BullMarketRun.com

Gold has traded between $1,316 and $1,331 so far today…as of 6:45 am Pacific, bullion is unchanged at $1,323…Silver is up a nickel at $21.78…Copper is up a penny at $3.24…Crude Oil has added 38 cents to $103.51 while the U.S. Dollar Index is down more than one-tenth of a point at 80.42…

Simple but very reasonable conclusion from one analyst at the Denver Gold Forum:  “Long term, Gold can only go up because of the lack of fiscal discipline of the major world economies, which then translates into overall weaker currencies as countries print money,” stated Dan Hrushewsky, senior analyst for Gold mining equities with Jennings Capital. “Weaker currencies, especially the U.S. dollar, would mean a higher Gold price.”

For now, cost containment is the dominant trend in the industry and that’s a message being repeated consistently in Denver…lower Gold prices this year have of course negatively impacted company balance sheets and share prices, but a positive effect of $1,300 Gold is that producers have been forced to get a much better handle on their overall cost structures…this, in turn, is laying the foundation for future success in terms of earnings…less exploration also brings up the question of where the next new deposits will come from – juniors who have the ability right now, and over the next couple of years, to make a discovery that a major will buy are going to be rewarded very handsomely in the market…investors have incredible opportunities at the moment if they focus like a laser beam on juniors who have the working capital, the expertise, the properties and the drive to succeed both on the ground and in the market…

TSX Venture-Gold Comparative Chart

Below is an interesting 3-year weekly Venture chart from John that also compares the Index with the price of Gold…this chart paints a clear picture of how the junior market and Gold have interacted over the last few years, and why we remain positive going into the final quarter of the year…first, notice how the Venture went from being in an extended overbought condition in late 2010/early 2011 to an extended oversold condition earlier this year…RSI(14) is currently at 41%, gradually climbing in a nice-looking uptrend…the outlook is very positive as long as that trendline support holds…sell pressure, dominant for the 1st half of the year, turned into accumulation and buy pressure at the beginning of July…

A couple of other interesting points – the CDNX is quickly approaching a down trendline in place for 2.5 years – a breakout above this down trendline would be extremely bullish, given failed attempts to do so last year and early this year…the Venture also tends to lead Gold to the upside or the downside, which is why the last few weeks have been interesting as the Venture has essentially shrugged off more than a $100 drop in bullion…what the CDNX seems to be saying is that Gold will hold important support around the $1,300 level and push higher in Q4…that goes against what many analysts are saying, but many of those analysts also predicted the Fed would start scaling back its bond-buying program this month (that may not actually begin to occur until sometime next year)…

The “Unintended Consequences” Of QE

On the subject of the Federal Reserve and the “tapering” issue, some interesting comments from Eric Sprott on a Mineweb podcast (www.mineweb.com)…responding to a question posed by Geoff Candy, Sprott went on a roll and stated:

“Who would have thought that printing money was appropriate, QE1, QE2, QE3 whatever, it’s totally ridiculous. If we all stand back and look at it from first principles here, we know that that’s a Ponzi scheme, that there’s going to be unintended consequences. Yes, it doesn’t show itself in the Gold and Silver market and yes, the stock market keeps going up, but sooner or later the unintended consequences will come into play here and I guess the biggest one will be the decline in the U.S. dollar. If the U.S. dollar starts going down, which is going down by the way, people owning those U.S. Securities, not only are they getting no return, the yields are going up, they’re losing on capital and they’re losing on the currency, so there could be a moment here when there’s a revolt against U.S. debt here and the dollar goes down and rates go up. So there’s no reason to believe anything that the Federal Reserve says, then they talked in 2009 about an exit policy – nothing’s ever happened there. They talked about tapering this year and nothing’s happened there. They have a bond market to deal with and it’s not going the way they wanted it and when Mr Bernanke was asked in the last Senate hearing what he thought about rates going up recently, he said, ‘well we’re puzzled by that’. And I thought, how can the chairman of the Federal Reserve be puzzled by interest rates going up? In other words, he didn’t really want to give the answer, and the answer is there are more sellers than buyers, and of course the sellers are selling for a reason.”

