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Gold has traded between $1,277 and $1,289 so far today…as of 7:30 am Pacific, bullion is down $9 an ounce at $1,281…for now it appears to be range-bound between $1,250 and $1,350 until a catalyst triggers either a breakout through $1,350 or a plunge to test the June low…Silver is off 18 cents at $20.60…Copper is flat at $3.17…Crude Oil is down 6 cents at $93.78 while the U.S. Dollar Index has slipped one-quarter of a point to 80.64…

Lots of nuggets of information in the World Gold Council’s latest quarterly report on Gold issued last week…Frank Holmes, in his weekly Investor Alert at www.usfunds.com, pointed out that, “What’s interesting about Gold demand today is that more and more investors around the world are buying higher-end, more expensive Gold. Specifically in China, 24-karat Gold jewelry and ‘four nines’ Gold gained market share in the third quarter.

“Four nines is named for the almost pure Gold content of 99.99%; in comparison, 24-carat jewelry has a purity of 99.95%. According to the WGC, four nines Gold is ‘unique to China and has proved to be most popular with consumers in lower tier markets and rural areas, again reflecting the investment qualities offered by such jewelry.’

“I point this out because investors should take note of the emerging trend for luxury goods as a result of growing incomes in emerging markets around the world.”

Gold Accumulation – People’s Bank Of China

Just how much Gold has the Chinese government been accumulating recently?  Minweb’s Lawrence Williams explored this issue recently at www.mineweb.com.  “The Bloomberg data, which has been available on Bloomberg terminals since mid October, puts a more precise figure on this, suggesting that in the current year the PBOC will likely add some 620 tonnes into its Gold reserves, and possibly even more next given the current lower Gold price.  China can do this without reporting the increase to the IMF by the simple mechanism of holding the newly acquired Gold in a separate account from its official reserves and only transferring it into the official reserve when it deems it timely, or politically expedient, to do so.  This is exactly what happened in 2009 when China announced an increase in its Gold reserve from 600 tonnes to 1,054 tonnes with the Gold having been acquired over the prior five years.

“It thus seems increasingly likely that China has been steadily accumulating Gold since its last gold reserve announcement, but again not reporting the figures – indeed even denying that it has been doing so – surely a question of interpretation if it is working in the same manner as in the five years prior to its 2009 reserve update?  However, there is plenty of Chinese domestic evidence that it may indeed be increasing its reserves, not least a number of statements from Chinese officials and academics calling for official Gold holdings in line with the size of the country’s growing economy – and in China few such statements are made without government approval.

In particular, Bloomberg notes the recent call in an editorial on state-run Chinese news agency, Xinhua, calling for a ‘de-Americanized world’.  Amidst some scathing comment on what the writer referred to as a hypocritical nation, the following paragraph is perhaps considered as particularly pertinent in relation to China’s believed interest in building its gold holdings: “What may also be included as a key part of an effective reform is the introduction of a new international reserve currency that is to be created to replace the dominant U.S. dollar, so that the international community could permanently stay away from the spillover of the intensifying domestic political turmoil in the United States.”

“Why should this be pertinent to China’s Gold holdings?  It is felt by the Chinese, and many others, that  a strong national Gold holding, perhaps even matching or exceeding that of the U.S.’s official 8,133.5 tonnes, would put the yuan in a particularly strong position to be at least a part of any new global reserve currency which may be set up, even if not replacing the dollar altogether.  Indeed the Bloomberg research suggests that at the current accumulation rate it would take China only 10 years to bring its Gold holdings up to the U.S. level – indeed some observers think this could be done even more rapidly and that it may be over half way there already.”

Eastern Consumer Demand For Gold At All-Time High, Helps Counter ETP Selling

Consumer demand for Gold via jewelery, bars and coins is at an all-time record high, fueled almost entirely by purchases from the east according to the WGC…“The vast bulk of the year-to-date growth in consumer demand for Gold came from Eastern markets; 90% of the 605-ton increase was accounted for by Middle Eastern and Asian consumers, as Gold continued to flow from West to East,” the report said…

Gold needs all the help it can get from Asian and Middle Eastern consumes, along with the PBOC.  Gold ETP’s in 2013 have turned into a source of significant supply, releasing 650 tonnes so far this year which is the equivalent of adding 17% to 2012’s global Gold supply…in addition, the most recent data by the IMF shows that in the first eight months of the current year central banks added Gold at the slowest pace since the start of the financial crisis…

