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Iskut, British Columbia – 9:30 am Pacific

TSX Venture Exchange and Gold

Volume on the Venture declined last week as the Index fell 7 points to close at 934. The Venture has traded in a horizontal pattern since mid-April between a low of 918 and a high of 972.  Interestingly, while the Index has slipped 35 points or 2.9% so far this month, buy pressure has increased significantly as you can see in John’s 9-month daily chart below.  In addition, RSI(14) is showing up momentum. The Venture has also outperformed both the TSX Gold Index (down 7.3%) and the overall TSX (down 3.7%) through the first half of June.  So what we’re trying to say is that it’s not all “doom and gloom” at the moment and certain traders/investors are clearly stepping up to the plate in anticipation of a possible breakout in the Venture at some point this summer above the important 970 resistance.  Markets don’t go up and down forever – just look what has happened in Japan recently.  The Venture has lost nearly two-thirds of its value since its 2465 high in early March, 2011, and the time for a powerful rebound (we’ve had a few significant rallies during this bear market) when most investors are asleep at the switch could be at hand.

Drill results/discoveries and the price of Gold are two critical potential catalysts that could come together at the same time to enable the Venture to bust out of this horizontal trading pattern to the upside in the near future.  We’ve spent the last several days in Iskut, British Columbia, which is buzzing with excitement as Colorado Resources (CXO, TSX-V) prepares to re-start drilling at its very promising North ROK Property where an important discovery was first announced in late April.  North ROK is part of a prolific geological region that we’re convinced will be a centre of investor attention throughout the summer.  In fact, we spoke to a senior B.C. government geologist Friday afternoon who will be on the field up here in about 10 days and believes in the “cluster” theory – a series of porphyry deposits beyond Red Chris are very possible in this under-explored area.  In this very early stage, there are striking similarities between North ROK and Red Chris as we’ve already pointed out.  This next round of drilling by Colorado will of course be critical as they attempt to stay in strong mineralization by focusing on a continuous magnetic high 300 to 400 metres wide and 1200 metres long, trending southeast from holes #1 and #4.

Colorado is certainly not the only company up here with a chance at finding a deposit.  Victory Ventures (VVN, TSX-V) is showing aggressiveness as it takes aim at its Copau Property situated east of North ROK and about 10 km north of Red Chris.  What has geologists excited about Copau are not just the encouraging geophysics, but the fault structure – Copau uniquely lies at the intersection of two major regional faults, an obvious zone of weakness which very possibly created pathways for mineralization and the kind of pressure, heat and fracturing necessary for the formation of a deposit.  Drilling will provide the answers and VVN launched its Copau drill program June 2.  With cash in the treasury, a tight share structure, early to drill and a determination to expand its footprint in this region, VVN is still a very tantalizing speculation at 12 cents even though it has doubled in price since we first brought it to the attention of our readers at the beginning of May.  John is working on an updated VVN chart that continues to show strong momentum and explosive upside potential.

West of Copau and North ROK, keep a close eye on West Cirque Resources (WCQ, TSX-V) which has a very promising project with its Castle Property.  Freeport McMoRan of Canada is funding exploration at Castle and two other WCQ properties in the area to earn up to a 51% interest (WCQ remains the operator).

Numerous other companies are active in this district and we’ll be reporting more on them in the days ahead.

Meanwhile, there are important developments in the Telegraph Creek area about 100 km to the west of Colorado’s discovery.  Following Thursday’s close, Doubleview Capital Corp. (DBV, TSX-V) reported very interesting visuals from hole #6 at its Hat Property which is contiguous to the eastern border of the Copper Creek Property which Peter Bernier’s Prosper Gold (PGX.H, TSX-V) is optioning from Firesteel Resources (FTR, TSX-V) as a qualifying transaction.  We spoke to Bernier again Friday afternoon.  We have huge respect for him and his technical team as of course they discovered what is possibly the largest Gold deposit ever in Canada west of Ontario – Blackwater, and Richfield Ventures was a massive winner for some of our readers as it went from pennies to over $10 a share when it was taken out by New Gold Inc. (NGD, TSX).  Bernier is convinced the Telegraph Creek area has “huge potential” and it’s highly significant that after a couple of years of searching for the right project for Prosper Gold, he and his team selected Copper Creek.  So this gives added credibility to the Doubleview situation, and it’s safe to say that DBV’s news Thursday raised some eyebrows at Prosper Gold.  It raised our eyebrows and others’, too.  DBV stated, “Initial reports from the field indicate that sulphide mineralization comprising pyrite and chalcopyrite is present from near surface to current depth of 230 metres” (hole was still in progress when the news was put out).  While it’s important to be very careful about putting too much emphasis on visuals, Doubleview appears to have hit some sort of a mineralized system at the Hat or at least the edge of a system.  This will likely warrant additional drilling, and the market responded favorably Friday by pushing the stock up 37% on volume (all exchanges) of 3.3 million shares.  Speculation could drive DBV even higher this coming week.  To the best of our knowledge, the Hat Property was never previously drilled but prospecting over the years has returned some excellent Gold and Copper values.