Today’s Markets

Asian markets were mostly modestly lower overnight with China’s Shanghai Composite off 9 points at 2199…Japan’s Nikkei average slipped 112 points to 14621…European shares are down slightly in late trading overseas…new data today showed that German consumer confidence is at its highest level in 6 years entering October…

In New York, the Dow will try to break a 4-session losing skid today…it’s down 8 points through the first 15 minutes of trading…the TSX is up 27 points while the Venture is off a point at 945…

Rackla Metals Inc. (RAK, TSX-V)

This is not a situation you’d want to bet the farm on, but if you’re looking for a bottom-fishing opportunity under a nickel with a chance of a drill hit – Simon Ridgway’s Rackla Metals Inc. (RAK, TSX-V) appears worthy of consideration…what’s interesting is that Rackla had been quiet all year up until just a couple of weeks ago when it struck a deal with Kestrel Gold Inc. (KGC, TSX-V) to option that company’s King Solomon’s Dome Property in the Yukon…Rackla commenced drilling almost immediately, and then quickly announced a $250,000 flow-through financing at a nickel…volume in the stock has picked up modestly but remains light…

There is plenty of history in the area surrounding the KSD Property, located in the heart of the Klondike Goldfields approximately 30 km southeast of Dawson City…Dominion, Sulphur and Gold Bottom creeks drain away from KSD and were some of the richest placer Gold creeks in the Klondike with historic production believed to exceed 3.5 million ounces…recent academic work suggests a clear link between the placer Gold and the widespread lode Gold occurrences across in the vicinity of KSD – they appear to represent a single, zoned eroded orogenic hydrothermal system…Kestrel’s trenching program defined a Gold bearing-quartz vein system over a strike length of at least 1,700 metres and at least 400 metres wide with Gold values from trace up to 17 g/t Au and several values of Silver greater than 50 g/t…Rackla’s drill target is a large chargeability anomaly to depths of approximately 350 metres…who knows, they may get lucky and pull out some nice numbers…at least they’re drilling and trying to make something happen when far too many Venture companies have gone into hiding…

RAK, which touched an all-time low of 1.5 cents last month after declining steadily since late 2011 when it commenced trading, closed at 3.5 cents yesterday…it has 50.4 million shares outstanding (prior to this 5 million share FT round), and the company reported working capital at the end of June of approximately $600,000…below is a Rackla chart since just after it started trading in late 2011…it’s interesting that RAK’s technicals look better now than they ever have…

Corvus Gold (KOR, TSX)

Quite a recovery in Corvus Gold (KOR, TSX) since May when the stock hit a low of 51 cents…it got as high as $1.35 early this month before experiencing a normal pullback…it closed yesterday at $1.12, its 4th straight daily decline…Corvus‘ North Bullfrog Property in Nevada continues to look very promising with favorable drill results showing an expansion of a higher-grade zone, a “starter pit” that could have a dramatic impact on the project economics…

Technically, KOR has excellent support around the $1 level…RSI(14) on John’s 2.5-year weekly chart is at 58% and trending higher…the rising 50-day moving average (SMA), just below $1, is about to cross above the 200-day SMA – another positive sign…as of 6:45 am Pacific, KOR is down 3 pennies at $1.09…

Two Graphite Plays – Mason Graphite Inc. (LLG, TSX-V) and Graphite One Resources Inc. (GPH, TSX-V)

We had some reader inquiries regarding 2 graphite plays – Mason Graphite Inc. (LLG, TSX-V) and Graphite One (GPH, TSX-V)…we have a chart for each this morning…as always, perform your own due diligence and remember that management is always key…

From a technical standpoint, LLG appears to have turned the corner but the critical thing to watch for is a close above the downsloping channel which is providing strong resistance in the mid-40’s (yesterday’s intra-day high)…LLG finished up a nickel yesterday at 38 cents…

Graphite One Resources Inc. (GPH, TSX-V)

Graphite One has been on a roller coaster ride this year, tumbling from nearly 30 cents in May to 7.5 cents in August (followed by a $2.2 million financing at 8 cents, how strange or how typical?) and then recovering to a September high of 19.5 cents yesterday…drilling has commenced at the company’s Graphite Creek Project in Alaska…the best time to jump in was around the time of the cheap financing…support levels are between 15 and 17 cents…this one will require a lot of volume and heavy lifting to get back to its May high, but anything’s possible – drilling is a good start…

Note:  John, Jon and Terry do not hold positions in RAK, KOR, LLG or GPH.