BullMarketRun.com

Gold is under some profit-taking pressure this morning…as of 6:00 am Pacific, bullion is down $12 an ounce at $1,761…Silver is off 71 cents at $33.81…Copper is 6 cents lower at $3.70…Crude Oil is down $1.34 a barrel to $91.55 while the U.S. Dollar Index has rallied one-quarter of a point to 79.71…

As mentioned in Saturday’s Week in Review And A Look Ahead, Gold and Silver are both technically overbought at the moment…therefore each is vulnerable to a minor correction…Gold has excellent support at $1,730 while a major support area for Silver, as John shows in his chart this morning (see further below), is $32.50…the primary trend for both is up, so astute traders and investors will take advantage of any immediate or near-term weakness and build positions for potential huge upside moves during the fourth quarter…

Fed’s Monetary Monster Creating Inflation Risks – Physical Gold Ownership Becoming More Attractive To Certain Investors

More high-net-worth individuals are seeking to buy Gold to protect their wealth from the risk of rising inflation after central banks boosted stimulus, according to Deutsche Bank’s asset and wealth-management unit…”Gold has historically been considered to be a store of value and an inflation hedge and increasingly it is being utilized as a monetary instrument,” said Mark Smallwood, head of Asia-Pacific wealth management solutions…”There is a growing interest among our clients to gain exposure,” he added, with an increased preference for physical holdings…”For our ultra-high-net-worth clients, and a growing number of our high-net-worth clients who have significant liquidity, they are becoming increasingly concerned to have at least some of their exposure to this asset class in the form of allocated physical bullion itself, rather than the indirect exposure that an over-the-counter product offers,” he said…

Deutsche Bank clients can store Gold in Malca-Amit Global’s vault at the Singapore FreePort, Smallwood said…Malca Amit, which holds assets for banks and individuals, is doubling its space in Singapore, the company said in February…”With the movements by the central banks globally in the last few weeks, there is considerable investor concern as to the long-term effects of the liquidity infusions,” Smallwood stated…”As a result of that, private clients are concerned about the possible future effects of inflation and the means of hedging that risk”…

More Views On Gold

Michaer Purves, Chief Global Strategist for Weeden & Co., commented on CNBC Friday:

“One key message I’d like to get out there is simply that we’ve seen a lot of money being made over the last several weeks, but I think we have to step back and realize that this is really breaking out of a consolidation and a really important move to the upside across the precious-metals complex…don’t be so fast to take profits here…right now, we have American, European and Japanese helicopters increasingly showering the world with money and therefore debasing reserve currencies…Gold is still under-owned by a wide spectrum of investors and owners…it’s important to point out that the bullish sentiment on Gold and Silver is still very low compared to where it was in 2010, 2011…the spec interest is still low as well…Gold’s been off everyone’s radar for a long time because it went through a very messy consolidation…I think that’s at an end, and I think we’re going to start seeing continued movement to the upside”…

Gold bug Jim Rickards (jimrickards.blogspot.ca):

Is the Fed trying to ramp up inflation to as much as 5% per year in an effort to tackle the debt problem?…that’s the type of solution the Fed is crafting, according to Rickards – a plan of targeting inflation at 5% for 14 years to cut the value of the greenback in half in real terms…”China owns $3 trillion of our debt and this would effectively be a $1.5 trillion real wealth transfer from China to the United States…this is the easiest solution to our debt problem and is the most likely choice policy makers will take”…

Silver – Short-term & Long-term Chart Updates

As regular BMR readers know, we are incredibly bullish on the long-term outlook for Silver…in fact, on July 23, we posted one of our most important articles of the year – “Silver’s Strength And Investors’ Historic Opportunity” when the metal was languishing at $27 an ounce but showing signs of getting ready to push higher…since then, Silver has climbed 30%…while it’s currently overbought on a short-term basis, and due for a minor pullback, we ultimately see Silver exploding to nearly $80 an ounce…

Silver has become the “Poor Man’s Gold” and the growth in investment demand over the last few years has been incredible…this will continue, especially in Asian markets…but Silver of course is also an industrial metal and we’re now entering a new era of technological change which is creating new sources of demand for Silver…photographic usage has dived dramatically with the onset of digital photography, but Silver’s unique properties are being increasingly used in the electronics and medical fields in particular and this is expected to contribute to a substantial boost in industrial consumption going forward…meanwhile, Silver supply comes mostly from Peru and Mexico where it’s getting more difficult in some areas of those countries to extract the metal due to violence (mining law reforms are also a concern)…”jurisdictional” risk exists in other Silver-producing areas around the world as well…

Below is a 9-month daily chart from John that shows a correction to at least the EMA-20, currently at $33, makes sense…

Long-term, Silver is in the early stages of a powerful “Wave 5” move that has a Fibonacci target (no precise timeline yet) of $78 an ounce…in the 15-year monthly chart below, you’ll notice that the RSI(2) has gone from historically oversold conditions over the summer to overbought levels now…however, on the monthly chart, it’s likely to remain in overbought territory for an extended period as was the case during much of the 2009-2011 advance…

What’s Happening With Crude Oil?

