90 points through the first 15 minutes of trading (see updated Dow chart at bottom of today’s Musings)…NBC News is reporting that the U.S. could launch a missile strike against Syria as early as Thursday…meanwhile, The Telegraph is reporting that Saudi Arabia has secretly offered Russia a sweeping deal to control the global oil market and safeguard Russia’s gas contracts, if the Kremlin backs away from the Assad regime…major geopolitics are at play…

The U.S. Treasury Department says it will hit its borrowing limit in mid-October and be unable to pay all of its bills soon after that time, narrowing the window the White House and Congress have to maneuver on budget talks…the deadline, which is sooner than many on Capitol Hill had expected, gives a sobering jolt to a number of fiscal discussions that have faltered for months…

The TSX is down 25 points as of 6:45 am Pacific while the Venture has slid 2 points to 953…

European shares are off significantly in late trading overseas while Asian markets were mixed overnight…Japan’s Nikkei average slipped 94 points to close at 13542…meanwhile, China’s Shanghai Composite gained 7 points to finish at a 1-week high of 2104 after profits earned by industrial firms rose 11.6% in July from a year earlier…interesting article regarding China’s growing debt in this morning’s Wall Street Journal by reporter Tom Orlik…“Nationwide,” Orlik stated, “four-and-a-half years of breakneck growth in lending has significantly increased China’s debt burden.  Outstanding borrowing by businesses and households rose to 170% of gross domestic product at the end of 2012 from 117% in 2008, according to data from the Bank for International Settlements.  The 2012 figure for the U.S. was 157%…as worries over China’s debt problem mount, the burden of paying off those loans could be the trigger that tips runaway credit into slower economic growth and financial stress.”

TSX Gold Index Update

The TSX Gold Index is inching closer toward a confirmed significant breakout…yesterday, it closed above the 210 level – slightly – for the 1st time since April…over the past 41 trading sessions, the Index has surged 38% since touching an intra-day low of 154 June 27…during that same period, Gold itself is up nearly 20% while the Venture Exchange has climbed 11%…is this just a dead-cat bounce in Gold and Gold stocks after the vicious declines we’ve seen, or is this just the beginning of a massive, unexpected upside move in the coming months – similar to what was seen after the 2008 Crash?…

One thing is for certain in our view – Gold stocks have further to go on the upside between now and the end of the year…how much further remains to be seen, but the TSX Gold Index chart is looking extremely bullish, though of course there will be occasional pullbacks…the Venture’s technical posture has improved remarkably as well, and the key for it will be to overcome major resistance at 970…it’s weaker today but strong support levels exist…

TSX Gold Index 6-Month Daily Chart

The Strategy With Juniors

No matter what Gold does and how the markets perform, the best strategy in our view for those who wish to “play the juniors” is to focus most of their attention on the small universe of companies (perhaps 10% of the Venture) that have the cash, the expertise and the drive to make a discovery that a major will buy…the need for fresh deposits in safe jurisdictions in the years ahead is going to be immense…

There are 2 high quality situations we’d like to remind our readers of this morning because they are so important and developing right now – 1 in Ontario and the other in red-hot northwest British Columbia along the incredible trend of the “Golden Triangle” where Pete Bernier has re-emerged with the Sheslay Cu-Au Porphyry Project…Prosper Gold’s (PGX.H, TSX-V) Sheslay and Garibaldi Resources’ (GGI, TSX-V) contiguous Grizzly Property combine to form 240 sq. km of prime exploration real estate that has a great chance of hosting a major new discovery or series of discoveries…that’s how fortunes are going to be made in this industry in the months and years ahead – identifying the right people in the right areas who can find the right types of deposits for majors…