Today’s Markets

China’s Shanghai Composite surged 61 points or nearly 3% overnight to close at 2197 as investors gave the country’s broad-based reform plans from the Third Plenum, announced in more detail late Friday, a thumbs up…these plans include easing of the the one-child policy, implementing residence registration reforms, allowing market pricing of key resources and further financial liberalization…“The reform package will have a long-lasting positive impact on China’s equity market outlook,” Deutsche Bank said in a report, forecasting the MSCI China index would rise 20-25% over the next 12 months…

European shares were moderately higher today, boosted by euro zone trade surplus data…

In New York, the Dow has topped 16000 for the first time…it’s up 48 points through the first hour of trading…the TSX has added 13 points while the Venture is unchanged at 934 as of 7:30 am Pacific…

Updated CDNX Chart

A stretch of 12 losing sessions out of 13, which ended last Thursday, interestingly didn’t put a dent into the Venture 3-year weekly chart…as you can see below, RSI(14) is at support along a climbing trendline…buy pressure (accumulation) remains steady, and most importantly the downtrend line that was in place for more than two years is now providing support…if you recall, the Venture broke above this downtrend line on the 3-year weekly chart in late October…a 100-day SMA that is now gently rising to the upside is also helping the Index which has built a solid foundation of support in the 920’s…below that, the 900 area is also very strong…

The U.S. Dollar Index – Going Higher Or About To Plummet?

Junior resource investors have to keep a close eye on the U.S. Dollar Index, particularly between now and the end of the year…technically, one can argue that the Dollar Index is quite vulnerable over the near-term (1-3 months) to a breakdown below key support at 79…this would have important ramifications for both the Venture and Gold which tend to move in the opposite direction of the greenback…Janet Yellen, of course, takes over as Fed Chairman at the end of January, and her comments last week on Capitol Hill solidified the belief in the minds of many that she’s actually more dovish than Ben Bernanke and isn’t too keen on any imminent scaling back of the Fed’s $85 billion per month bond-buying program…

Dollar Index 2.5-Year Weekly Chart

In September, the Dollar Index broke below 2+ year uptrend on the weekly chart…currently, the Index is in a trading band between very strong support at 79 and stiff resistance at 81…significantly, the 200-day moving average (SMA), or MA-40 as displayed with the blue line on John’s weekly chart, has flattened out at 81.89 (more resistance) and is threatening to turn lower within the next month or two unless the Index can jump on its horse very quickly and really begin to gallop…that is possible but would likely require a Fed tapering surprise…

The combination of the Dollar Index falling below an uptrend, and the Venture finally pushing above a downtrend, is quite possibly more than just coincidence…the next four to eight weeks should confirm if these technical developments are merely temporary blips or represent a truly significant shift out of a Venture bear market and into renewed Dollar weakness…

24-Year Monthly Dollar Index Chart

Below is a 24-year monthly Dollar Index chart that shows how the Index met resistance at a downtrend line in late June, right at the same time as Gold and the Venture both hit their respective lows…notice the declining highs in RSI(14) and the critical support at 79…if support at 79 fails, the Dollar Index would be in danger of testing the mid-70’s…

13-Year Copper Monthly Chart

Copper, which came under pressure last week, is also an important yardstick for the Venture…one positive in this long-term Copper chart is a big wall of support around the $3 level, and this really must hold as it did in 2011 and again earlier this year…encouragingly, RSI(14) is currently very close to long-term support, so the recent weakness appears to be just normal market behavior (range trading)…a break below $3 a pound doesn’t make sense unless the global economy implodes…

Crude Oil 2.5-Year Weekly Chart

WTIC has taken a beating in recent weeks (down 15% since early September) due to supply concerns…this 2.5-year weekly chart, however, shows that Crude is underpinned by very strong support between $87.50 and $92.50 after reacting at resistance at $110, and RSI(14) is already flattening out at previous support…so a turnaround appears to be in the works…one must never forget that the Middle Easy is always volatile and full of potential surprises – an Israeli attack on Iran’s nuclear infrastructure can’t be ruled out, for example…

Silver Short-Term Chart

Silver has strong support around the $20.50 level which was initial resistance after the first move from the late June low…over the immediate future, look for Silver to be range-bound like Gold, likely between $20.50 and $21.50, until a catalyst triggers a major move in one direction or the other…

Silver Long-Term Chart

A 11-year monthly chart for Silver confirms strong support around the $20 level, so there’s every reason to believe the mid-year low will hold as the metal tries to build a base for a move higher…