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TSX Venture Exchange and Gold

Weekly advances on the Venture have been a rare event over the past 6 months, but the Index climbed 15 points last week to close at 948.  This puts the CDNX back above its 10-day moving average for the first time in nearly 2 weeks.  Improving Gold prices helped, along with rising enthusiasm over what’s developing in the Iskut River area and in some other select situations.  It’s still a very tentative market but we do see a glimmer of hope in John’s 1-year weekly chart below.  RSI(14) has recovered from the oversold zone and is showing increasing up momentum, buy pressure (interestingly) remains constant according to the CMF indicator, while the ADX indicator shows a weakening bearish trend.  Could it be that we’ll see a significant rally unfold in June?  This is very possible, but first the Venture must get through important resistance at 970.  A close above 970 would be very bullish, for the short-term at least.  It’s too early to tell if this market has truly bottomed out yet.  Continue to focus on a “market within a market” as all exploration deals aren’t dead.  The Iskut River play is demonstrating that, and Solvista Gold Corp. (SVV, TSX-V) is another example as it doubled last week on some excellent drill results out of Colombia.  It has momentum in its favor and could continue to move higher in the days ahead.

The Venture closed April at 966, so after 3 straight months of losses totaling 21% the Index has a chance to post a small gain for the month of May with 5 more trading sessions to go.

Gold

Gold staged a significant intra-day reversal last Monday which has given Gold bugs fresh hope that the April lows will hold.  They probably will for now given the intense physical buying below $1,400 – the question is, where will Gold be several months from now in this uncertain environment and with the primary trend still negative?

Gold purchases are getting so strong these days, buyers are willing to pay a premium, says Mineweb. The mining publication reported last week that premiums on Gold bars are climbing to all-time highs in Hong Kong and Singapore, with Chinese residents paying $5 to $6 an ounce over the spot London price due to the classic economic one-two punch of huge demand and tight supply.  According to data from the Hong Kong Census and Statistics Department, “net Gold flows from Hong Kong to China jumped to 223.519 tons in March from 97.106 tons in February, smashing a previous record of 114.372 tons in December,” stated Mineweb.

Below is a 2-year weekly chart, and what we like about – for the short-term at least – is the “W” formation in the RSI(14).  Sell pressure and the bearish trend are showing signs of weakening.  Again, like with the Venture, this points to a possible June or summer rally.

Silver collapsed below support at $22 last Monday morning but reversed strongly and closed above that level by the end of the day.  For the week, Silver was off 47 cents as it finished at $22.39.  Copper was off a penny at $3.29.  Crude Oil slipped $1.87 a barrel to $94.15 while the U.S. Dollar Index encountered resistance above 84 and closed down half a point for the week at 83.64.

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.