First, Probe Mines (PRB, TSX-V) continues to make impressive progress with its Borden Lake Gold Project in northeastern Ontario…investors should have gotten the message about this one during the spring…as Gold prices were collapsing, Agnico Eagle Mines (AEM, TSX) took a significant slice of Probe (9.9%) through a private placement at a substantial premium to the market…a game-changing moment at Borden Lake occurred when Probe discovered a high-grade zone to the southeast of the original lower-grade deposit that was outlined…this high-grade area continues to expand as Probe reported in its most recent news release last week (August 21)…Probe expects to be able to produce an updated resource estimate for Borden Lake later this year (check their January 15, 2013, news release for the most recent estimate – approx. 4 million ounces), and it should be interesting given the amount of drilling (exploratory and inifll) they have completed in recent months in the high-grade area…well-managed company with lots of cash…at yesterday’s closing price of $2.05, PRB’s current market capitalization is a relatively modest $156 million – a take-over of Probe would likely come at a significantly higher price, especially if Gold prices continue to head north…as always, perform your own due diligence…

Below is an updated PRB chart from John (2.5-year weekly) and it is very bullish…you can also see how PRB can has been strongly out-performing the Gold price since early May…

Prosper Gold (PGX.H, TSX-V)

Pete Bernier and his highly qualified team are armed and dangerous, in a good way of course…we have nothing but respect for Bernier who’s a straight-up guy who partnered with his geological guru, Dirk Tempelman-Kluit, to find and then sell (for half a billion dollars in 2011) a massive Gold discovery at Blackwater in central British Columbia…the precision with which they carried out that exploration program (which included a winter drill program) was nothing short of incredible, and that same precision and expertise is about to be applied to the Sheslay Cu-Au Porphyry Project approximately 60 miles west-northwest of Colorado Resources’ (CXO, TSX-V) North ROK discovery at Iskut…North ROK is very interesting, but investors who have done their homework know that the Sheslay is a more advanced situation and also holds major blue-sky potential as it has never been tested at depth…there are a minimum of 5 porphyry zones on the Sheslay with mineralization open in every direction…it is a geologist’s dream to work on a project like this, and there is no one better to figure it out than Tempelman-Kluit and the team he and Bernier have assembled…

As Prosper Gold reported last week, its qualifying transaction for the Sheslay is expected to close by the end of this week (conditional approval has already been granted) with trading in the stock (under the symbol PGX) slated to begin sometime next week…Bernier has a huge following and he has all of his ducks in a row (money, exploration crews, everything) to launch an all-out immediate assault on the Sheslay…this is going to be a Power Show that could light up like a Christmas tree and bring some major excitement to the Venture…

With many investors asleep at the switch this summer, and mistakenly giving up on the Gold market, most people have never even heard of the Sheslay River Valley…rest assured, BMR will be putting it on the world’s radar screen in the near future when we do a site visit…many investors also aren’t aware that Garibaldi Resources is the 100% owner of 17,500 hectares (vs. nearly 7,000 hectares for the Sheslay) contiguous to the western and southern borders of the Sheslay…GGI’s Grizzly Property is at a much earlier stage of exploration than the Sheslay, but it hosts a critical “heat engine” (Mount Kaketsa) believed to be driving mineralizing fluids at both properties…various work in recent years, such as soil sampling and a major airborne magnetic survey that was flown over parts of the Grizzly and also the southern half of the Sheslay for comparative purposes, have delineated some highly prospective areas on the Grizzly (the Western Block and the Southern Block) that warrant extensive and immediate follow-up, especially considering that the dynamics in the Sheslay River Valley have changed dramatically with Bernier’s arrival on the scene…

A picture tells a thousand words…below is a Google Earth snapshot that BMR has used for an exclusive map that gives a very close approximation of the property boundaries and the exploration targets at both properties…Prosper Gold’s initial drilling will focus on the Star Porphyry where more than 80% of historical holes (average length of only 174 metres) bottomed in strong Cu-Au mineralization as reported by PGX…

The Sheslay and the Grizzly – Right On Trend With Major Systems To The Southeast

Garibaldi is attractive not only for the potential of its Grizzly Property, and for the fact it’s in the heart of what could easily become the most exciting Cu-Au Porphyry play in the country in the months ahead, but the company also possesses a very strong portfolio of properties in Mexico – 1,000 sq. km of strategically located concessions close to some of the most robust Gold and Silver mining projects ever discovered in that country including Mulatos, Dolores and Ocampo…Mexico provides a rock-solid, long-term foundation for Garibaldi, and the company has already created value for shareholders there when it sold its Temoris Project to Paramount Gold and Silver (PZG, NYSE) in 2009 for cash and shares…that wise transaction put and has kept GGI in a strong working capital position, so much so that the company hasn’t had to do a financing in more than 4 years…how many Venture companies have destroyed their share structures just in the last few months, let alone the past couple of years, in order to raise cash merely to survive?…GGI has no warrant overhang (57.4 million shares outstanding) and Steve Regoci, the President and CEO, and Barrie di Castri, the CFO, together hold approximately 20% of the stock…share structure always has to be a key consideration in evaluating any junior, and GGI’s is highly attractive…the management team is focused, skilled, and driven to take advantage of the opportunities GGI has both at the Grizzly and in Mexico…