Updated Venture Chart

Markets in the week ahead will be preoccupied with the FMOC meeting Tuesday and Wednesday, looking for clues regarding the central bank’s plans for possibly paring back some of its stimulus efforts.  Our guess, for what it’s worth, is that the Fed will keep the pedal to the metal and will be cautious about signalling when it might start pulling back.  The IMF last week said that while underlying fundamentals in the U.S. are gradually improving, the economy is still being restrained by government spending cuts and tax increases. The IMF revised its U.S. growth outlook for 2014 down to 2.7 %, while maintaining the 2013 guidance at 1.9%.  Globally, deflation – not inflation – is a concern, and stock markets have been volatile with Japan’s Nikkei plummeting over 20% in a month.  China also continues to grapple with problems.  The country’s new bank loans, aggregate financing, year-over-year growth rate of exports, imports, and industrial production in May, all came in lower than expected last week.  Producer prices continue to deflate further in China, a clear reflection of anemic demand and an absence of government stimulus.

Gold

For the past 9 weeks Gold has traded between just under $1,500 and the strong support band between $1,320 and $1,350.  Recently, Gold has stabilized as sell pressure and the bearish trend have started to weaken.  Commercial traders have dramatically reduced their net short positions which is bullish.  RSI(14) may have commenced an uptrend with the formation of a low “W”.  So there are reasons to believe that Gold could be gearing up for a rally that will once again test important resistance around $1,500.  The $1,420 area remains key – if Gold can push through that resistance, then the bulls will grab the upper hand – for the short-term at least.  Below is John’s 2-year weekly chart.

For the week, Gold finished up $7 an ounce at $1,392 after finding support in the $1,360’s.  Silver climbed 39 cents to $22.08.  Copper fell 7 cents to $3.20.  Crude Oil, on concerns regarding the situation in Syria, jumped another $1.82 a barrel to $97.85 while the U.S. Dollar Index continues to weaken – it fell another point last week to close at 80.62.

Dundee Wealth’s Martin Murenbeeld made some insightful comments regarding Gold to Mineweb’s Geoff Candy:  “I think we’re in a sort of holding pattern. I’ve kind of likened this to the mid-cycle correction that we saw in the 1970’s – you may recall that Gold was in a huge bull market from 1970 to 1980, but just shortly around the time of the U.S. recession of 1973-1974 – that was a very nasty recession, Gold prices came off almost 50% peak to trough. So what I’ve been putting out is that we’re going into a bit of a mid-cycle correction. In 1974-1975 the market cycle thought that the Gold price had peaked, it was over, and done with, finished and of course, it wasn’t and I sense the same sort of sentiment today. The Gold price is finished, the 10, 11, 12 year bull market has been completed and we’re now going into a bear market. We have not yet had in this bull market even a very significant year-on-year correction – that is the year average price, this year being lower than the year average price last year.”

The “Big Picture” View Of Gold

As Frank Holmes so effectively illustrates at www.usfunds.com, the long-term bull market in Gold has been driven by both the Fear Trade and the Love Trade.  The transfer of wealth from west to east, and the accumulation of wealth particularly in China and India, has had a huge impact on bullion.  Despite its current weakness, the fundamental long-term case for Gold remains incredibly strong – currency instability and an overall lack of confidence in fiat currencies, governments and world leaders in general, an environment of historically low interest rates, a Fed balance sheet now in excess of $3 trillion and expanding at $85 billion a month, money supply growth around the globe, massive government debt from the United States to Europe, central bank buying, flat mine supply, physical demand, emerging market growth, geopolitical unrest and conflicts…the list goes on.  However, deflation is prevailing over inflation in the world economy and this had a lot to do with Gold’s recent plunge below the technically and psychologically important $1,500 level, along with the strong performance of equities which are drawing money away from bullion.  Where and when Gold bottoms out in this cyclical correction is anyone’s guess, but we do expect new all-time highs later in the decade.  There are many reasons to believe that Gold’s long-term bull market is still intact despite a major correction from the 2011 all-time high of just above $1,900 an ounce.