Crude Oil rebounded slightly at the end of last week after suffering through a 3-day rout that knocked it down by 7%…rising U.S. inventories and Saudi efforts to tame prices contributed to the slide…the decline followed weeks of concern about the impact of higher Oil and fuel costs on the struggling U.S. economy, which had prompted expectations the White House could tap emergency reserves to cool off prices (Obama will not hesitate to use the SPR for political purposes but he may not need to as he’s getting so much help right now from an incompetent Mitt Romney campaign)…

John’s latest WTIC chart (6-month daily) shows a breakdown in an upsloping channel that had been in place for a couple of months, perhaps an early warning that we could see some temporary weakness in the Gold price as there’s a close relationship between the two commodities…RSI(14) seems to have found support, as indicated in John’s chart, so the minor correction possibly may have already run its course or the downside from current levels is at least very limited…since Crude Oil prices make up such a large component of Gold producers’ cost structures, some minor weakness in Oil (or at least no surge through the $100 barrier) is actually helpful to many Gold stocks…having said that, Oil in the high $80’s at a minimum seems to be a magic number that keeps producers and investors happy…continued trading in the $88 – $100 range, like we’ve seen since early July, is probably ideal…the risk to the global economy at this moment is significant if Oil were to surge through $100 a barrel which is why there is probably a concerted effort behind the scenes, especially after the launch of QE3, to prevent that from happening…WTIC has very strong technical support between $88 and $92 per barrel…

Today’s Markets

Asian markets were mixed overnight with China’s Shanghai Index, coming off its worst week in 11 months, falling to a intra-day low of 2005 before rebounding to finish at 2033…European shares are moderately lower this morning while stock index futures in New York as of 6:00 am Pacific are pointing toward a negative opening on Wall Street but nothing severe…

The Venture Exchange has climbed for 6 out of 7 weeks and closed Friday at 1346…the Venture is facing a resistance band between 1350 and 1365 and may need to test its supporting 10 and 20-day moving averages first prior to overcoming that, given temporarily overbought technical conditions…any minor pullback may open up some attractive opportunities in certain issues, some of which we detail below…

First, John has an interesting technical update from two different perspectives on Rainbow Resources (RBW, TSX-V) which formed a bullish hammer reversal pattern last week (requires confirmation) and appears to be gearing up for another challenge of the 25-cent resistance area…October should be a very interesting month for RBW, especially with the launch of two more drill programs and results expected from the International…

John’s first chart, a 22-month weekly chart, shows a bullish hammer reversal candle last week almost identical to the one in June (blue circles)…accumulation is still very strong, and RSI(14) at 54% has plenty of room to support a move up after bouncing off the 50 level…the stock has rising 50, 100, 200 and 300-day moving averages which confirms the primary trend remains up…

Below is a very different chart that, pardon the pun, shows a Rainbow “above the cloud” – RBW’s bullish position from a different perspective…instead of his usual indicators, John has used the ICHIMOKU CLOUD and Dr. Elder’s IMPULSE SYSTEM…the cloud indicates the trend is up when prices are above the cloud (green)…the chart shows the candle breaking and closing above the green cloud on Friday, indicating RBW’s trend is up…the Impulse System uses the daily EMA-13 (Inertia) and the MACD (12,26,9) Histogram (momentum) to determine entry and exit levels…first, the system requires the trend to be up…this was verified by the cloud…the entry level signal is given when both the momentum and inertia indicators move up together…on the chart we see the MACD Histogram has been moving up since Sept. 19 and the EMA-13 turned up on Friday…together with the trend being up, this shows RBW to be in a bullish position…

RJK Explorations (RJX.A, TSX-V)

RJK announced last Thursday that it has commenced drilling at its Blackwater Northeast Property where it made an interesting Silver discovery last spring, a 3.3-metre super high-grade section grading 79 ounces per ton (2,710 g/t)…this claim group This claim group is contiguous to the east of New Gold Inc.’s (NGD, TSX) Blackwater bulk-tonnage Gold deposit currently shown at 9.6 million ounces of Gold (indicated and inferred) and 58.4 million ounces of Silver (indicated and inferred)…the drill program will consist of a series of angled holes from the discovery hole to test the contact between the felsic volcanics and the sediments…detailed ground magnetic surveying, drill hole interpretation and MMI soils suggest a potential system that strikes northwesterly and is steeply to vertically dipping…

Following Blackwater Northeast, RJK will be drilling its Blackwater West Property where the company has learned there is a significant volume of potential sulphide mineralization, particularly on the southern portion of the property, after a recently completed 18.5-km IP survey and MMI soil sampling…a 350-metre-wide-north-south-by-600-metre-long open-ended anomaly has been outlined on the southern portion which could be an extension of the mineralization located on the 3T’s Property (Independence Gold, IGO, TSX-V) just 3 kilometres to the south…

We are bullish on the entire Blackwater area, and one only has to review New Gold’s Preliminary Economic Assessment last week to understand why…numerous juniors are operating in the area, and two in particular we like are RJK and Parlane Resource Corp. (PPP, TSX-V)…

Another situation worth our readers’ due diligence is Troymet Exploration (TYE, TSX-V) which has resumed exploration at its Key Gold Project (drilling will commence in October)…below is a 2.5-year weekly chart from John after TYE closed Friday at a nickel…

Corvus Gold Inc. (KOR, TSX) and Aurcana Corp. (AUN, TSX-V)

John has two additional charts this morning – Corvus Gold (KOR, TSX), which has been one of our favorites this year due to its strong chart and exploration success in Nevada, and Aurcana Corp. (AUN., TSX) which offers investors great leverage on rising Silver prices (and it too has very favorable technicals)…KOR jumped 22 cents Friday and is up in four of the last five trading sessions, so a minor pullback could be in order…new support is $1.10 to $1.16…

Corvus Gold (KOR, TSX)

Aurcana Corp. (AUN, TSX-V)

Note: John and Jon both hold share positions in RBW and RJX.A.  Jon also holds a share position in PPP.