Exclusive Interview:  BMR Puts Greencastle CEO On The Hot Seat

BMR has conducted a fascinating interview with Greencastle Resources‘ (VGN, TSX-V) President and CEO Tony Roodenburg, who finds his company under attack from CNSX-listed Zara Resources Inc. (ZRI, CNSX) which has launched a simultaneous all-share takeover bid for 100% of the outstanding shares of Greencastle and 2 other companies (Visible Gold Mines, VGD, TSX-V) and Altai Resources (ATI, TSX-V)…in a news release yesterday, ZRI’s Danny Wettreich referred to VGN, VGD and ATI as “undervalued, underutilized and mismanaged assets.”

So far, the market doesn’t appear to be taking Wettreich’s bravado very seriously…if his name were Pete Bernier and Zara itself was leading by example and had its own track record of creating serious value for shareholders, it would be a different story and a lot more investors would be excited by the offer…nonetheless, Wettreich has brought up some valid points on the minds of many investors at the moment in terms of such things as valuations, management compensation, and the need for companies to be more responsive to their shareholders…too many individuals running these public companies, or involved with them, fail to understand they serve at the pleasure of the shareholders…too many of these companies are failing to execute both on the ground and in the market…

At BMR, we decided to ask Greencastle’s Roodenburg for an interview, and he accepted even though we warned him we would be asking some tough questions…below is a 5-minute excerpt from the interview – the rest of it will split into at least 2 parts and posted in the near future…

Click on the forward arrow below to listen to the 5-minute excerpt of the discussion between BMR (Jon is asking the questions) and Roodenburg…

[audio:https://e8d59e.a2cdn1.secureserver.net/wp-content/uploads/2013/08/VGNinterviewclip.mp3|titles=VGNinterviewclip]

Great Panther Silver (GPR, TSX) Chart Update

Great Panther is one of the few pure Silver plays on the market…as a result, it has responded very favorably to the recent strength in Silver prices…GPR’s 200-day SMA has been in steady decline since late 2011 but potentially that could change before the end of the year…GPR closed at $1.29 yesterday, a 90% increase over its June 26 low of 68 cents where it also bottomed during a mild market correction in 2010…by early 2011, the stock was trading as high as nearly $5 a share…

If you believe that Silver is headed much higher over the next 12 months, any minor pullback in the metal in the immediate future (to cleanse temporarily overbought conditions) may present a great opportunity to accumulate shares in some strong Silver producers and explorers…below is a 2.5-year weekly GPR chart…John has indicated the Fibonacci resistance levels…there is very strong chart support at $1, but also check the 10 and 20-day SMA’s on any pullback in the stock as they should provide support as well if this uptrend is for real…

Canadian Dollar Chart Update

What is wrong with the Canadian dollar?…Oil, Gold and Copper are going up but the loonie continues to languish, along with just about every other currency…we’re not quite sure what this means (readers, do you have any thoughts?) as the loonie certainly can’t be weak simply because Justin Trudeau holds a commanding lead in the opinion polls for Prime Minister…

The Canadian dollar is caught in a downsloping channel, as you can see in John’s 3-year weekly chart, and last week it broke below support at 96 cents…

Dow Chart Update

The Dow got into quite oversold conditions last week before rallying moderately Thursday and Friday, but it’s still vulnerable to an additional decline…we’re not too concerned about the potential for a major correction, despite this year’s strong advance, as the Fed will jump in if it has to in order to keep the equity markets healthy – that’s what they’ve been all along since 2008…

Note: John and Jon both hold share positions in GGI.  Jon also holds a share position in VGN.